By Dan Darrow
November 14, 2022
Today's Trade Ideas
Strategy: Long Call
Contracts: Jan20 $40 call
Action Area: $2.75 - $3.25
Comments: GM is a bullish trade idea. We had a trade on GM a few months ago, which revolved around a break of the year-to-date downtrend. The move higher to 40+ made for a solid swing trade at the time, but momentum turned lower quickly in September, and the stock came close to retesting the 52-week low in October before finally stabilizing. GM has put together a strong bounce since that October low, with earnings a few weeks ago fueling a sustained run on the stock into the 200day sma. That moving average was a sizable area of resistance up until Thursday and the CPI release, and now having traded well above the key level, GM looks set up for higher prices. On a clean break of 41.50, GM has room to March pivot resistance around 45, and the Jan20 call will be targeting an initial move to 42.50+ to begin locking in money. The swing trade will have a tight stop below 38.50 (under the 200day sma) or a 30-40% net debit loss, whichever happens first.
Strategy: Put Spread
Long Dec16 $10 put
Short Dec16 $5 put
Action Area: $1.50 - $1.85
Comments: MARA is a speculative bearish trade idea. Crypto assets have seen elevated volatility recently following the shocking FTX implosion, and the ripple effects have spread out to the Bitcoin Miners, with MARA at a precarious technical spot. Since rebounding in July, MARA has found buyers at 10 on multiple occasions over multiple months, but recent weakness across the Crypto space has knocked it under the key level. The stock has been consolidating under 10 for the past several sessions, with the 8day ema now joining overhead to increase downward pressure in the near term. On a clean break of 9, MARA should build momentum lower, and the mid-July pivot (~7) is a clear initial target for the Dec16 put. The swing trade will have a tight stop above 10.75 or a 30-40% net debit loss, whichever happens first.
On The Radar
This will be an important week for ALLY. The steady downtrend lower on ALLY that began in August led to a dip below 25 on Wednesday, but the cooler CPI reading gave the stock a big boost on Thursday. ALLY cleared the 8day ema and 20day sma on Thursday, and it spun around the 50day sma on Friday. It failed to extend above the 50day sma last week, and today it began to retrace lower, and it will be important for the stock to continue sliding lower now. If ALLY resets above the 50day sma and 29.50 level, we will need to exit the Dec16 put spread roll down. That would mark a change in trend, and it would negate the near-term bearish thesis for the stock.
TSLA is on watch the remainder of this week (and next week, too) for an opportunity to recover premium on the bull portion of the Nov25 strangle. The bear portion of the trade was closed into weakness when the stock broke down last week, but a lack of a meaningful bounce over the past few sessions has weighed on the Nov25 call spread. With TSLA struggling to reset above 200, the chance of a large move higher by next Friday’s expiration is low, so we will be watching for an opportunity to close the current spread for >$.10 (if possible).
Trader Author Portfolio Holdings
**As of 4pm ET November 14, 2022