By Dan Darrow
November 17, 2022
Today's Trade Ideas
Strategy: Long Put
Contracts: Dec30 $15 put
Action Area: $1.45 - $1.80
Comments: We are going to revisit DKNG for a bearish trade idea. The recent strangle strategy was a play on the post-earnings setup and midterm election. The stock ended up rallying sharply on election day but then dropping the following session as the overall market slid and Prop 27 in California resoundingly failed. Similar to many stocks last week, though, DKNG exploded higher on the CPI day and continued to surge into the start of this week, but momentum stalled on Tuesday right at the critical 200day sma, marking its fifth consecutive test and failure at the moving average since August. Coming off a disappointing quarter and with no California rollout as a catalyst, DKNG should turn lower following another failure to reclaim the 200day sma, and each of the previous drops off the moving average saw the stock slide 20%+ in a couple of weeks (in a few days in some instances). The Dec30 put will be targeting an initial move to <13.25 to begin locking in money, and the swing trade will have a tight stop above 16.25 (above the 200day sma) or a 30-40% net debit loss, whichever happens first.
Strategy: Call Spread
Long Dec16 $315 call
Short Dec16 $325 call
Action Area: $3.80 - $4.40
Comments: HD is a fast-developing bullish trade idea. HD broke through the 200day sma on the CPI day last week, and it ran into the mid-teens ahead of this week’s report. A solid print from the company on Tuesday morning initially led to a red open on the stock, but buyers stepped in around the 200day sma, driving the stock back green and into the mid-teens again. HD has now started to stabilize around 310, and the fast-moving 8day ema has caught up underneath. With rising support, the stock looks set up for a near-term run, and a clean break of 317 should get momentum building for a retest of the August high (332.98). The Dec16 call spread will be targeting an initial move to 317+ to begin locking in money, and the swing trade will have a tight stop below 300.50 (under the 200day sma) or a 30-40% net debit loss, whichever happens first.
On The Radar
Tomorrow is main monthly Nov18 expiration, and there is one position set to expire: GSK $34 - $36 call spread roll up. The plan has been to watch to see if GSK can hold above 32.50 (above the 8day ema and 20day sma) to roll out the position to December expiration, but the stock has been spinning around that level all week without much direction. The current call spread has no bid going into Friday, but it will be on watch for a chance to recover premium during the session if possible. If we end up opening a December option strategy on GSK, it will likely happen next week once the stock establishes support above the two key moving averages.
UBER had a fast rip to 31.50+ on Tuesday to give a shot to scale back risk on the Dec16 call, but momentum turned quickly lower yesterday, and today the stock sank back into a key level. UBER retest the 200day sma off the open this morning and it dropped into it again later in the afternoon, holding the key moving average both times. The 200day sma is an important downtrend resistance level, so it will be critical for the stock to continue to hold above it now. We already took money out of the trade, but we will place a new technical stop at 27.25 for the remainder of the position moving forward.
We can tighten the stop on VZ now too. The short-term position was rolled up for a second time last week, this time out to Dec16 to buy more time for the developing rebound to take shape. VZ’s rally stalled around the 50day sma, though, and it has been hanging underneath it the past few sessions. VZ found buyers at the 20day sma into weakness this morning, and it will need to hold that moving average moving forward to keep the recent uptrend intact. We will place a stop at 37 for the remainder of the position to make sure to exit the trade before a sustained slide lower can start.
Trader Author Portfolio Holdings
**As of 4pm ET November 17, 2022