By Dan Darrow
November 21, 2022
Today's Trade Ideas
Strategy: Call Spread
Long Jan20 $45 call
Short Jan20 $50 call
Action Area: $1.65 - $1.95
Comments: We are going to revisit EBAY for a bullish trade idea. The post-earnings breakout above 40 and the 50day sma a couple of weeks ago was a beauty, leading to a fast few-day run into the mid-40s and a fast win for the swing trade at the time. EBAY continued to climb after the position was closed, ultimately running up to 47+ to come within a few cents of the key 200day sma before losing momentum last week. Since nearly testing that moving average last Tuesday, the stock has formed a new base around 45, with recent rising support from the 8day ema. The bullish action is indicating another leg higher should be coming soon, and a retest of the 200day sma (47.27) should be an easy initial target. If EBAY can clear that level, then the July/August bounce high around 50 comes into play. The Jan20 call spread will be targeting an initial move to 47+ to begin locking in money, and the swing trade will have a tight stop below 43.75 or a 30-40% net debit loss, whichever happens first.
Strategy: Put Spread
Long Dec16 $18 put
Short Dec16 $14 put
Action Area: $1.35 - $1.65
Comments: UPST is a fast-developing bearish trade idea. A significant guide down on their November report sent UPST tumbling under 15, but the stock recovered quickly thanks to the market-wide rip on the CPI reading the following session. UPST continued to rally into the beginning of last week, trading as high 23.49 on Tuesday before finally cooling off. The rebound paused right at the 50day sma, and after a couple of days of selling, the stock was back below the 20day sma and 8day ema as well. Today’s drop briefly put the stock into the gap from 11/10, and momentum should continue to build on the downside now to close that gap (17.06). The Dec16 put spread will be targeting an initial move to <17.15 to begin locking in money, and the swing trade will have a tight stop above 20 or a 30-40% net debit loss, whichever happens first.
On The Radar
The quiet period for MBLY has expired, and the stock saw a number of initiations this morning from analysts. While generally bullish, the stock was unable to hold onto the early gains, and the drop back below 28 sent MBLY under support from last week. The higher strike $35 call was sold into the rally to turn the position into a very low debit call spread, but even with the reduced risk, it still makes sense to manage the trade closely. There will be a hard stop at 25 on the position moving forward. A break of that level means MBLY would lose post-IPO support and set up lower prices, so we will plan on exiting before a serious downside move can develop.
What a difference a week makes for ALLY. Last Monday, ALLY was trading above 29 and threatening to clear the key 50day sma. After five straight sessions of selling, though, the stock is under all moving averages and into the gap from the CPI reading (24.84). With bullish momentum gone and the stock steadily sliding lower again, the Dec16 put spread roll down is in good shape and close to the money, so we can be patient with the trade as it continues to develop. The next target will be <25.
Trader Author Portfolio Holdings
**As of 4pm ET November 21, 2022