By Dan Darrow

November 28, 2022

Today's Trade Ideas

Symbol: MMM

Style: Swing

Strategy: Put Spread


Long Dec30 $124 put

Short Dec30 $120 put

Action Area: $1.20 - $1.60

Comments: MMM is a fast-developing bearish trade idea. MMM has had a strong move off its year-to-date low like many Industrial peers, and the fast rally mid-November to the 130s looked set to deliver a retest of the 200day sma before momentum finally cooled two weeks ago. MMM quickly rolled back into the mid-120s, and it reset under the 100day sma last week, forming a short-term head-and-shoulders pattern on the daily chart. Today’s sharp drop triggered the pattern on the downside, and there is now an open path lower to 119-120 and the 50day sma (119.55). The Dec30 put spread will be targeting an initial move to <122 to begin locking in money, and the swing trade will use a 30-40% net debit loss as a stop.

Symbol: TNDM

Style: Swing

Strategy: Put Spread


Long Jan20 $40 put

Short Jan20 $35 put

Action Area: $1.55 - $1.90

Comments: TNDM is a bearish trade idea. A miss for the quarter and a sizable guide down was a bad recipe for TNDM, leading to a sharp two-day drop from above 51 pre-earnings to below 34 a couple of sessions later. The stock managed to recover some of the loss over the following two weeks, but it never sustained any momentum above 40, and once the 8day ema caught up overhead, it put a ceiling on the rally. That moving average has continued to provide pressure on TNDM recently, and the bounce late last week has the stock back into the 8day ema and 40 level again, and it is setting up a near-term bearish opportunity. With the 20day sma close to joining now too, TNDM should start to turn lower as pressure builds above, and there is a clear path into the low-to-mid 30s to retest the low from November (33.51). The Jan20 put spread will be targeting an initial move to <38 to begin locking in money, and the swing trade will have a tight stop above 42.50 or a 30-40% net debit loss, whichever happens first.

On The Radar

A lack of a material bounce last week with the overall market has put UPST in a great position to break lower this week, and now the stock needs a sustained drop below 18 to get momentum building. UPST struggled to reset the 8day ema all of last week, and while it pushed green early off the open this morning, it failed around that moving average again and quickly turned lower. Buyers have shown up under 18 the past few sessions, but repeated failed attempts to rally should start to weigh on sentiment, and the 11/09 unfilled gap should act as a magnet once it starts to turn lower. The Dec16 put spread is in good shape at the moment, so we can be patient with the position while the trade develops, but if the stock still hasn’t dropped near 17 by the end of the week, we may have to start thinking about rolling out the options to buy more time. 

VZ is on close watch tomorrow. After breaking through the 50day sma two weeks ago and steadily grinding up above 39 last week, VZ has started to lose momentum, and today’s slide down near 38 put it below the 8day ema and close to key trend support. The 20day sma has marked the low of the month-long rally, and with the moving average currently at 38.05, it will be important for buyers to defend that level tomorrow, or the stock may begin to accelerate lower. With the Dec16 call roll up beginning to run low on time, we will need to place a tight technical stop at 37.90 to make sure to exit before a breakdown can develop.

Open Positions

* The following Open Positions pertain to the Options In Play trade ideas from this and previous editions. Disclosure of the Trader Co-Author’s actual portfolio holdings, as of the date of each publication, is made below under "Trader Author Portfolio Holdings.".

Trader Author Portfolio Holdings

**As of 4pm ET November 28, 2022