By Dan Darrow
November 29, 2022
Today's Trade Ideas
Symbol: SNOW
Style: Event
Strategy: Strangle
Contracts:
Long Dec09 $155 call
Short Dec09 $160 call
Long Dec09 $120 put
Short Dec09 $125 put
Action Area: $1.90 - $2.35
Comments: SNOW is an interesting candidate for a strangle on earnings this week. High growth, high priced Software stock SNOW is set to report earnings on Wednesday after the close, and the stock looks set up well for a larger-than-expected move. Year-to-date, SNOW has averaged a ~19% move on the day of its results, but the Dec02 straddle is only pricing in a ~13% move for the week. In addition, the stock has a clear unfilled gap from 11/09 underneath (126.26) and an open path to the 50day sma/100day sma above (160.50-163). Recent volatility on Software earnings has been high, and last quarter SNOW saw a nearly 23% pop on its print, so there are reasons to expect elevated volatility this week. The Dec09 strangle will be targeting a move of $18 in either direction over the next week. There will be no stop until after earnings are released, and a lack of movement will take a toll on the short-term contracts, so be sure to plan your size accordingly.
Style: Swing
Strategy: Call Spread
Contracts:
Long Jan20 $60 call
Short Jan20 $70 call
Action Area: $3.20 - $3.75
Comments: RCL is a bullish trade idea with a tight stop. November earnings were a mixed bag for RCL, but an initial drop on the numbers on 11/03 was met with aggressive buying, and the month-long uptrend remained intact. The stock cleared the key 200day sma post-CPI the following week, and it has tightened up in a two-week bull flag at 60, while the 8day ema provides increasingly higher support. Today’s rally to 60 put RCL directly at recent resistance, and it is setting up a near-term breakout, with open room to run into the mid-60s. The Jan20 call spread will be targeting an initial move to 62.50+ to begin locking in money, and the swing trade will have a tight stop below 57.50 or a 30-40% net debit loss, whichever happens first.
On The Radar
MSFT began to clear recent bull flag resistance at the end of last week, but momentum has completely reversed this week. After beginning to push above 248 Wednesday and Friday to come within striking distance of the earnings gap (250.66), MSFT has quickly slid lower the past two sessions, with today’s drop sending it under 240. It will be important for the stock to stabilize around 240 to maintain the upper base, otherwise, the bull thesis will change. The drop today didn’t hit the technical stop (237) or the net debit stop, but if the weakness continues tomorrow, either could be hit, so we will need to keep a close eye on it now.
We can tighten the stop on JNJ now. The Dec16 call spread was rolled up/out yesterday when the stock probed 178, but that early Monday high ended up marking the top for the week. JNJ has slid lower since that move, with a quick drop this morning under the key 175 level. Though it did have a dividend recently, the 175 level is still an important spot technically, and buyers need to defend that area moving forward, or the stock could begin to slide back into the low-170s and the 200day sma. With that in mind, we are going to tighten the stop on the roll up to 174 now.
Open Positions
Trader Author Portfolio Holdings
**As of 4pm ET November 29, 2022
