By Dan Darrow

November 07, 2022

Today's Trade Ideas

Symbol: ABBV

Style: Swing

Strategy: Call Spread


Long Dec02 $150 call

Short Dec02 $155 call

Action Area: $1.55 - $2.00

Comments: ABBV is a bullish trade idea. It took ABBV all of August, September, and the better part of October to break back above the 200day sma, but the rally was short-lived. After running into the low-150s ahead of earnings, ABBV quickly sank back below the 200day sma following a mixed report on 10/28, and the stock has been spinning around under the key moving average since. Today’s strong session put it slightly above the 200day sma, though, and it is setting up an interesting short-term bullish strategy. If ABBV can decisively hold above 148 now, it should build momentum into the 150s to close the earnings gap (153.50), and continued strength across the Pharma sector should act as a tailwind. The Dec02 call spread will be targeting an initial move to 151+ to begin locking in money, and the swing trade will use a tight 30-40% net debit loss as a stop.

Symbol: EBAY

Style: Swing

Strategy: Long Call

Contracts: Dec16 $40 call

Action Area: $2.00 - $2.45

Comments: EBAY is a fast-developing bullish trade idea. Better-than-feared earnings from EBAY last week prevented the stock from breaking down out of its recent consolidation under 40, and after a strong finish Friday and a solid session today, the stock is setting up for a near-term breakout. The 50day sma has been a key area of resistance over the past two weeks, but the stock is beginning to tick above the moving average following recent strength, and there is an open path on the chart emerging for a run to the 100day sma (42.83), which creates a nice setup for a short-term bullish strategy. The Dec16 call will be targeting an initial move to 41.75+ to begin locking in money, and the swing trade will have a tight stop below 38.50 or a 30-40% net debit loss, whichever happens first.

On The Radar

UUP is on close watch tomorrow. The slide into the 50day sma two weeks ago led to a nice reversal higher last week, and the ETF looked set up for a quick potential retest of the 52-week high following a strong session Thursday. The Dollar was under pressure following the jobs report on Friday, though, and today UUP sank back below the 50day sma again, making for an important couple of sessions. If UUP breaks this moving average, it could start a sustained move lower into the 100day sma, so we will need to tighten the stop on the Dec16 call roll up to 29.48 (the October low). What happens with UUP may have a significant impact on the overall market as well, so traders will be closely watching the action. 

GSK had a tough start to the week. After steadily riding the 8day ema higher for a month, GSK gapped below the moving average this morning following some disappointing data on a pipeline candidate. The stock opened right at the 20day sma, though, and stabilized around it during the session, so it will be interesting to see how it responds tomorrow. If GSK can rebound to reset the 8day ema quickly, it should reinforce the idea that the stock has put in a near-term bottom and has more room to move higher, and if that is the case, then it makes sense to roll the Nov18 call spread out to buy more time as the position has been running low on time. If GSK keeps sliding tomorrow and loses 31.25, it will have broken below the 8day ema, 20day sma, and 50day sma, and it probably makes the most sense to exit the remainder of the trade and wait for a new setup.

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 07, 2022