By Dan Darrow
October 26, 2022
Today's Trade Ideas
Strategy: Call Spread
Long Dec16 $290 call
Short Dec16 $305 call
Action Area: $4.30 - $5.20
Comments: We are going to revisit BIIB for a bullish trade idea. A quality bullish setup didn’t materialize on BIIB post-Alzheimer’s data until last week, and the timing was too close to earnings to get involved again. With earnings now out of the way (expectations were low for the print) and the stock above key near-term support, a bullish setup is forming. BIIB stabilized in the 260s, with rising support from the 8day ema and 20day sma, and should start to build momentum higher into the back half of November as the important CTAD conference (11/29 - 12/02) comes into view. BIIB will be presenting the full results of the Phase 3 trial at the conference, and expectations should rise into the event. The Dec16 call spread will be targeting an initial move to 289+ to begin locking in money, and the trade will use a 40-50% net debit loss as a stop.
Strategy: Long Put
Contracts: Nov25 $10 put
Action Area: $1.00 - $1.25
Comments: SNAP is a bearish trade idea. We are going to quickly jump back into SNAP for a trade following its huge gap lower on earnings and recent sizable bounce. The rebound this week has carried the stock back into the 10 level to retest key previous support, and today’s failure to reset that level should start a near-term slide lower. In addition, the fast-moving 8day ema has joined overhead, while the 20day sma is also slightly high, and the combination of the two moving averages should provide a near-term ceiling on the stock. The Nov25 put will be targeting an initial move to <8.75 to begin locking in money, and the swing trade will have a tight stop above 10.25 or a 30-40% net debit loss, whichever happens first.
On The Radar
UPS’s solid report gave FDX a slight boost yesterday, but it wasn’t enough to trigger a break of the month-long range. FDX climbed higher again today and stalled before testing the key 160 level, but that level could be in play tomorrow (or Friday). With a heavy lineup of eCommerce reports tomorrow, FDX (and UPS) should see interest, and a clean break of 160 can open the chart up quickly. Neither of the positions have been managed yet, but we will be watching for an opportunity to scale back risk on one side of the trade the remainder of the week.
We can tighten the stop on RH. The breakdown of recent support and slide into the low-230s gave a nice opportunity to roll down the initial Nov18 put spread, but the put fly is now moving further out of the money as the stock rebounds. RH reclaimed 250 yesterday and held above it again today, so we need to keep a close eye on the stock moving forward. The 50day sma and 100day sma are sitting overhead, and the latter will act as a stop for the remainder of the position (264.19). The trade can still work on the downside, but it would be more encouraging to see the stock reset under 240 soon.
Trader Author Portfolio Holdings
**As of 4pm ET October 26, 2022