By Dan Darrow
September 22, 2022
Today's Trade Ideas
Strategy: Call Spread
Long Oct14 $315 call
Short Oct14 $320 call
Action Area: $1.10 - $1.65
Comments: TSLA is a speculative bullish trade idea. We are a little over one week away from TSLA’s delivery numbers, and the stock has recently slid into key support. After probing two-month resistance around 315 on Tuesday and Wednesday morning, TSLA reversed sharply post-FOMC statement/meeting to finish the session at 300. It continued to fall again today, breaking under the 8day ema, 200day sma, and 20day sma, and sinking into the mid-280s to test the 50day sma. It held the latter and firmed up into the close, creating an interesting near-term bullish setup. TSLA had strong buying interest in the 280s in August, and with deliveries expected to be solid and the stock seeing large runs into the numbers two out of the last three quarters, there is a good chance that buyers step into the name soon. The Oct14 call spread will be a speculative strategy targeting a rally on the stock over the next week to lock in money or reduce risk, but the risk/reward is still solid for an event trade even if it doesn’t move immediately. The trade will use a 30-40% net debit loss as a stop prior to the deliveries.
Strategy: Long Put
Contracts: Oct21 $42 put
Action Area: $1.95 - $2.30
Comments: WFC is a bearish trade idea. Financials (XLF) broke an important two-month support level yesterday post-FOMC, and WFC sank to finish slightly below a critical spot. Since mid-July, WFC has found consistent buying interest at 42.50, with several dips into the level already in September. Yesterday’s drop put WFC below that key level, though, and following a lackluster session today, the stock is susceptible to a near-term breakdown. There is a clear path down into the high-30s under the 42.50 support level, and the Oct21 put will be targeting an initial move to <40.50 to begin locking in money. The swing trade will have a stop above 43.25 or a 40-50% net debit loss, whichever happens first.
On The Radar
Tomorrow is weekly Sep23 expiration, and there are no positions set to expire. Today was a busy session of updates, and if the morning is volatile again, tomorrow may be as well, so keep an eye out for updates early!
Action deteriorated quickly on DKNG. The stock was looking fantastic last week as it pushed above the key 200day sma and 19 level, and it looked set up well for a continued run to retest the high from August. Momentum stopped quickly, though, and over the last few sessions, the stock has dropped back below the 8day ema, 20day sma, and 50day sma. DKNG will need to hold 14.75-15 on this drop, or we will need to exit the remainder of the Nov18 call spread. That would mark a breakout failure and put the stock below all moving averages.
Another day like today, and OKTA could be into the roll zone again. OKTA has been steadily walking lower since it lost the 60 support level last week, and the drop today put the stock near 55, and the Oct21 put fly roll down near the money. We will be now targeting either a drop to <54 or a 70% gain on the strategy to roll down again, and today’s weak finish could lead to one of those tomorrow. We will also tighten the stop on the remainder of the position to 60.50 moving forward.
Trader Author Portfolio Holdings
**As of 4pm ET September 22, 2022