By Dan Darrow

September 25, 2022

Today's Trade Ideas

Symbol: CHPT

Style: Swing

Strategy: Call Spread


Long Oct28 $15.50 call

Short Oct28 $19 call

Action Area: $.75 - $1.00

Comments: CHPT is a bullish trade idea. It’s not good to keep going back to the well too many times on a name that has worked, but CHPT’s two-week drop has put it at a big level. The last of the recent strangle trade was closed when the stock surged past 19, but that session ended up marking the top of the run, and over the past week, CHPT has slid all the way back down below 15 to test a key support level. The stock closed Friday near the 100day sma and 14 level, an area where it has found buyers since the start of August. A similar fast reversal lower played out in August, leading to a quick bounce to ~17 a couple of weeks later, so we will step in here on a bullish position targeting a similar rebound. The Oct28 call spread will be targeting an initial move to 16.75+ to begin locking in money, and the swing trade will have a tight stop below 13.75 or a 40-50% net debit loss, whichever happens first.

 Symbol: KSS

Style: Swing

Strategy: Put Spread


Long Oct21 $26 put

Short Oct21 $22.50 put

Action Area: $1.00 - $1.30

Comments: We are going to circle back to KSS for a bearish trade idea. The pre-CPI rally across the market lifted many weak stocks, including KSS, which had been trading in a tight, lower range under 30 since its mid-August report. The fast rally to 30+ put the stock above the 8day ema, 20day sma, and 50day sma, and it triggered the stop for the remainder of the swing trade at the time. No material rally ended up developing, however, and after the CPI came in hotter than anticipated and the market got hit, KSS sank right back below those moving averages and the key 30 level. KSS remained heavy this past week and finished Friday slightly above its recent low, setting up a near-term breakdown on the stock. On a clean break of 26, KSS should see a quick move down to the low-20s, and the Oct21 put spread will be targeting an initial move to <24.50 to begin locking in money. Because this is a revisit, we will use a tighter 30-40% net debit loss as a stop (or a technical stop above 30.25 if it rallies).

On The Radar

Any hopes that Powell and company would ease off the gas were extinguished on Wednesday. The market was already reeling following the hotter-than-expected CPI the week before, looking for any encouraging commentary from the Fed chief to start a bounce. None came on Wednesday, though, and the selling escalated that session and continued Thursday and Friday. The sharp drop on Friday put both QQQ and SPY near their June low, setting up a critical stretch of action this coming week. If the previous 2022 low does not hold, both indices could have material downside, with no major support underneath for some ways. The slope of the selloff has steepened, though, and stocks are getting more oversold, so a bigger bounce is possible if the low of the year holds, but QQQ and SPY need to reset key moving averages (8day ema to begin with) to start showing signs of stabilizing. It will likely be a volatile week of action, and we need to continue to manage trades closely. 

PINS is beginning to get dragged down with the overall market. After holding steady around 25 and above the 200day sma post-CPI, PINS finally started to roll over this past week following the Fed meeting, and Friday’s drop put it back below the key 24 level and under the 20day sma. The Nov18 call spread has not hit the net debit stop loss, but we will need to pay more attention to the position in the near term. PINS has to hold the 100day sma (21.17) now, or the stock may build momentum to the downside. That will be the new technical stop for the trade, in addition to the 40-50% net debit loss. 

REGN hangs in well. Pharma and big Biotech names were a bright spot on Thursday and Friday, and while REGN closed the week red, it continued to hold the bottom of the recent bull flag. If REGN can make a push back through ~705 now, it should start to build momentum for a near-term run, so it is worth being patient with the position. We can institute a new technical stop at 670 moving forward, which would be a break of bull flag support.

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 September 23, 2022