By Dan Darrow

September 29, 2022

Today's Trade Ideas

Symbol: FSLR

Style: Swing

Strategy: Put Spread


Long Oct28 $125 put

Short Oct28 $115 put

Action Area: $2.65 - $3.10

Comments: FSLR is a bearish trade idea. We don’t typically focus on shorting the strongest stocks in the strongest sectors, but recent leader FSLR is setting up well for a move lower. Solar stocks were on fire in July and early August, and the sector resumed its strength at the start of September following a modest pullback. Throughout that stretch, FSLR did not stop going up, climbing steadily from the mid-70s in July to ~140 by early September. It rode the 8day ema higher the entire way, only losing the key moving average last week. The sector has turned lower fast since the FOMC meeting, and FSLR closed below the 8day ema and 20day sma today following a big green to red reversal. With peers sharply off their high and FSLR beginning to lose key moving average support, the stock should start to build momentum lower, and there is an open path into the 50day sma (116.55) underneath. The Oct28 put spread will be targeting an initial move to <123 to begin locking in money, and the swing trade will have a tight stop above 138.25 (above today’s high) or a 40-50% net debit loss, whichever happens first.

Symbol: SMH

Style: Swing

Strategy: Put Spread


Long Nov18 $184 put

Short Nov18 $177 put

Action Area: $2.40 - $2.90

Comments: SMH is a fast-developing bearish trade idea. Several warnings from prominent names in the Chip sector have weighed on sentiment on the SMH, leading to a deep correction from the middle of August through the end of September. After stalling around previous resistance near 245, SMH turned lower into the back half of August, similar to the overall market, losing all moving average support post-Fed Jackson Hole speech. It continued to slide into the start of September, sinking to ~200 to retest key June/July pivot support, then broke that level last week post-FOMC meeting. The ETF formed a week-long bear flag right at the July low (189.94) and dropped below the bottom today to start a near-term breakdown. Under 190, there is an open path into the mid-to-low 170s, and the Nov18 put spread will be targeting an initial move to <181 to begin locking in money. The swing trade will have a tight stop above 195.50 (above the 8day ema) or a 40-50% net debit loss, whichever happens first. Because MU’s earnings could have an impact on SMH early tomorrow morning, we will wait ~30 minutes off the open to make sure the setup is still valid.

On The Radar

Tomorrow is weekly Sep30 expiration, and there are no positions set to expire. Following a volatile week and with the closely-watched PCE number in the morning, the market could have a busy Friday morning, so be on the lookout for early updates!

Action on Bonds was particularly ugly this week, and HYG will head into the final day of the quarter just off its worst level from the pandemic. HYG sank to a low of 69.41 in March of 2020, though 70 was the key support area at the time. The ETF has been consolidating below 72.50 this week and under previous support from June, setting it up for a retest of the key 70 level from 2020. The original trade was rolled down multiple times, so we can be patient with the Nov18 put spread and wait for a move closer to the 70 area while also tightening the stop now to 73.75. 

GLD is at an important level. After breaking down nicely and extending into the low-150s earlier this week, GLD has recovered some lost ground, with a bounce Wednesday sending it above the 8day ema and a flat session today keeping it above that moving average. The 8day ema has been downtrend resistance since GLD turned lower in August, so tomorrow (and early next week) will be an important test for the ETF. If it begins to push above 155, it may have a path to the 20day sma (156.49), and that will need to be the hard stop for the remainder of the Oct21 put spread swing trade. We do not want to let GLD build momentum out of the downtrend.

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 29, 2022