August 02, 2022

Today's Trade Ideas

Symbol: T

Style: Swing

Strategy: Long Put

Contracts: Sep16 $19 put

Action Area: $.80 - $1.00

Comments: T is a bearish trade idea. The 8ema catch-up pattern revolves around stocks that gap on earnings (or other events). We wait for the moving average to catch up to the stock, set the floor/ceiling, then start another move in the direction of the gap. T had an unexpectedly bad print two weeks ago, leading to a large gap lower on the stock to the 19. It slid below that level the following couple of sessions and has remained in a tight lower range underneath it since, as key previous monthly support now turns into resistance. The 8day ema joined overhead on Monday, and the stock began to turn lower today, with a weak finish putting it near the bottom of its post-earnings trading range. A clean break of 18.20 should start another leg lower now, and the Sep16 put will be targeting an initial move to <18 to begin locking in money. The swing trade will have a tight stop above 19.15 (earnings gap high) or a 40-50% net debit loss, whichever happens first.

Symbol: MPC

Style: Swing

Strategy: Call Spread


Long Sep16 $95 call

Short Sep16 $105 call

Action Area: $2.70 - $3.35

Comments: MPC is a bullish trade idea. We knew numbers on the Refiners would be good this quarter, but companies blew expectations out of the water. MPC turned in a massive beat this morning, confirming the great numbers seen by peers VLO and PSX last week. While MPC only had a modest stock rally today on the print, it triggered a key technical development, which should set up further upside in the near term. After topping out above 114 in early June, MPC rolled over quickly later in the month to the 100day sma in the 80s. It stabilized at that moving average temporarily, then broke lower at the beginning of July to test the 200day sma in the high-70s. A textbook double bottom formed at the 200day sma, and a steady recovery through July put the stock back at the 100day sma heading into earnings this morning. With a sizable beat and a solid rally today, MPC has pushed past the 100day sma and the 50day sma above it, removing all near-term resistance and opening the chart up for a run. The Sep16 call spread will be targeting an initial move to 98+ to begin locking in money, and the swing trade will have a tight stop below 88 or a 40-50% net debit loss, whichever happens first.

On The Radar

WMT’s huge drop on guidance but even larger rebound has made for a whiplash-inducing week of trading, and the action on the stock has also impacted the Retail sector broadly. JWN sank with WMT last week, and it has recovered over the past few sessions as well. The rally on Monday put it back above the 50day sma, and it chopped around above it most of today’s session. JWN is still squarely in its monthly downtrend, so the thesis for the Sep16 put spread still stands, but we will need to keep a close eye on the stock if it approaches ~24.75 and the 200day sma. A break of that moving average could start a larger rally, so we will need to manage the position quickly if it begins to clear that level. 

GM has had a nice push higher since it began to clear the key 50day sma last week, and it has hit 37 on back-to-back sessions this week. Both times GM failed to hold above that level, though, narrowly missing our initial target range of 37.50+. If 37 turns into a near-term area of resistance, we will lock in some money on the Sep16 call earlier. We will wait for another test of 37 to make a decision.

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 August 02, 2022