August 07, 2022
Today's Trade Ideas
Strategy: Put Spread
Long Sep16 $18 put
Short Sep16 $13 put
Action Area: $1.40 - $1.70
Comments: LCID is a bearish trade idea. LCID’s results this week were not good. Not only did numbers come in far below expectations, but the company slashed its production forecast for the year due to supply chain issues. The stock traded lower following the print, but a risk-on environment prevented a material move to the downside. LCID held 17.75-18 support on Thursday and put together a modest bounce during the session, but sellers stepped in on Friday to knock it back to the key support area again, and momentum should build for a breakdown in the near term. With the stock under all moving averages and sitting at key support, a push below 17.75 should start an extended drop to 16.35 (July low) and 15.30 (June low) underneath it. The Sep16 put spread will be targeting an initial move to <16.50 to begin locking in money, and the swing trade will have a tight stop above 19 or a 40-50% net debit loss, whichever happens first.
Strategy: Put Spread
Long Sep16 $140 put
Short Sep16 $135 put
Action Area: $1.95 - $2.35
Comments: ABBV is a bearish trade idea. One disappointing quarter can be an anomaly, but two in a row is the beginning of a trend. ABBV followed up a weak April report with a lackluster print last Friday, and the stock struggled to recover this past week. ABBV sank into the 140 level and the 200day sma on the day of its results, and buyers stepped in to defend the key moving average similar to the drop in June. A lack of a meaningful bounce this past week put the stock in a susceptible spot, though, and following Thursday’s tick lower and Friday’s weaker session. ABBV is setting up for a break of the 200day sma. The 8day ema has joined overhead and should start pressure building to the downside now, and the Sep16 put spread will be targeting an initial move to <136 ( a retest of the June low) to begin locking in money. The swing trade will have a tight stop above 143.50 or a 40-50% net debit loss, whichever happens first.
On The Radar
A red session following a stronger-than-expected Jobs report on Friday may have paused momentum on the market’s recent run, but bulls still enter the busy upcoming week with the upper hand. QQQ and SPY continued their strong action over the past week, with both finishing higher over the five-day stretch and both closing above their 100day sma for the second consecutive week. The CPI reading on Wednesday will be a significant market even on Wednesday, and it could lead to a sizable swing on the indices, but for now, the action remains constructive on the bull side. Our focus will continue to favor bullish patterns due to the overall market activity, but with many names getting stretched and/or turning in less-than-rosy reports, more bearish patterns should begin to emerge.
CHPT had a fast reversal back to the top of its multi-month downtrend following the surprise Green Energy bill proposal, and the stock has continued to build higher since the initial pop. CHPT rallied to June resistance around 15.75, paused initially, then began to leg up through it at the end of this past week. With rising 8day ema support, CHPT should make a run into the 200day sma (16.61), so we will be watching for a move to 16.50+ to begin to manage the Sep16 strangle.
XLF continues to show positive signs. It was a flat week for Financials, but that is fine for XLF as it began to build a higher base above previous resistance at 33.25. The 8day ema joined underneath mid-week, and the grind higher into Friday’s close put it in a good position to make a run at 34 early this coming week. The initial Sep16 call has already been rolled up, and we will be patient with the current call as the trade develops. It may be a volatile week for Banks, with the CPI reading due out Wednesday morning, so we can tighten the stop to 32.75 moving forward.
Trader Author Portfolio Holdings
**As of 4pm ET August 05, 2022