August 09, 2022

Today's Trade Ideas

Symbol: STX

Style: Swing

Strategy: Put Spread


Long Sep16 $75 put

Short Sep16 $70 put

Action Area: $1.15 - $1.60

Comments: STX is a bearish trade idea. STX’s two closest peers (MU, WDC) have warned of weak forward guidance over the past week, and the back-to-back negative announcements should start to weigh on STX in the near term. STX is coming off a significant miss and guide lower on its own report a few weeks ago, though the strong recent rally on Semis helped the stock recover most of the losses it saw on the earnings session. It bumped up into key downtrend resistance at the 100day sma this week, however, and as the rally stalls and peers tumble on weak headlines, STX is setting up for a sustained move lower as well. The Sep16 put spread will be targeting an initial move to <75 to begin locking in money (test of the earnings day low), and the swing trade will use a 40-50% net debit loss as a stop (no technical stop initially).

Symbol: XME

Style: Swing

Strategy: Call Spread


Long Dec16 $50 call

Short Dec16 $57 call

Action Area: $2.20 - $2.85

Comments: XME is a bullish trade idea. July saw a broad bounce/recovery in many Commodity names, with some of the hard-hit Metal Miners turning the corner after several months of weak action. XME dropped to retest key multi-month support at 40 in early July and reversed sharply off the level shortly after. The hammer bottom started a sustained rally up into the high-40s by the end of July, and more buying in August has pushed the ETF up near 50. XME tested the 20d0ay sma on Monday and again today, and it is setting up for a near-term breakout above the moving average as momentum steadily builds across the Metal Miners. There is an unfilled gap from 6/10 at 51.93, and that will act as the initial target range for the longer-term Dec16 call spread. The swing trade will have a tight stop below 46.50 (under the 50day sma) or a 40-50% net debit loss, whichever happens first. 

On The Radar

MSFT is acting well. The stock has shown resilience over the past few sessions as it works on a new higher base around 280, and today’s green finish (in a sea of red in Tech) was a clear sign of relative strength. The 8day ema has joined underneath this week, and rising support from that moving average should help set up a near-term run on the stock. The unfilled gap from 5/05 at 289.98 is still a clear upside target, so we will remain patient with the Sep16 call spread for now. 

Back-to-back closes above 70 marked the first time BJ has finished two consecutive sessions above the key level, and it should start to put upward pressure on the stock. BJ has traded through 70 several times over the past year but it has never managed to close above the level twice in a row until this week. The fast-moving 8day ema has now joined the stock as it trades above resistance, and a near-term breakout should be imminent. The Sep16 call spread will still be targeting an initial move to 73+ to begin locking in money, but we can tighten the stop now on the downside to 68.50 (under last week’s low).

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 09, 2022