By Dan Darrow

August 22, 2022

Today's Trade Ideas

Symbol: DE

Style: Swing

Strategy: Call Spread


Long Sep16 $377.50 call

Short Sep16 $385 call

Action Area: $2.70 - $3.40

Comments: DE is a fast-developing bullish trade idea with a tight stop. A mixed report on Friday morning initially led to a sharp gap lower on DE, but a big rebound created an interesting near-term setup on the stock. The sizable hammer reversal on DE came as the stock was consolidating around the key 200day sma. Having broken then reset that moving average on Friday, today’s solid session can be seen as confirming the bullish pattern (especially since the overall market was down substantially), and if the stock can clear 370 now and hold above it, there is an open path to the mid-380s. The Sep16 call spread will be targeting an initial move to 379+, and because this is a fast-developing, make-or-break pattern, the trade will use a tighter 30-40% net debit loss as a stop.

Symbol: SWN

Style: Swing

Strategy: Long Call

Contracts: Oct21 $8 call

Action Area: $.80 - $1.00

Comments: SWN is a bullish trade idea. UNG’s bullish reversal is complete. After a massive run into June and a massive correction later that month, UNG has rebounded back up to its 52-week high, with today’s rally confirming a near-term breakout after a week-long consolidation. SWN (and many of the Natural Gas E&P names) is still significantly off its best level of the year (9.87), but a bullish pattern is forming, indicating the stock may be ready for a large near-term run as well. SWN rallied to reclaim the key 100day sma last week, and it built a several-day consolidation above it. With rising support from the 8day ema and sustained strength in the underlying commodity, SWN looks set to build on today’s breakout, and there is an open path to 9+ now that it has cleared recent resistance. The Oct21 call will be targeting an initial move to 8.75+ to begin locking in money, and the swing trade will use a 40-50% net debit loss as a stop.

On The Radar

XLV will be on close watch the next couple of days. The breakout was developing nicely last week as XLV began to build to 134+ to start distancing itself from 200day sma resistance, but similar to many other sectors, it has rolled over quickly the past few sessions. XLV’s drop today has sent it back below the key 200day sma, and a weak finish has it near the bottom of August support. If XLV struggles to hold around 131 tomorrow, we will likely need to exit the Sep16 call spread roll up. Losing the 100day sma (131.17) would open the chart up for a move into the high-120s, and the premium on the options would erode further. 

HACK will also be on close watch this week. A solid two-week consolidation above 50 looked set to trigger a run to the mid-50s on HACK, but the Cyber Security ETF has rolled over the past couple of sessions to lose 50 and multiple moving averages. HACK will need to recover quickly tomorrow and stabilize around 50 (there is a good chance of that too, thanks to a strong quarter from PANW after the close), or we will need to close the remainder of the Sep16 swing trade. 

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 22, 2022