By Dan Darrow
August 24, 2022
Today's Trade Ideas
Symbol: MDB
Style: Event
Strategy: Call Spread
Contracts:
Long Sep09 $362.50 call
Short Sep09 $370 call
Action Area: $2.40 - $3.30
Comments: MDB is a speculative ramp into the report candidate. The market has rolled over a large recent run, and Software stocks have tumbled along with it, cutting momentum on many big names ahead of their late August earnings releases. MDB, from a market cap perspective, is not as big as some Software companies reporting this week or next, but it has been a consistently solid performer, with strong results on both reports year-to-date. The stock’s reversal over the past two weeks after testing the 200day sma has knocked it lower by >15% ahead of its earnings release (8/31), and it is setting up an opportunity to step in for a ramp into the report play into the event. If Tech firms up over the next several sessions (or just stops sliding), traders should grow more positive on MDB as earnings near, and there is an unfilled gap from last week at 353.53 with plenty of room above. The Sep09 call spread will be a speculative strategy targeting a rally on the stock over the next few sessions to lock in money or reduce risk. The short-term trade will use a 30-40% net debit loss as a stop.
Style: Swing
Strategy: Put Spread
Contracts:
Long Oct21 $77.50 put
Short Oct21 $72.50 put
Action Area: $1.00 - $1.40
Comments: TSN is a bearish trade idea. TSN was knocked sharply lower on earnings earlier in August following a mixed report with cautious comments. The stock dropped from the mid-80s down below 80 on the day of the results, but it clawed back some of the losses over the following week. The bounce stalled around June/July support (~82) and the 8day ema, however, and it has slowly started to turn lower over the past few sessions to probe the earnings day low. With momentum building on the downside, a clean break of 78.50-78.75 should lead to a quick move lower, and there is room to ~75 before it encounters the next area of support. The Oct21 put spread will be targeting an initial move to <77.25 to begin locking in money, and the swing trade will have a tight stop above 82 or a 40-50% net debit loss, whichever happens first.
On The Radar
DKNG’s big breakout and huge run gave several opportunities to lock in money and roll up earlier in August. The stock ended up pumping the brakes as soon as it hit the 200day sma in the low-20s, and it has rolled over along with the overall market the past few sessions. DKNG has found buyers around the 20day sma on this week’s dip, and if it continues to hold steady in this area, it will be in a good spot to make a run for 20 again when the market bounces back. The plan will be to give the stock several more sessions to confirm the higher support level and then look to open up the Nov18 call spread roll up. Right now, the spread is a tight $2.50-wide position, and we may open that up to a $5-wide spread for slightly more net debit.
AMD has been under pressure since last week, similar to the Semi sector (and Tech overall), and the stock has been attempting to hold the 100day sma since first testing it on Monday. The 100day sma has been a key area of support since the end of July, so this is an important development for AMD as it looks to stabilize. Closely-correlated peer NVDA reported after the close today and is roughly flat following better-than-feared results, and that may provide a positive boost for AMD tomorrow. The Oct21 call spread has plenty of time and allows us to be patient while the trade develops, but we will need to keep a close eye on the stock as it hovers near the key 100day sma. We will institute a new technical stop at 90 moving forward as well.
Open Positions
Trader Author Portfolio Holdings
**As of 4pm ET August 24, 2022
