By Dan Darrow

August 31, 2022

Today's Trade Ideas

Symbol: PANW

Style: Swing

Strategy: Call Spread


Long Oct21 $580 call

Short Oct21 $590 call

Action Area: $3.65 - $4.20

Comments: PANW is a fast-developing bullish trade idea. PANW had a tight four-month consolidation ahead of its report last week, setting up the possibility of a large move higher/lower on a resolution of the range. A beat, raise and proposed three-for-one stock split did the trick. PANW popped sharply following its results to clear the top end of the four-month consolidation, and the stock surged up into the low-570s to retest levels from early May. PANW has managed to hold onto the gains even as the overall market has tumbled since Friday, and the stock is in the process of forming a new higher base above 550 as the 8day ema joins underneath. Rising support from that moving average should set up another leg higher, and there is a path to ~600 once it starts to push past last week’s high (~577-578). The Oct21 call spread will be targeting an initial move to 585+ to begin locking in money, and the swing trade will have a tight stop below 449 or a 40-50% net debit loss, whichever happens first.

 Symbol: ENPH

Style: Swing

Strategy: Call Spread


Long Oct21 $310

Short Oct21 $320

Action Area: $3.70 - $4.30

Comments: ENPH is a bullish trade idea (with a tight stop). The Solar sector has been on fire since the first announcement of the Inflation Reduction Act, and ENPH has been one of the best names in the group. In addition to riding the tailwind from the green energy spending bill, ENPH also turned in a strong earnings report on 7/26, helping to accelerate the move to the upside. ENPH hit the 300 level several sessions after its print, then promptly pumped the brakes and tightened up into a flag underneath it. The stock has remained range-bound below 300 for the past month, with support at 280 and the 8day ema and 20day sma. The higher base has also formed above the high from 2021, and the leading stock in a leading sector is in a great position for another material leg higher once the market firms up. The Oct21 call spread will be targeting a breakout and initial move to 308+ to begin locking in money, and the swing trade will have a tight stop below 272 (under the August low) or a 40-50% net debit loss, whichever happens first.

On The Radar

I had an update written up and ready to go out on SNAP in the premarket, then the stock pulled a total 180. SNAP was trading around 9 most of the premarket after two Ad executives announced they were leaving the company. At 9:15 ET, the company released an official statement announcing a workforce reduction and updating certain financial metrics, and the stock ripped to 11+ in a matter of minutes. It looked like we were going to get the double dip on the Sep16 strangle ( make money on both sides), but now we will have to wait and see. The plan was to use 11 as a new stop for the position, but because it gapped above that level and was in play today, I decided to give it a little more room. If it doesn’t have a sustained move above 11.50 by Friday, we will likely look to close the remainder of the trade. 

GFS hangs in much better than nearly all other Semis, but a constant barrage of negative news in the sector is hard to overcome. A warning from STX this morning knocked the Semis lower early, and after an impressive session yesterday, GFS slid quickly back to 60 to give up the previous day’s move. GFS has found strong support around 59-60 and the 20day sma, and as long as it can keep holding in this area, it will be in a great position to turn higher once the overall market and sector firm up. We are only using a net debit stop loss on the Oct21 call spread at the moment, but a break of 58 would be a negative for the bullish pattern, and it may be the cue to exit even if the stop loss isn’t hit. This will be on close watch the next few sessions.

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 31, 2022