July 13, 2022

Trade Ideas

Symbol: DKNG

Style: Swing

Strategy: Call spread


Long Nov18 $12.50 call

Short Nov18 $20 call

Action Area: $1.40 - $1.75

Comments: DKNG is a speculative longer-term bullish trade idea. While admittedly there isn’t a ton of historical data for DKNG’s stock since it has been public, there has been a strong seasonality trade starting in July and lasting through September and the start of the NFL season. A relative low was put in during July 2020 when the stock dipped to the high-20s, and a similar relative low was put in last July when the stock dropped to the low-40s before snapping back quickly. This year has been rough for DKNG after opening in January near 28, but the selling has slowed since the May flush to 10, and there have been consecutive higher lows in June and July. DKNG needs to bust above the 50day sma (12.95) to break the downtrend, but once it does, momentum should build quickly for a move to 15+, especially with seasonality providing a tailwind. The Nov18 call spread is a more speculative strategy targeting a larger initial move to 14+. The swing trade will have a tight technical stop below 10 or a 40-50% net debit loss, whichever happens first.

Symbol: STZ

Style: Swing

Strategy: Call Spread


Long Aug19 $250 call

Short Aug19 $255 call

Action Area: $1.75 - $2.15

Comments: STZ is a bullish trade idea. STZ wrapped up June with a beat and raise print, though the market wasn’t in love with the numbers. The stock dropped from 243+ down to the low-230s on the day of the results, setting up another test of the 200day sma. Similar to earlier in June, STZ found buyers around that moving average that session and the following couple of days, and it began to recover into the end of last week. The stock has been choppy so far this week, but it has started to stabilize above the 50day sma again, with today’s rally putting it right near the top of recent downtrend resistance. On a clean break of 247, STZ should begin to build momentum for a run into the mid-250s, and the Aug19 call spread will be targeting an initial move to 250+ to begin locking in money. The swing trade will use a 40-50% net debit loss as a stop.

On the Radar

TLT needs to make up its mind about which direction it wants to go. After setting up a major downtrend breakout at the start of July, TLT failed and rolled back below all near-term moving averages last week. This week, though, it has rebounded quickly, and today’s rally post-CPI put it back above the 50day sma and all near-term moving averages again. If TLT can hold around 116 now, it should start to build momentum for a move to the high teens, and a quick rally would be welcomed as the Jul29 strangle is starting to run low on time. This will be a focus over the next few sessions, and if the ETF gives no chance to reduce risk or lock in money by Monday/Tuesday, we will need to manage the position (close or roll out to buy more time).  

Many stocks across many sectors were swept up in the risk-off selling on Tuesday, and IBM was one of those names. After opening red this morning, IBM recovered to nearly trade green, but it ran out of momentum before it could push past 139. The stock did hold the 50day sma, and it does still have a chance to ramp ahead of next week’s report, but it will need to snap back soon for the pattern to work. The Jul22 call spread didn’t have a technical stop when initiated, but we will use 136.50 as a stop level moving forward. That would put it below the key 50day sma. 

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 July 13, 2022