July 14, 2022
Today's Trade Ideas
Strategy: Put Spread
Long Aug19 $55 put
Short Aug19 $47.50 put
Action Area: $2.05 - $2.50
Comments: OXY is a fast-developing bearish trade idea (with a very tight stop). OXY has weathered the recent Energy rout better than most of its peers, perhaps in part to Buffett’s interest in the stock. The stock rolled into the 100day sma in mid-June, and it has defended that moving average numerous times since then, but sellers are starting to get more aggressive. OXY sank under the 100day sma on Tuesday, and it has struggled to reset above the key moving average the past couple of sessions. A pent-up break to the downside should develop fast, and a retest of the June low (54.35) is a clear first target. The Aug19 put spread will be targeting an initial move to <54.50 to begin locking in money, and because this is a make-or-break setup, the trade will have a tight technical stop at 59.25 ( a reset of the 100day sma) or a 30-40% net debit loss, whichever happens first.
Strategy: Call Spread
Long Aug05 $2320 call
Short Aug05 $2330 call
Action Area: $2.30 - $3.10
Comments: We are circling back to GOOGL for a bullish trade idea. The recent call spread on GOOGL targeted a rally on the stock ahead of the split and/or a ramp into earnings. The big bounce last week played out perfectly for the options, and instead of sticking around for the split/earnings, the trade was closed into strength. GOOGL has given back a majority of its bounce from last week, and it is nearing recent support again following the four-day slide. With buyers consistently showing interest on dips lately and the stock split set to take effect on Friday, this is an interesting opportunity to revisit a bullish trade on GOOGL with a two-week timeframe. The Aug05 call spread will be a lower debit strategy using only a portion of the gains from the recent trade. It will be targeting a move higher over the next week to lock in money, and the trade will use a 30-40% net debit loss as a stop.
On The Radar
Tomorrow is main monthly Jul15 expiration, and there is one position set to expire: XLF $33.50 call roll up. We were watching for an opportunity to recover premium today on the call after Bank earnings disappointed, but there were no bids for the contracts during the session. We will continue to keep an eye on it tomorrow to see if bids show up.
WMT had a strong session today and a strong finish, and it looks to be setting up for a near-term run finally. With today’s close near 128, WMT is within striking distance of the 50day sma (128.84), and if it can clear that level with volume, 130 should come quickly. If the stock begins to stall around the 50day sma over the next few days, though, we may lock in some money on the bull side of the Aug26 strangle.
This coming week will be a big one for Commodity earnings, and while BTU was not scheduled to report until later in July (tentatively 7/28), they guided preliminary numbers after the close today. With revenues coming in below expectations, there is a chance the stock is under pressure tomorrow, and a clean break of 20 should start momentum building on the downside again. The initial Aug19 put spread was already rolled down, so we can be patient with the current spread as long as the stock keeps holding below the 20day sma (21.51).
Trader Author Portfolio Holdings
**As of 4pm ET July 14, 2022