July 25, 2022

Today's Trade Ideas

Symbol: U

Style: Swing

Strategy: Put Spread


Long Aug19 $36 put

Short Aug19 $30 put

Action Area: $2.10 - $2.50

Comments: U is a bearish trade idea. Momentum took a “U-turn on U in November after the stock hit 200, and it has been straight down ever since. A sizable guidance cut on the May report sent the stock spiraling under 30, but the dip below that level was short-lived. U recovered most of its earnings-related losses by the beginning of June, but it never managed to stabilize in the high-40s. Another rally attempt earlier in July looked to be gaining momentum, but the company announced a surprise merger with IS two weeks ago while also simultaneously announcing weak guidance, and the 1-2 combination knocked the stock sharply lower again. U closed the merger gap last week as it pushed to 40+, but the rally stalled as soon as it tested the 50day sma, and now it is beginning to turn lower after several failed attempts to reclaim that moving average. Having lost the 8day ema today, U has a path back to the post-merger announcement low (31.73), and the Aug19 put spread will be targeting an initial move to <33.50 to begin locking in money. Because earnings are due out soon (8/09), we will be using a tight 30-40% net debit loss as a stop, and we may adjust the initial target higher if it starts to show signs of consolidating.

Symbol: JWN

Style: Swing

Strategy: Put Spread


Long Sep16 $22.50 put

Short Sep16 $17.50 put

Action Area: $1.25 - $1.75

Comments: JWN is a bearish trade idea. We recently focused on JWN for a bearish play after momentum cooled following its large post-earnings run. The late May/early June rally stalled at the top of its yearly downtrend, and when it reset below the 100day sma and 200day sma, it created a solid bearish pattern. JWN has had a similarly strong run over the past week, and the move has also coincided with a failure at yearly downtrend resistance and the 100day sma and 200day sma. The Sep16 put spread will be targeting a repeat of the June retracement, and we will begin to lock in money <22. The swing trade will have a tight stop above 25.50 (above last week’s high and the 100day sma/200day sma) or a 30-40% net debit loss, whichever happens first. The earnings date is not confirmed yet, but the Sep16 options should cover the report, so premiums should hold in better than the shorter-term Aug19 contracts.

On The Radar

Tomorrow is a big day for GOOGL. The company will report earnings after the close, and the stock struggled to hold onto early gains today while sliding late to end near Friday’s low. The drop on Friday came in response to SNAP’s results, but SNAP is not always a good indicator for GOOGL. We circled back to the stock with an Aug05 $116 - $116.50 call spread (the original trade was Aug05 $2320-$2330 before the split) using a portion of the gains from the recent trade, so I decided to give the position a little room to see if it recovered post-SNAP print. If Tech firms up tomorrow, GOOGL may put together a run ahead of  its report, so we will wait and see how the session shapes up before making a decision on the position. Keep an eye out for an update tomorrow.  

TWLO had a tough session Friday, similar to many Software names, and the drop sent it sliding away from the key 50day sma breakout level. The stock caught a downgrade this morning, which didn’t help it early, but buyers showed interest throughout the session to prevent a deeper slide, and the modest loss (on a weaker overall session) was a positive sign. Call buying was active for next week’s contracts, and the pattern can still work if the market firms up, so we can stick with the Aug19 call spread for now. We will use a new technical stop at 84 if the selling does continue, however.

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 25, 2022