By Dan Darrow
September 13, 2022
Today's Trade Ideas
Strategy: Put Spread
Long Oct21 $140 put
Short Oct21 $135 put
Action Area: $1.85 - $2.35
Comments: BURL is a bearish trade idea. BURL has consistently underwhelmed on earnings all year, and while that is not major development for a Retailer after a tough stretch, it’s harder to shrug off when the stock is an expensive growth name. BURL’s comp miss and large guidance reduction on 8/25 sent the stock lower on the day of the results, but the move didn’t even lead to a retest of the August low (139.18) or key recent support (138 -140). A lack of a meaningful bounce since the report has led to a two-week consolidation forming right above that level, however, and with the 8day ema, 20day sma, and 50day sma all sitting overhead, pressure should start to build on the downside. On a clean break of 138, BURL should start to see a quick move down into the 52-week low (133.28), and there is open room underneath that level into the low-120s/teens. The Oct21 put spread will be targeting an initial move to <136.50 to begin locking in money, and the swing trade will use a 40-50% net debit loss as a stop.
Strategy: Put Spread
Long Oct21 $125 put
Short Oct21 $115 put
Action Area: $2.90 - $3.60
Comments: MRNA is a bearish trade idea. Covid-related stocks have fallen out of favor recently as covid case numbers remain low, and after a weak stretch in August, MRNA is setting up for lower prices. MRNA slid into the end of August to lose the key 150 level and all near-term moving average support. It stabilized in the low-130s and attempted to bounce last week, but sellers stepped in quickly around the 8day ema and 20day sma. With today’s sharp move lower, MRNA is now back to the recent support range and prepping for a near-term breakdown following a lackluster bounce, and under 129-130, there is a clear path to the June low (115.61). The Oct21 put spread will be targeting an initial move to <125 to begin locking in money, and the swing trade will use a 40-50% net debit loss as a stop.
On The Radar
ORCL’s report Monday after the close was mixed, and that made for a choppy session for the stock today. After opening red, ORCL quickly turned green even as the market rolled lower, and it pushed past 78.50 and 200day sma during the first few minutes. It stalled around 79, though, and it quickly reversed red, erasing any potential momentum. The stock alternated going green and red again in the afternoon but eventually finished lower, and the lack of a major move weighed on the Sep23 strangle. The plan with strangles/straddles on the first day is to watch for a move to recover 80-90%+ of the net debit of the trade (if it doesn’t have a huge gap), and if not, then give the stock two to three more sessions to establish direction. If ORCL has still not made a sustained mover higher or lower by Thursday, we will need to manage the Sep23 strangle.
The speed of the reversal lower on many stocks today was staggering. After rallying for several sessions in a row, AMZN dropped over 7% today to give back all of its gains from last Wednesday. AMZN wasn’t alone among the big Tech names in seeing a huge drop today, so it shows that even the best-in-breed names saw heavy risk-off selling. The original Oct14 call spread was rolled up on Monday to lock in money, but now we will need to tighten the stop on the current position. The bullish trade revolved around the stock holding the 100day sma and key 125 previous resistance level, so the stop moving forward will be at 124.50. Giving the stock room to the 100day sma (122.56) now is too much risk, so we will have a stop right under the low from last week.
Trader Author Portfolio Holdings
**As of 4pm ET September 13, 2022