By Dan Darrow
September 14, 2022
Today's Trade Ideas
Strategy: Long Call
Contracts: Dec16 $23 call
Action Area: $1.25 - $1.65
Comments: ICLN is a longer-term bullish trade idea. The Inflation Reduction Act was a big win for Green/Alternative Energy companies, and as an ETF focused on Clean Energy, ICLN was a major beneficiary. With top holdings in the Wind, Solar, Electric, and Hydrogen Fuel Cell areas, ICLN surged to 22 on the surprise announcement of the bull in July, and it continued to grind higher over the following couple of weeks before topping out at 23.85. The ETF has started to find support above 22 and previous year-to-date resistance, and it is building a new higher base to set up another large leg higher. Once the overall market stabilizes and/or puts together a bounce, ICLN is in a great position to make a run at the August high as it rides recent tailwinds, and through 23.85 there is an open path to 25 to retest key resistance from 2021, with the possibility of a major breakout above it. The Dec16 call will be targeting an initial move to 23.75+ to begin locking in money, and the longer-term swing trade will have a stop at 21 or a 40-50% net debit loss, whichever happens first.
Strategy: Put Spread
Long Oct21 $157 put
Short Oct21 $150 put
Action Area: $1.50 - $1.95
Comments: GLD is a bearish trade idea (with a tight stop). GLD looked like it was about to fall through the floor at the start of September when it sank below 157.50 to lose the critical 158 support level. It ended up snapping back to the 159-160 quickly, though, and it began to rebound into the low-160s on Monday before promptly turning lower following the CPI. The two-day drop has now put GLD back under 158 in a position to trigger a major multi-year breakdown, and a clean break of 157 should start momentum building fast on the downside. Under this level, there is a clear path to ~150, and the Oct21 put spread will be targeting an initial move to 155 to begin locking in money. The swing trade will have a tight stop above 160.50 or a 30-40% net debit loss, whichever happens first.
On The Radar
WDAY hosted an analyst event yesterday, and it proved to be a low-impact catalyst. The stock was hit along with the overall market yesterday and went into the analyst event around 160 and above the 50day sma. It opened green this morning, turned red in the afternoon, then rebounded late to end almost perfectly flat. The stock is sandwiched between the 50day sma below and 100day sma above and needs a push past 162.50 to start resolving higher. The bullish thesis for the Oct21 call spread still stands, but because the trade revolves around the stock holding the key 50day sma, we are going to tighten the stop to 157.50.
XME is on close watch (again). After dropping at the end of August into the key 50day sma and holding it well, XME looked like it was starting to build momentum higher again as it pushed past 50 and all near-term moving averages on Friday and Monday. It was hit post-CPI like many names, but today’s ~3% drop was more troubling. Top Steel name NUE warned before the open, sending the sector sliding sharply lower intraday. XME managed to stabilize around the 50day sma again today, but we will need to use a tight stop under 46.50 (below today’s low) to make sure the Dec16 call spread roll up is closed before a major breakdown can develop.
Trader Author Portfolio Holdings
**As of 4pm ET September 14, 2022