Sunday Setups - 10/20

Happy Sunday,

To make your Monday more enjoyable, we’ve prepared some Fresh Trade Ideas for you. They go nicely with a freshly squeezed glass of lemonade!

What is the Sunday Setup?

It’s a short review of the market, trades from last week and a detailed overview of trade ideas for this week. Build your trading strategy for the week in the time it takes to finish a glass of lemonade.

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Alright, is that sugar kicking in? Let’s find some edge!

Market Review

Before we dive in to the individual trades that I am looking to take, I want to do a quick review of where the markets stand. Understanding the overall market trend will help guide us with how we approach these trades.

Quite the week we had! We kicked it off with new all time highs on Monday. ASML was sold after earnings Tuesday, which brought semiconductor names down, like NVDA in sympathy. Tuesday looked like we might be getting a sell signal in the indices, with the SPX closing below the low of the high bar (Monday). Though, the rest of the week, we saw some wide upward chop - with NFLX kicking off the Mag7 earnings with a beat, and TSM putting the ASML fears to rest a bit with a beat.

Moving averages are stacked positive (8 EMA > 21 EMA > 34 EMA), and we continue with a pattern of higher highs and higher lows. So, I am still short-term bullish, but I think it’s going to be a bit choppy up here with the potential for a reversion to the mean (21 EMA).

It is important to be ready for that, because it can be swift and sharp - don’t want to be 100% long when that happens.

We are extended above the 21 EMA - trading around 2 ATR (see chart below):

It does not mean short the index and get rid of your longs, but it just means that we have to be cautious and prepared for a reversion to the daily 21 EMA.

It is entirely possible we continue higher and once again reach new all time highs, but I am going to be patient with new entries. It is when you buy extended names with the market ALSO extended that you can get caught off guard with a flush to the 21 EMA. You’re sitting on losses, you have less time to let your trades play out with theta decay eating profits, and you have less capital to deploy when there is a buying opportunity at the 21 EMA.

So, the market is still in a bullish trend, and I am targeting $5900 - $5918 in the SPX & $5950 - $6000 in the /ES. However, given the chop last week and the fact that we are extended, I am open to the idea that the SPX & /ES could revert to the rising 21 EMA before reaching those new highs.

The 21 EMA is 100 pts lower, which could be painful to hold through. BUT, it will also present a great buying opportunity for many names. So, I’m holding what I have got on right now and will be more conservative with entries on new long positions.

In terms of events this week, there is not much on the economic calendar, but TSLA is the next Mag7 name to report this week - Wednesday after the bell.

I think the expected move is underpriced, and I am positioned for a move higher with the call debit spread put on last week. It’s rare I hold anything through earnings, but this is a longer term play based on the Monthly chart.

Net - I am not able to be bearish without any sell signals, but I will focus my entries on strong names trading near their mean (21 Daily EMA).

Alright, here is what I’m trading this week.

This week’s Trade Ideas

1.) BOX  Long

Reasoning:

• Bullish Trend (8 EMA > 21 EMA > 34 EMA) on the daily and weekly charts - trading with the trend

• Squeeze on the Daily chart, which increase the probability for a bigger move over the next few weeks.

• Recent run up in price and has been consolidating before it’s next move. Looking for a base hit on this one.

My Levels:

Entry Zone: $32 - $32.5

• 34 EMA (green line in daily chart) up to the 8 EMA (blue line in the daily chart)

• Entries priced at current levels.

Targets: $34.6

• T1: $34.6

  • 127.2% fibonacci extension from most recent swing high to low.

BOX Options Strategies

**exits are theoretically priced for 2 weeks out, but the price of the underlying is the primary trigger for taking the trade off. In other words, if price gets close to $214, I look to sell the calls as close to the MID price as possible.

Long Calls (80 Delta, $28 Strike, 61 Days to Expiration)

• Entry: BUY +1 BOX 100 20 DEC 24 28 CALL @5.00 LMT

• Exit T1: SELL -1 BOX 100 20 DEC 24 28 CALL @7.00 LMT

Only one good setup this week - too many earnings coming up across the other setups I like. SPOT for example looks great, but would likely have to hold through earnings. Not going to risk it.  

I’ll keep you posted on any trades I take!

Open Trades Review

Week of 8/18 Trade Ideas

• LOW (8/21 entry)

  • I am still holding half the position for T3: $290, T4: $320. Acts great - monthly squeeze is really pushing this higher.

Week of 9/22 Trade Ideas

• ADI (10/8 entry)

  • Waiting for squeeze to play out - still looks good.

Week of 9/29 Trade Ideas

• MRVL (CLOSED)

  • Got our target at $80. Flat. Great trade!

Week of 10/6 Trade Ideas

• CTAS (10/8 entry)

  • Got our first target this week at $215 - took half off. Holding the other half for $222.

• CAVA (10/7 entry)

  • Still holding. This acts great - looking for $140.

• ED (10/7 entry)

  • This recovered nicely & the sqeeze has fired long - looking for $108 and $110.

Week of 10/13 Trade Ideas

• WMT (10/14 entry)

  • Got in at the open near the 8 EMA Monday. This acts great - waiting for the squeeze to play out. Looking for $83 and $86.

• TSLA (10/14 entry)

  • Picked this up Monday at the 21 EMA on the Monthly chart. I will likely hold this through earnings, as this is a long-term setup.

That’s it, that’s all. Let me know what you thought of this week’s Sunday Setups!