Sunday Setups - 8/11

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 Lemonade?

It’s a short review of 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.

Looks like that follow through we talked about was no joke. The /ES fell nearly 250pts on Monday, followed by a sharp bounce.

These can be really fun markets to trade, as the moves to the downside are fast and violent. Though, it can also be super challenging, as the short-covering rallies tend to come quicker and can be just as violent. We need to be nimble.

Last week, I talked about this week’s close as critical - we closed above the 21 EMA on the weekly chart. This, in addition to the long-wicked candle that formed on the weekly chart leads me to believe we start to see higher prices.

BUT, we still have a bit of work to do on the daily chart to provide a bit more confirmation.

Longer-term (weekly chart), I think this is another buying opportunity, as we have seen the same pattern play out over the past year. History may not repeat itself, but it sure tends to rhyme.

Ideally, prices regain the 21 EMA on the daily chart - most importantly on a closing basis. If that happens, that opens to the doors to new all time highs and puts the bulls back in charge.

It is entirely possible that the /ES goes up to that 50% retracement level, which coincides with the 21 EMA on the daily, and we see a rejection.

So, we’re not out of the woods just yet. Though, I would take the weekly entry 10/10 times, as probability is in our favor. It might not work every time, but it provides a good risk/reward profile and should produce a profit more times than not in a market with bullish structure (8 EMA > 21 EMA > 34 EMA on the weekly chart).

Additionally, the Put/Call ratio is starting to support a near-term reversal higher in prices.

The 10 day simple moving average (purple line in chart above) has regained 0.8, which has led to a bottom in the market, as highlighted by the two blue boxes in the chart.

Now, we could see a bit of chop at current levels (not going straight up), with the Put/Call rising even further, which would give me more confidence in the long side.

Net - I’m long with a short leash. I’m buying names that held up through this pull-back (prices did not fall below their 21 EMAs on the daily time frame), and I will only look short if we breach the low of 5120 we saw last week.

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

This week’s Trade Ideas

1.) LEN  Long

Reasoning:

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

• Squeeze on the daily and weekly charts, which increase the probability for a bigger move in the near future. Weekly fired already, so looking for higher prices the next 5-6 weeks.

• Near all time highs, so less resistance overhead.

My Levels:

Entry Zone: $166 - $171

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

• Entries priced at current levels (in between 8 and 21 EMAs)

Targets: $190 - $203

• T1: $190

• T2: $203

  • Fibonacci extensions from prior swings.

LEN Options Strategies

**reminder: exits are theoretically priced for two weeks out, but the price of the underlying is the primary trigger for taking the trade off.

Long Calls (70 Delta, $160 Strike Price, 41 Days to Expiration)

• Entry: BUY +1 LEN 100 20 SEP 24 160 CALL @15.60 LMT

• Exit T1: SELL -1 LEN 100 20 SEP 24 160 CALL @31.00 LMT

• Exit T2: SELL -1 LEN 100 20 SEP 24 160 CALL @43.50 LMT

2.) AEM  Long

Reasoning:

• Bullish Trend (8 EMA > 21 EMA > 34 EMA) in both the weekly and the daily charts

• Daily squeeze, which increases the probability of a larger move.

My Levels:

Entry Zone: $72.4 - $74

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

• Entries priced at current levels (8 EMA)

Targets: $85

• T1: $85

  • Fibonacci clusters from prior swings.

AEM Options Strategies

**reminder: exits are theoretically priced for two weeks out, but the price of the underlying is the primary trigger for taking the trade off.

Long Calls (71 Delta, $70 Strike Price, 41 Days to Expiration)

• Entry: BUY +1 AEM 100 20 SEP 24 70 CALL @5.85 LMT

• Exit T1: SELL -1 AEM 100 20 SEP 24 70 CALL @15.00 LMT

3.) MPWR  Long

Reasoning:

• Bullish Trend (8 EMA > 21 EMA > 34 EMA) in both the weekly and the daily charts - trading with the trend. Note: the daily EMAs reversed, but price regained them, and it looks to be getting back to a bullish structure.

• Daily squeeze, which increases the probability of a larger move.

My Levels:

Entry Zone: $806 - $812

• This is the range of EMAs

• Entries priced at $812 - the 21 EMA

Targets: $920 - $$990

• T1: $920

• T2: $935

• T3: $995

  • Fibonacci clusters from prior swings.

MPWR Options Strategies

**reminder: exits are theoretically priced for two weeks out, but the price of the underlying is the primary trigger for taking the trade off.

Long Calls (50 Delta, $840 Strike Price, 41 Days to Expiration)

• Entry: BUY +1 MPWR 100 20 SEP 24 840 CALL @41.00 LMT

• Exit T1: SELL -1 MPWR 100 20 SEP 24 840 CALL @99.00 LMT

• Exit T2: SELL -1 MPWR 100 20 SEP 24 840 CALL @111.00 LMT

• Exit T1: SELL -1 MPWR 100 20 SEP 24 840 CALL @163.00 LMT

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

Open Trades Review

Week of 7/14 Trade Ideas (CLOSED)

• WELL (CLOSED)

  • I was initially looking for $126 on this one, and it still might get there, but we had the august series, and I wanted to book profits on a green day. Took the rest off at $115 - great trade!

Week of 7/28 Trade Ideas

• SIG (7/31 entry)

  • Still holding the other half for $73-$72 zone. Pretty much got there this week - will look to book profits on any weakness early this week. If we get strength, I’ll likely cut it loose - will be active Monday with this one.

• ABT (7/30 entry)

  • Didn’t love the action on this one last week - clear resistance up at $112. Glad we were able to book profits on some the week prior, but the setup is still in tact. It is holding the 21 EMA. A close below that, and I’ll look to cut it loose. Otherwise, Ill still be looking higher for $114 and $117.

Week of 8/4 Trade Ideas

• CVNA (8/5 entry)

  • Great entry, a little stress, and then a quick recovery. Just some post-earnings shenanigans. Setup looks great still - holding & waiting for it to play out.

• AVB (8/8 entry)

  • Same thing here - weakness got us a great entry. Setup looks great. Holding & waiting for this to play out

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