Sunday Setups - 9/15

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 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.

The face-ripping short covering rally I mentioned last week came to fruition, and really never stopped, with five straight days of buying.

Once again, the 21 period exponential moving average (EMA) on the weekly chart proved to be a great buy. This had an interesting confluence with the 50% retracement from the most recent swing low to swing high (around $5400).

Prices rose back above the exponential moving averages on both the daily and the weekly charts, and the 8, 21, and 34 period EMAs on the daily chart have crossed back to bullish (the 8 is greater than the 21, which is greater than the 34).

At the risk of sounding like a broken record…

So, is the selling over? Back to new ATHs?

That might be the case after the strength we saw this past week, but I still think there are a few signals that warrant caution.

Zooming out and looking at the overall trend of the indices, we have a series of higher highs and higher lows. This is the definition of a bullish trend. We have not broken the low we saw the week of 8/5, and the moving averages are all stacked bullish again. So, technically, the path of least resistance is up (again).

However, as I mentioned the past few weeks, it might not be a direct path higher, like we saw earlier this year. We need to be prepared for distribution, or wide chop, like we have seen these past two weeks.

Let’s review some key signals to determine the bias for the coming weeks:

1. /ES & /NQ structure & signals

2. Put/Call Ratio

3. Mag 7 structure & signals

4. Any other red flags or extreme readings in major markets?

/ES and /NQ structure

The /ES has a bullish structure - the 8 EMA is higher than the 21 EMA, which is higher than the 34 EMA on both the daily and weekly chart. (in chart below, blue line is 8 EMA, red line is 21 EMA, and green line is 34 EMA)

The /NQ is bullish, but lagging the /ES…the 8 EMA > 21 EMA > 34 EMA on the weekly chart (larger trend is bullish), but it has some work to do on the daily chart. See below - the EMAs are still stacked negatively on the Daily chart, which effectively means we are not out of the woods quite yet.

Now, let's review the Put/Call Ratio and where we stand against recent levels.

Compared to recent levels, this is pretty neutral with a lean towards bearish. The 10 day simple moving average of the PCALL (purple line in chart) is 0.8. Historically, below this was bearish for the market. That has changed over the past year or two, as the volume of options trading has changed. Now, this is a better signal (bullish or bearish) when there are more extreme readings when compared to recent history.

Let me explain, as there are two ways to look at this.

The SMA - when this gets to more extreme levels compared to recent history, there is often a turn in the market. you can see this play out in early April - the 10 day SMA of the PCALL rose to 0.9, which was the highest level since November of last year. That is when the market bottomed and continued higher. The opposite happened in July of this year - the SMA moved below 0.5, and the market had a sell-off (this took a bit longer to play out, but it warranted fair caution).

The other important reading are single day extreme readings. 1/17 of this year is a good example - this rose to 1.24 and closed at 1.19. The market rose the next several days. A similar move happened on 8/5, following a sell-off in the market. The PCALL popped above 1, and the market bottomed.

So, where are we now? I highlighted the chart above because we are in a similar spot. After the strength we saw this week, the 10 day SMA is back up to 0.8 and we do not have any extreme readings. So, we are in bearish territory, but do not yet have any extreme readings. This is neutral, as there is no clear reading. So, I will be watching this week for anything that might tip the scale one way or another.

Ok, on to the Mag 7 stocks - how do they look?

AMZN and META both have weekly squeezes, with bullish structure (8 EMA > 21 EMA > 34 EMA).

AAPL has a bullish structure with a daily squeeze that could take it to higher prices.

TSLA has a bullish structure on the daily and weekly, and the daily squeeze just fired. So, probability points to higher prices here.

MSFT is relatively neutral - looks like we might see some distribution. The 8EMA is below the 21 EMA on the weekly, and the 21 EMA is below the 34 EMA on the daily. Prices are above the EMAs, which is bullish, but not a super clear bullish structure overall. If you’re bearish, you almost argue that it has potential for a head and shoulders top setting up. Not convinced of that - seems more like chop.

NVDA is somewhat neutral. While the Weekly is bullish, the daily is mixed - EMAs are stacked negatively, but price is above them.

GOOGL has a bearish structure, with negatively stacked EMAs (34 EMA > 21 EMA > 8 EMA). While this may not go straight down, I’d be expecting downward chop.

Whats the takeaway from all of this?

Net, 4 of the 7 look strongly bullish, 2 look neutral (but bullish on the longer term charts), and only 1 is bearish. Given the heavy weighting in the indices, they could push them higher in the near term.

Another heavily weighted name - NFLX has bullish structure and has a daily squeeze - looking primed for $725, if not $800.

Anything else to be aware of, showing a lean one way or the other?

The Aussie Yen continues it’s bearish march, indicating a risk-off sentiment in the market.

This has a bearish structure, and the path of least resistance is lower.

To sum it all up, the strength last week fixed a lot of the technical issues in the indices, but there are still some indicators that point to the potential for lower prices. To simplify, if the /ES goes below $5400, I’ll be looking lower.

Otherwise, we will approach this market the same way we approach every trade - find names and levels where we can get edge, and use options to put the risk/reward profile in our favor.

There will still be good long trades in this market, but there will also be more short opportunities than there have been. And, we will need to be conservative with entries and exits for those longs. So, I’ll wait for the 21 EMA instead of placing longs on momentum names above their moving averages.

Now, in terms of the economic calendar, we have the Fed on Wednesday, which could be a spark one way or the other based on the verbiage used. Like I mentioned last week, if they were to cut rates more than 25 bps, there might be some selling, as it would be confirmation that there are signs of a recession.

Pretty interesting that it’s split 50/50 for a 25 bps or 50 bps cut.

Then, we have unemployment claims Thursday, which are becoming more important based on the focus on overall economic health.

Also - the Fed day move is sometimes a head-fake, so will be interesting to see how the market reacts to the report on Thursday.

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

This week’s Trade Ideas

1.) AMP  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.

• Just about $10 off of life-time highs, so potential for that to be breached.

• Inverse head and shoulders pattern forming - bullish pattern.

My Levels:

Entry Zone: $432 - $437

• 34 Day EMA up to the 8 Day EMA on the daily chart

• Entries priced at $435 (round number near the 21 EMA on daily chart)

Targets: $465 - $490

• T1: $465

• T2: $490

  • Fibonacci extensions from prior swings.

AMP 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, $420 Strike Price, 61 Days to Expiration)

• Entry: BUY +1 AMP 100 15 NOV 24 420 CALL @29.50 LMT

• Exit T1: SELL -1 AMP 100 15 NOV 24 420 CALL @50.75 LMT

• Exit T2: SELL -1 AMP 100 15 NOV 24 420 CALL @78.00 LMT

Call Debit Spread (Buying $470 Calls, Selling $500 Calls, 61 Days to Expiration)

• Entry: BUY +1 VERTICAL AMP 100 15 NOV 24 470/500 CALL @4.50 LMT

• Exit T1: SELL -1 VERTICAL AMP 100 15 NOV 24 470/500 CALL @6.20 LMT

• Exit T2: SELL -1 VERTICAL AMP 100 15 NOV 24 470/500 CALL @18.00 LMT

2.) NFLX  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.

• $14 off the all time high, so less resistance overhead.

My Levels:

Entry Zone: $621 - $684

• 34 EMA (green line in 4hr chart) up to the 8 EMA (blue line in the 4hr chart)

• Entries priced at $685 (round number at the 8 EMAs).

Targets: $725 - $795

• T1: $725

  • 127.2% retracements from most recent swings

• T2: $742

  • 161.8% retracements from most recent swing

• T3: $765

  • 161.8% retracement from most recent larger swing

• T4: $795

  • Fibonacci clusters from prior swings & nearly 800 psychological number.

NFLX 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 - meaning, if the stock price reaches $98, you sell the options as close to the active MID price as possible.

Long Calls (60 Delta, $685 Strike Price, 61 Days to Expiration)

• Entry: BUY +1 NFLX 100 15 NOV 24 685 CALL @44.50 LMT

• Exit T1: SELL -1 NFLX 100 15 NOV 24 685 CALL @64.00 LMT

• Exit T2: SELL -1 NFLX 100 15 NOV 24 685 CALL @77.00 LMT

• Exit T3: SELL -1 NFLX 100 15 NOV 24 685 CALL @96.00 LMT

• Exit T4: SELL -1 NFLX 100 15 NOV 24 685 CALL @120.00 LMT

3.) GEHC  Long

Reasoning:

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

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

• $8 off the all time high, so less resistance overhead.

• Held up well with market sell off a week ago, so could buck that trend if we get anymore selling in the broader market.

My Levels:

Entry Zone: $81.5 - $84.3

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

• Entries priced at $83 (round number between the 8 & 21 EMAs), which would be a solid entry.

Targets: $90 - $100

• T1: $90

  • Confluence of a 127.2% retracement and a 78.6% retracement from prior swings.

• T2: $97

  • Confluence of a 161.8% retracement and a 261.8% retracement from prior swings.

• T3: $100

  • 127.2% retracement from larger swing high to swing low throughout this year.

GEHC Options Strategies

**exits are theoretically priced for two months out, but the price of the underlying is the primary trigger for taking the trade off - meaning, if the stock price reaches $570, you sell the options as close to the active MID price as possible.

Long Calls (55 Delta, $85 Strike Price, 96 Days to Expiration)

• Entry: BUY +1 GEHC 100 20 DEC 24 85 CALL @4.25 LMT

• Exit T1: SELL -1 GEHC 100 20 DEC 24 85 CALL @7.80 LMT

• Exit T2: SELL -1 GEHC 100 20 DEC 24 85 CALL @13.00 LMT

• Exit T3: SELL -1 GEHC 100 20 DEC 24 85 CALL @16.00 LMT

4.) KKR  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 in the near future.

• Just about $6 off of life-time highs, so potential for that to be breached.

My Levels:

Entry Zone: $118 - $120

• 34 Day EMA up to the 8 Day EMA on the daily chart

• Entries priced at $120 (round number near the 8 EMA on daily chart)

Targets: $465 - $490

• T1: $137

• T2: $147

  • Fibonacci extensions from prior swings (right after earnings at the end of July.

KKR 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 (67 Delta, $330 Strike Price, 47 Days to Expiration)

• Entry: BUY +1 KKR 100 20 DEC 24 115 CALL @12.10 LMT

• Exit T1: SELL -1 KKR 100 20 DEC 24 115 CALL @24.50 LMT

• Exit T2: SELL -1 KKR 100 20 DEC 24 115 CALL @53.00 LMT

5.) FTNT  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 in the near future.

• Just about $6 off of life-time highs, so potential for that to be breached with low overhead resistance

My Levels:

Entry Zone: $72 - $75

• 34 Day EMA up to the 8 Day EMA on the daily chart

• Entries priced at $74 (round number at the 21 EMA on daily chart)

Targets: $79 - $86

• T1: $79

• T2: $86

  • Fibonacci extensions from prior swings.

FTNT 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 (72 Delta, $70 Strike Price, 96 Days to Expiration)

• Entry: BUY +1 FTNT 100 20 DEC 24 70 CALL @7.75 LMT

• Exit T1: SELL -1 FTNT 100 20 DEC 24 70 CALL @11.20 LMT

• Exit T2: SELL -1 FTNT 100 20 DEC 24 70 CALL @17.30 LMT

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

Open Trades Review

Week of 7/28 Trade Ideas

• ABT (7/30 entry)

  • Still looking higher for $117. Almost got it last week. Will look to take profits at these levels this week - we are close enough to target.

Week of 8/4 Trade Ideas

• AVB (8/8 entry)

  • Holding half position on this. Still looking for T2: $236. Looks great - hopefully booking profits this week.

Week of 8/11 Trade Ideas

• LEN (8/14 entry)

  • Setup still looks great - holding the EMAs and a pattern of higher lows/highs. Looking for $187 to take profits.

Week of 8/18 Trade Ideas

• LOW (8/21 entry)

  • This still looks great - higher highs, higher lows, and holding the EMAs on the way up. This one is a longer term trade, with a monthly squeeze. Looking for T1: $260, T2: $270, T3: $290, T4: $320. Looking for T1 this week…

• BLDR (9/9 entry)

  • Finally got an entry on this. It had previously reached T1: $182. So, I’ll just be looking for $196. Took this off of the hourly squeeze. Shortly after, a 4 hour squeeze showed up and has now fired long. Great close this week - holding.

• PAYX (8/20 entry)

  • Booked 1/3rd of the position at T1: $132. Holding the other 2/3rds for T2: $136 and T3: $144. It is acting great.

Week of 8/25 Trade Ideas

• CRS (9/3 entry)

  • Good recovery this week. Holding & looking to see if this can break $150 in the near future. Still targeting T1: $156 & T2: $167.

• MTZ (9/12 entry)

  • Big V shaped recovery here. I like the momentum so far. Entered as it closed above the EMAs. Holding to see if this big change in direction can take us higher. Targets at T1: $118 (conservative, but wise to take some chips off the table), T2: $126, T3: $138.

Week of 9/1 Trade Ideas

• SPOT (9/13 entry)

  • Similar story to MTZ. Good recovery, entered, seeing if the momentum can take us up to T1: $375 & T2: $395.

• ROP (9/4 entry)

  • Daily squeeze formed, which could help our case. Holding and waiting for this to play out.

• META (9/6 entry)

  • Still holding this - love the recovery this week. Weekly squeeze looks great. Looking for this to continue higher - target around $600.

Week of 9/8 Trade Ideas

• TTD (9/9 entry)

  • Picture perfect entry near the 21 EMA and a quick bounce up. Great close this week. Looking higher for T1: $110 & T2: $118.

• BOOT (9/4 entry)

  • Upgraded right after entry - wish that would happen every time! Took off half at $155, holding the rest for T2: $167.

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