Today we’re starting with a look at the Nasdaq 100 index. Which is basically the Nasdaq 5 index, as 5 stocks make up about half of the market cap.
A few of those stocks reported earnings today— AAPL, AMZN, and FB. They all reported solid numbers, saw strong moves premarket, and aggressive fades as it becomes a “sell the news” event.
This is now our risk proxy. The longer QQQ hangs out in this range, the higher the odds of continuation. yet if it takes out 250 and holds under it into the first bounce, then it will be a distinct change in character with the sector that led us higher.
It’s possible we see a multimonth correction that is rotational in nature– where tech takes a break and other sectors (industrials, commodities) play catch up.
If big cap tech dips into next week, we’ll look at fading that, but right now we will look at areas that offer the best risk/reward.
Trade #1: UPS
UPS reported monster numbers, and the stock jammed into 140. I expect the breakout to hold as it was related to earnings, and for the stock to drift higher over the next few months.
Expected Price: 141.28
Sell to Open UPS 21Aug20 133/130 Put Spread
Tier 1: Enter at 0.43, Exit at 0.05
Tier 2: Enter at 0.602, Exit at 0.12
Tier 3: Enter at 0.774, Exit at 0.14
Stop Out If Close Under 132.89
Trade #2: GDX
GDX has seen a strong move on the 37 breakout, and hasn’t really seen a proper pullback since. I want to be involved, but need to see a push lower before it offers good risk/reward. The gap up on Monday failed and if sellers take it into 40, then I’ll pull the trigger.
Expected Price: 40.05
Sell to Open GDX 21Aug20 38/36 Put Spread
Tier 1: Enter at 0.43, Exit at 0.16
Tier 2: Enter at 0.602, Exit at 0.322
Tier 3: Enter at 0.774, Exit at 0.424
Stop Out If Close Under 37.89
Trade #3: WORK
WORK has seen a solid multi-day pullback and is finding support. Look for the breakdown to fail and for the stock to reclaim the multimonth trading range it’s seen.
Expected Price: 28.95
Sell to Open WORK 21Aug20 27/25 Put Spread
Tier 1: Enter at 0.45, Exit at 0.18
Tier 2: Enter at 0.63, Exit at 0.35
Tier 3: Enter at 0.81, Exit at 0.47
Stop Out If Close Under 26.89