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Proactive Spreads, December 28th, 2020 – CHWY, ZM, SQ

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Markets are having another good one, this time led by financials. The fiscal deal is signed and I think has high odds of being a “sell the news” event. Still, the momentum will last as long as it lasts, and it’s very difficult to see proper selling in this environment.

Today we will focus on some “falling angels” — high flying momentum names that are (or soon will) come into key support.

Trade #1: CHWY

We’re on the other end of a successful short in this name, an dthis is the first proper pullback the stock has seen in a while. It’s an ugly day today, ideally we get a gap down tomorrow into the rising 20 day moving average.

Trade Setup

Expected Price: 88.75

Sell to Open CHWY 19Feb21 75/70 Put Spread

Tier 1: Enter at 1, Exit at 0.32

Tier 2: Enter at 1.4, Exit at 0.68

Tier 3: Enter at 1.8, Exit at 0.9

Stop Out If Close Under 74.89

Trade #2: ZM

Zoom is 40% off its highs and back into levels I’ve been looking for since Halloween. The rising 200 day moving average is also coming up to catch price.

Trade Setup

Expected Price: 356.76

Sell to Open ZM 19Feb21 300/290 Put Spread

Tier 1: Enter at 2.2, Exit at 0.87

Tier 2: Enter at 3.08, Exit at 1.69

Tier 3: Enter at 3.96, Exit at 2.26

Stop Out If Close Under 299.89

Trade #3: SQ

SQ has probably seen enough selling for it to run to new highs again, but I want to play for a push to prior resistance… the idea here is that the earlier dip buyers get stopped out.

Trade Setup

Expected Price: 215.3

Sell to Open SQ 19Feb21 185/180 Put Spread

Tier 1: Enter at 1.05, Exit at 0.37

Tier 2: Enter at 1.47, Exit at 0.76

Tier 3: Enter at 1.89, Exit at 1.01

Stop Out If Close Under 184.89

Disclaimer

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