Right now, many traders and investors are missing something very important coming up.
We’ve been inundated with all sorts of newsflow surrounding politics, but it seems that everyone forgot one thing…
Earnings! We are coming in hot into earnings season. Large cap financials are reporting this week and a ton of FANG stocks are up on deck.
We try to avoid trading through earnings events as it’s difficult to keep an edge on these names. Instead, we can focus on names that have earnings later, or we can start looking for plays in the indices.
While it’s hard to find an edge through earnings, there are some plays that I look for *around* earnings. I think we have the potential for a setup in the Nasdaq that we’ll talk about in today’s newsletter.
Trade #1: COST
COST is feeling weak here, and I don’t think the support at 360 will hold and we will get a deeper dip. I want to use the gap fill level from Nov 10th, as the place to start scaling in. Overall trend is still very strong and there are several levels that provide a margin of safety on the trade.
Expected Price: 356.62
Sell to Open COST 19Feb21 340/335 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 339.89
Trade #2: LULU
Similar to COST– this stock has support at 340 but I don’t think it will hold. Instead we will push down into the low 300s before finding support. This could just be wishful thinking and the stock just jams above 400, but I want to be prepared if we get that dip.
Expected Price: 326.32
Sell to Open LULU 19Feb21 310/300 Put Spread
Tier 1: Enter at 3.13, Exit at 1.96
Tier 2: Enter at 4.382, Exit at 3.25
Tier 3: Enter at 5.634, Exit at 4.4
Stop Out If Close Under 309.89
Trade #3: QQQ
About 50% of the weighting for the Q’s are in just a few stocks: AAPL, AMZN, TSLA, FB, GOOGL, and MSFT. They all report at the end of the month, and combined with the perceived political risk some of them face, we could easily see a rug pull in those names before their earnings events. I’m looking for a test of the rising 50 day moving average and a gap fill to play.
Expected Price: 299.82
Sell to Open QQQ 19Feb21 282/279 Put Spread
Tier 1: Enter at 0.62, Exit at 0.21
Tier 2: Enter at 0.868, Exit at 0.43
Tier 3: Enter at 1.116, Exit at 0.58
Stop Out If Close Under 281.89