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Full Time Profits, August 4th, 2021 – LRCX, V, NKE
Markets have been in a whippy range over the past two weeks. It’s been exceptionally rotational, and I’ve not seen much on the large-cap side to really justify being *super* bearish here.
One thing to keep in mind is how stinking elevated the volatility markets have been. The VIX has stubbornly stayed above 16, most likely due to concerns about the cold-that-shall-not-be-named… I email this out and I want to make sure there’s no keyword blocks that break my ability to send to you…
There’s two primary risks about this. First is biological… the sunbelt is having its seasonal wave and many are freaking out, and we’ll find out in about a week if this is even a concern.
The second risk is political, and I am hesitant to even talk about it given how polarizing it is. I will just say this– there are rumblings about large executive orders that would have large effects in stocks, and I think this is the biggest risk in the market.
Ok, out of politics. Smallcaps are continuing to show signs of distribution, which could be a concern, but we haven’t seen enough evidence to really put the warning sign on.
So what do we do here?
I think the best bet is to stick with strong sectors, and we can balance out with a few more short setups if they start to play out.
Trade #1: LRCX
This is a semiconductor company, and this sector has been incredibly strong– see the parabolic run in AMD this week, along with the most recent rally in NVDA.
I think that this looks ripe for continuation. It’s been choppy for a few months so I don’t expect it to be a straight shot higher, but we should get some nice movement to the upside, and as long as the lower end of the range holds, will be good for a trading vehicle.
Trade Setup
Expected Price: 650.06
Sell to Open LRCX 17Sep21 575/570 Put Spread
Tier 1: Enter at 0.72, Exit at 0.01
Tier 2: Enter at 1.008, Exit at 0.2
Tier 3: Enter at 1.296, Exit at 0.25
Stop Out If Close Under 574.89
Trade #2: V
Visa has seen a nice correction here, and is seeing some near term buying pressure against the rising 50 day moving average. Underneath that we have a larger support trendline to work with, as well as a key pivot level into the 230s.
Trade Setup
Expected Price: 236.75
Sell to Open V 17Sep21 225/220 Put Spread
Tier 1: Enter at 0.82, Exit at 0.1
Tier 2: Enter at 1.148, Exit at 0.36
Tier 3: Enter at 1.476, Exit at 0.48
Stop Out If Close Under 224.89
Trade #3: NKE
This is just one of those solid trenders that hasn’t looked back after its monster earnings gap. I think that, in the near term, perfection is being priced in and that we could see a rug-pull before the earnings event, which is scheduled for after September options expiration.
Trade Setup
Expected Price: 174.56
Sell to Open NKE 17Sep21 185/190 Call Spread
Tier 1: Enter at 0.82, Exit at 0.1
Tier 2: Enter at 1.148, Exit at 0.36
Tier 3: Enter at 1.476, Exit at 0.48
Stop Out If Close Over 185.11
Market Primer, 8-1-21
Full Time Profits, July 26th, 2021 – SNAP, LVS, LULU
The large cap indices are continuing the march higher into tech earnings. The shakeout we saw to 4250 was short lived as way too many traders picked up hedges on the same day– see the VVIX running to 150 as evidence.
Right now it feels like enough of those traders are stuck on the wrong side of the market as we head into tech earnings. About 35% of the weighting in the S&P is in 5 stocks, and they all report this week. The good numbers out of SNAP and TWTR have led to names like FB running in anticipation of that.
With earnings season, we’re going to see many more setups around those events come into play. There is usually a “hangover” after earnings that allows enough premium to come into play and it can further enhance our edge.
Trade #1: SNAP
Clean earnings breakout on good numbers. We want to play this several times into the rest of the year.
Trade Setup
Expected Price: 78.33
Sell to Open SNAP 20Aug21 70/68 Put Spread
Tier 1: Enter at 0.4, Exit at 0.12
Tier 2: Enter at 0.56, Exit at 0.27
Tier 3: Enter at 0.72, Exit at 0.36
Stop Out If Close Under 69.89
Trade #2: LVS
This company has a “one-two” punch of risk right now.
First, you’ve got the pandemic and whether they can continue to generate enough cashflow to have good earnings.
Second, you’ve got the exposure in Macau and the regulatory overhang that we’ve seen from China for a few years now. It’s coming to a bit of a head– see DIDI and TME news as recent examples.
Right now, much of the bad news has been priced into the name, with a 34% sellof down to key support.
And this is key support. It was in play in the fall of last yaer, and a reasonable level to play against.
Earnings just came out, and they were bad, but we’re to the point where all the bad news is a “known known” and we should see a sympathy bounce soon.
Note the expiration is September on this trade.
Trade Setup
Expected Price: 44.55
Sell to Open LVS 17Sep21 40/35 Put Spread
Tier 1: Enter at 0.62, Exit at 0.13
Tier 2: Enter at 0.868, Exit at 0.03
Tier 3: Enter at 1.116, Exit at 0.02
Stop Out If Close Under 39.89
Trade #3: LULU
Great move off the lows, we’re looking for the first pullback after this most recent move. I’m targeting the last area we found sellers, as well as the rising trendline coupled with the 20 day moving average.
Trade Setup
Expected Price: 385.23
Sell to Open LULU 20Aug21 360/355 Put Spread
Tier 1: Enter at 0.77, Exit at 0.05
Tier 2: Enter at 1.078, Exit at 0.28
Tier 3: Enter at 1.386, Exit at 0.36
Stop Out If Close Under 359.89
PRIMER 7-25-21
Full Time Profits, July 21st, 2021 – SPY, XLE, XBI
If everyone loads up on hedges at the first sign of weakness, it’s hard to find some proper followthrough.
Last Friday’s weakness saw some followthrough on Monday. It was ugly, with the SPX down about 2% when it was near its lows.
Two days later and we’ve retraced most of those losses, and the market is coming back into Friday’s open.
What gives? Why can’t we get that second push to the downside?
My best guess is that it comes down to the VVIX.
When you have the first selling day met with a push to 150 on the VVIX, it shows that institutions are willing to pile on, in size, with VIX options.
And if you get too many people buying those calls, it creates a natural floor in the market.
And THEN… if the vega on those VIX calls start to dissapate, the dealers are forced to get long SPX to reduce directional risk.
Throw that on with some short calls getting smoke, and that’s how you get the options-driven squeeze we’ve been seeing.
Zoomed out, this is a pretty normal pullback, and the fact that the SPX tested prior support, now resistance, suggests to me that this is still a fairly constructive market.
As to new setups… we’ve got earnings season for dang near everything in my watchlist, so we will focus on a retracement short on the SPX and two plays on sectors.
Once we get through earnings season, we will have some nice setups on individual stocks.
Trade #1: XBI
XBI (biotech) is developing a longer term bottoming process. The 126-124 level has held since March, and there was one captulative gap under 120 that was bought aggressively.
The index is currently bid up and coming into key pivot levels, so we want to look for a shallow retracement with the bet that these recent lows will hold.
Trade Setup
Expected Price: 129.25
Sell to Open XBI 20Aug21 123/120 Put Spread
Tier 1: Enter at 0.65, Exit at 0.25
Tier 2: Enter at 0.91, Exit at 0.49
Tier 3: Enter at 1.17, Exit at 0.65
Stop Out If Close Under 122.89
Trade #2: SPY
Pay attention to the three blue lines. It’s no completely precise, yet it shows that the magnitude of the rally in May is similar to the one we saw in June. If we were to see something similar now, it means we would find sellers right around 442.
A lot of this will come down to large-cap tech earnings, yet it’s reasonable to assume, that without the introduction of a new catalyst, the energy required to push the market up won’t be sufficient, and we will at least settle down into a trading range.
I don’t think shorting here is a good idea, because way too many people are stuck short and I don’t think they’ve cleared out yet.
If you were short, where would you place your stop? That’s the question to ask here. You don’t want to use a new all time high, as that’s a chump level to work with. Instead I think the failed gap higher from July 16th, would be a reasonable place to see a stop run… and that’s where we want to initiate some call spread sales.
Trade Setup
Expected Price: 436.15
Sell to Open SPY 20Aug21 448/451 Call Spread
Tier 1: Enter at 0.52, Exit at 0.09
Tier 2: Enter at 0.728, Exit at 0.26
Tier 3: Enter at 0.936, Exit at 0.35
Stop Out If Close Over 448.11
Trade #3: XLE
With the nasty crude breakdown, XLE saw a fast push to support at 46. It’s now retracing, with key levels at 51. This is a multi-week distributive process and I have a feeling there are some stuck longs who bought in June. I don’t think it’s a good short here, yet if we go and retest the low 50s, we will get a good edge.
Trade Setup
Expected Price: 51.83
Sell to Open XLE 20Aug21 56/58 Call Spread
Tier 1: Enter at 0.24, Exit at 0.06
Tier 2: Enter at 0.336, Exit at 0.05
Tier 3: Enter at 0.432, Exit at 0.05
Stop Out If Close Over 56.11