We've got an oil stock on the doorstep of multi-year highs, a recent shakeout that probably rinsed out the hot-money crowd that came into the stock following their latest earnings report, and implied volatility plumbing new yearly depths.
This sets up an excellent opportunity to take a flyer on a simple long calls trade.
“Why do you rob banks?” authorities asked notorious bank thief Willie Sutton.
His response: “Because that’s where the money is.”
We're not planning on robbing anybody, but if today's trade plays out like we think it can, it might feel like we're stealing. Only, we won't need to worry about the authorities coming after us, nor will we need to feel bad about it.
Our Analyst Willie Delwiche says that a basic requirement for many bullish ideas right now is that any stock or ETF in question needs to be above August highs. Anything below August highs is subject to a rude reversal. I'm on board with this line of thinking.
So, today's trade is in an American bank that is above its August high and showing signs of wanting more.
With strength starting to stand out in more and more sectors, we have a few good setups that we like for long trades here.
In chatting with our Head Technical Analyst Steve Strazza today, he pushed me in the direction of today's trade by highlighting the fact that if this one moves, its likely to move much faster and stronger than a couple of the other ideas I was interested in.
And the options in this stock are set up in a way that we can play this idea with a simple long calls trade. I like that. So let's dig in.
And price continues to tell us the Energy bull market still has legs.
Today's trade is a case in point where trading action today announced a declaration that an old-school oil services name wants to continue climbing higher.
Yesterday we were treated to the latest interest rate hike from the Federal Reserve and a speech and Q&A with Fed Chairman Powell that apparently wasn't well received by the market as stocks slid furiously into the closing bell and continued the selloff into this morning.
Where we go from here is anyone's guess. Still, I'd like to take the opportunity to continue taking advantage of consistently elevated options premiums and put on a delta-neutral credit spread in an area of the market where I think some sideways rangebound action may be setting up into the end of the year.
"Old Economy" stocks are drawing our attention again.
Our Head Technical Analyst Steve Strazza says: "these old economy stocks are all beating earnings and taking leadership roles" and he cites companies like Caterpillar $CAT, Deere $DE, as well as energies, homebuilders, and transportation stocks.
Today's trade is an expression of the continuation of this theme, and our target stock is offering us a nice pullback to enter into.
We continue to be handcuffed by earnings season. Some of the best setups we like right now are in stocks slated to announce earnings over the next week or two. As an options trader, I don't like to position ahead of imminent earnings announcements. That is tough binary risk to control.
Today's trade has earnings coming up in a little over a month from now, so that'll have to do. At least it gives us some time to build a little cushion. Because if we're wrong in this trade, it's likely we'll find out pretty quickly over the next two weeks.
I was talking with a relatively new day trader last night at my twice-monthly trader meetups here in Colorado. We were chatting about stop losses. Or more specifically, his inability to stick to his “mental stop loss levels.”
As you can imagine, this was leading to him taking occasional big losses – which were wiping out good runs in the market.
He’d make a few hundred bucks several days in a row. He’d then lose it all (and then some) on one bad trade.
A lightbulb went off in his head when I reframed the importance of not taking big losses. No doubt many of you are shaking your heads and uttering – duh!
But for this gentleman, it took me breaking it down this way for him to get the picture:
I dunno why, but thinking about train tracks and rail stocks got me thinking of Blue Steel. There is absolutely no connection between today's trade and the pose made famous by the Zoolander film. But, you're welcome.
It's that time of the quarter where we options swing traders need to be extra mindful of pending earnings releases. The last thing we want to do is place a directional bet in a stock or it's options heading into a binary event that could decapitate us in a heartbeat.
This is frustrating us right now because most of the charts we like best (both the bullish and bearish ones) are in stocks with earnings slated to be released in the next week or two.
During our morning Analyst meeting today, we discussed the fact that many of the banking/financial sector stocks have already reported earnings by now, therefore, this is a place we should look.
Specifically, we like the big money center mega/multinational banks that are represented best by the $KBE ETF. Here is a chart that paints a pretty good picture of why we like it:
