Trade Ideas for 12/14/20

Quick guidelines for daily trade ideas:

  • Do not chase on gaps-up.  
  • Do not follow blindly.  Make every trade your own.  
  • Dashed blue line = suggested trigger
  • Dashed red line = suggested stop 
  • Always use limit orders on option trades. I suggest using $0 as your stop (100% of the premium) and sizing accordingly. If you are not experienced trading options I recommend paper trading for at least a few weeks to get a feel for price movement.

As mentioned in the Weekly Review, we are experiencing an orderly market-wide pullback to this point. Should key levels be broken on further downside we will become even more focused on capital preservation. Currently my main concern is chop, thus I've only put on a few trades during the pullback. As always, meticulous risk management is the priority and raising stops as price moves in our favor is a key tactic.

Unless Monday gives us an obvious market move at the open (in either direction), I will likely be watching in the morning to see what sectors/industries are working. During pullback/chop it makes sense to watch price action at the open. It's much easier to take pre-planned trades at the open when we are in a trend with strong continuation.

A few trade ideas for tomorrow: 

Trade Idea #1: FSLY

Link to chart: Daily FSLY

Rationale: FSLY is one of the names that showed tremendous strength on Thursday, printing a bullish engulfing candle on the session. Price is just below a key pivot at $101 and has room to run to fill the October gap. Additionally, strong volume can be seen on recent up-days adding a level of confirmation to bullish price action. This can be bought in anticipation of a move; make it your own.

Suggested Trigger: $101.40 (above recent highs)

Suggested Stop: $94.95 (below Friday's lows)

First Partial Target: $107

Potential Target: $121+

Option Play: December 18th, $103 strike calls - $2.25 range. Risk is 100% of premium.

Risk: 50 - 100 bps

Trade Idea #2: LVS

Link to chart: Daily LVS

Rationale: LVS is bull-flagging and has broken below its 20 day SMA. Should it reclaim that level it has room to run back to the top of its current channel and beyond. This is a "reopening" and gambling play that obviously benefits from vaccine success.

Suggested Trigger: $57.90 (above Friday's highs and 20 day SMA)

Suggested Stop: $55.90 (below recent lows)

First Partial Target: $59

Potential Target: $64+

Option Play: December 18th, $59 strike calls - $0.41 range. Risk is 100% of premium.

Risk: 50 - 100 bps 

Trade Idea #3: ATVI

Link to chart: Daily ATVI

Rationale: ATVI has broken out of a four-month descending wedge pattern and launched from its 50 day SMA. Price has been consolidating nicely during the recent market pullback and may be ready to re-test recent all-time-highs.

Suggested Trigger: $84.10 (above Friday's high)

Suggested Stop: $81.50 (below recent lows)

First Partial Target: $87

Potential Target: $92+

Option Play: December 18th, $86 strike calls - $0.60 range. Risk is 100% of premium.

Risk: 50 - 100 bps

Trade Idea #4: XLE

Link to chart: Daily XLE

Rationale: I have played the strength in the energy sector via NBR and FANG. However the purest play is through the XLE itself. Should the incredible strength continue this can become more of a position trade than a swing. The inside day on Friday is promising as price is just below gap resistance at $42. This can be bought in anticipation.

Suggested Trigger: $41.45 (above Friday's high)

Suggested Stop: $39.05 (below recent lows and 9 day SMA)

First Partial Target: $43

Potential Target: $47+

Option Play: December 18th, $42.50 strike calls - $0.45 range. Risk is 100% of premium. Position trade: March 31, 2021, $45 strike calls - $1.95 range.

Risk: 50 - 100 bps

Other names to have on your watch-list: TWLO PYPL ILMN BLDR PTON TSCO WKHS EOG


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