Trade Ideas May 12, 2020

Seriously…F’ MAGA

by Dan

This tweet from @NorthmanTrader regarding an observation from technician Jonathan Krinsky also on Twitter regarding Apple’s (AAPL) recent price action caught my eye as I, like all of you have been counting the days until it retests it prior all-time highs…

The stock has now gained 50% from its intra-day low made on March 23rd, now just 3% from those prior highs

 

It is worth noting that MSFT’s chart is nearly identical, up 40% from its March lows and now only 3% from its February all-time high:

 

And GOOGL, up nearly 40% from its March lows but 9% away from its Feb all-time highs, despite being at a very noticeable resistance level:

And FB, just 4% from its Feb all-time highs, and up 55% from its March lows:

 

We know what happened last month when AMZN approached its all-time highs, it broke the F out in a massive way:

 

So there you have it F’ MAGA, 21% of the weight of the S&P 500 and 45% of the weight of the Nasdaq 100, all up on the year, with FB & GOOGL up 4%, AAPL up 8%, MSFT up 18% and AMZN up 30% dragging the major averages with them, masking a lot of very bad performance among the other 495 and 95 stocks respectively in the two indicies. A month ago, prior to earnings, when these stocks were much lower I took a crack at the QQQ on the short side (here) when it was just below $200 with a MAY put spread. It did not go well.

While short-dated options prices are down considerably from the March highs, they remain well bid, but they are not likely to go to much lower in the current environment unless the names above all do what AMZN did last month in the coming weeks, which would also mean that the SPX and the Nasdaq would likely be back within a few percent of their Feb all-time highs:

 

So what’s the trade? I’m inclined to take another shot at a Nasdaq reversal, consider a put spreads in June 30th quarterly expiration…

Bearish Trade Idea: QQQ ($226.40) Buy June 30th 220 – 200 put spread for $4.15

-Buy to open 1 June 30th 220 put for 6.80

-Sell to open 1 June 30th 200 put at 2.65

Break-even on June 30th expiration:

Profits of up to 15.85 between 215.85 and 200 with max gain of 15.85 at 200 or lower

Losses of up to 4.15 between 215.85 and 220 with max loss of 4.15 above 220

Ratuibake: this trade idea risks 2% of the etf price for the next month and a half. Has a break-even down 5% and a max profit of 7% down 10% in the QQQ on June 30th. The options market is saying there is about a 32% chance this trade idea is break-even on June 30th at about a 16% chance it is at max value at $200 down 11.5%

To my eye, the QQQ is at technical resistance, and the next support level is $210, and then down near its 200 day moving average just above $200:

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