Stocks To Watch For The Week Of 10/18/21 & Introducing The Gator Setup
Crypto Stocks, Low IV Higher ATR combo, TSLA & SNAP Earnings, 10 IPOs
Some Sundays (soon to be every Sunday) I throw down a list of potential chart breakouts, undervalued companies, sector trends, upcoming earnings, new IPOs, plus an occasional high yield dividend payer, or a recent SPAC merger to note. I include any positions I have or a trade plan to attack if the stock acts as I expect. I am not your investment advisor, this list is for informational purposes only.
Want me to discuss a topic or have a chart request? Message me on Twitter. I have thousands of charts posted over the years there for all to learn from. I’m not as active on Twitter as I used to be, so don’t expect an instant reply, but I will get back to you.
Crypto Theme:
Cryptocurrency names are gaining momentum as Bitcoin stretches back towards highs. A new Bitcoin Futures ETF is launching this week to keep it interesting. A few crypto stocks to watch:
Coinbase (COIN) - 280 now needs to build as new support on the weekly chart for a chance to breakout towards 340 in the coming weeks. No position currently. Looking to trade November $300 calls if the momentum continues. Currently trading around $12 with over 2,000 contracts swapping hands Friday. Earnings are priced in as they should report on the 9th or 10th.
I’ll probably look back next year and wish I just held stock when it is 500-600. This chart screams long-term breakout potential that runs higher than most expect. I may look to turn any short-term options gain into a long-term stock position.
Hut 8 Mining (HUT) - already brokeout over 11 thus makes identifying your risk guide very easy. I suggested the setup early last week and I bought some stock on Friday. I will be looking to add dips and or intra-day continuation setups using my original entry over 11 as the risk guide.
Greenbridge Generation Holdings (GREE) - potential bounce play after the recent reverse merger with Support.com. If it clears 25 I’ll look to get long November $25 calls for a quick trade.
BIT Mining Limited (BTCM) - watching for a breakout over 10 to swing trade some stock here. Once/if I get in I’ll set a stop just below the 10 pivot and forget about it.
Marathon Digital (MARA) - A breakout over 45 gives us a similar trade plan to HUT above using 45 in place of 11. Although I don’t have a position in this one yet, I’ll look to trade short-term $50 calls and convert any profits into LEAPS or a stock position.
Riot Blockchain (RIOT) - if you only look at stocks that are down, this is the laggard. 25 risk guide from here. You can draw that line on a chart yourself.
Amplify Transformational Data Sharing ETF (BLOK) is a crypto stock sector exchange-traded fund if you’d rather have something with less volatility and a long-term outlook while being able to go about your day not in front of a computer screen. https://amplifyetfs.com/blok.html
Tech Chart Updates:
Microsoft (MSFT)- This low Implied Volatility (IV) stock is great for options traders once it starts to breakout as the average range is usually higher than what the options market prices in. Example, in August the $300 calls went $1 to $5 when it broke out to new highs then. Let’s see if we can get a similar move in $310 calls this time. They are trading around .50. Average True Range (ATR) is 5.4 Meaning it could take less than a day for the $310s to be in the money if we get a breakout.
Low IV with higher ATR at the point of breakout is an A+ setup for directional options traders. MSFT options are currently 18% below historical volatility. Meaning option premiums are cheap compared to were they have been all while were looking into the face of a potential breakout. Yeah, the market is sleeping, which means if it does breakout, the move will produce a big winner for call buyers.
What is a Gator Bite setup? An incomplete inverse head and shoulders, incomplete cup and handle, or incomplete ascending triangle can be identified as a Gator. That is a powerful jaw just waiting to snap and quickly pull its prey under the surface. I first started using this pattern for short setups but now I also see the long-side idea. The breakouts can be more powerful as recent increased volatility coupled with everyone surprised to see it breaking out so quickly without necessarily a complete old-school pattern developed can lead to upward pressure as recent sellers get back in, shorts cover and other technical traders chase the surprise breakout.
Just look at this Gator ready to snap a delicious meal and pull it under the surface. Gator Bite Setup = Power move. Do they always work, of course not. That is why I’m waiting for MSFT to clear 305 and show me price action that is indicative it wants to push higher. Go ahead, laugh it off as you wish. Although you can’t unsee this pattern now. You’ll recognize the power soon enough, even if it’s not through MSFT.
Apple (AAPL) - sneaky pivot at 145 to keep an eye on for a breakout higher this week.
Advanced Micro Devices (AMD) - interesting pattern here, where have I seen this before? Looking at some short-term 115 calls if momentum continues. Notice the volume retreating from August highs while the stock has still based higher than the previous breakout around 95? That’s a long-term bullish sign and it may be ready for the next leg up soon. 10/22 $115 calls are less than a buck while it has a ATR of 3. A 2-day continuation move could put this 118+ for a chance at a 200% gain.
Nvidia (NVDA) - 220 key level. This week 220 calls are trading at $2.5, 225 calls trading about a buck, while the stock has an ATR of 6. You can do the math on this one. However, just because the setup is there, doesn’t mean it must go. Wait for the breakout confirmation and sell into strength. Weekly options are for quick trades. Don’t get greedy.
Atlassian Corporation (TEAM) - on watch for a trend continuation move over 415 soon. You can apply the principles above to plan a trade on any uptrending software stock right now: SNOW U SPLK APPS ZS etc
Upcoming Earnings:
Albertson’s (ACI) - Monday pre-market. Someone was buying heavy $28 calls last week. Think they know something? Worth watching for a day-trade opp if they are right. Daily chart is messy for my swing trading style though, hence why I’ll just stick to a day-trade if intra-day action presents an opportunity to anticipate movement. Basically taking the same patterns we can use for swing trades and zoom into the 5-minute chart.
Steel Dynamics (STLD) - Monday after close. Expected to have over 800% year-over-year EPS growth partially due to increasing steel prices. With a current PE ratio of only 9 it’s already undervalued and could get a nice post-earnings run. No guarantee. I wait until after earnings if I haven’t been in a stock for a period already. Thus Tuesday we will get a better sense of what this could do. The daily chart has formed a head and shoulders topping pattern, however, if post-earnings buyers can get it over 65 that pattern would be negated and it would turn into a breakout opportunity. JP Morgan has a $107 long-term target. If earnings estimates turn true, that is still cheap in my opinion.
Silvergate Capital (SI) - Tuesday before open. My opinion of this company is starting to change recently. A breakout over 120 at the beginning of October fueled a nice pre-earnings run into all-time high resistance. It may take a solid beat to get it over 170 for the next leg up.
Netflix (NFLX) - Tuesday after close. I have no idea what to think here. The stock made a quick breakout over long-term resistance but has since stalled out again. Let’s see what earnings bring before I can setup a new trade plan. Fundamentally it could be argued it’s over valued, but if earnings growth continues, valuation metrics will continue to not matter. Price action > fundamentals on high growth names.
Knight-Swift Transportation (KNX) - Trucking industry trying to gain momentum. See more charts in the Trucking Stocks section below. As for KNX revenue is expected to be up 25% or so with a forward-looking PE of only 11.
Tesla (TSLA) - The one everyone wants to see right Wednesday after close. You know they’re going to beat. It’s the Elon way. YEAH, Tesla will probably beat earnings expectations. I expect the stock will approach all-time highs soon even if the initial reaction to earnings is a gap down. I’m long stock here as premiums have burned me recently by trading too far out of the money for the lower trading range (which finally sped up some on Friday). I should have played farther out expiration dates. Nonetheless, I gave up on options until after earnings and will ride the stock. I’ve posted plenty of TSLA charts on Twitter with the latest being the breakout over 750 last month. No chasing gap ups until intra-day action can prove it will continue via 5-minute chart.
Crocs (CROX) - Thursday before open. Seems to beat a lot historically. Potentially another blowout quarter can get the stock moving back towards 160 or more.
Snap Inc (SNAP) - Thursday after close. The stock has been stuck in a 10-point range since the last earnings report. Investors want to see if it was a fluke or if the growth can continue. They are predicted to show a profit. No trade plan yet. I want to see how it reacts for a potential trade on Friday. Unless it tries for a pre-earnings breakout in which case I could day or overnight trade it being out before Thursday close.
American Express (AXP) - Friday before open. Looking for a pre-earnings breakout over 178 for a quick push to day-trade 180 calls. Won’t hold through earnings. Can re-evaluate the bullish daily chart on Friday morning depending on how it reacts.
Trucking Industry:
Several transport/trucking stocks are trying to breakout right now. If you like momentum post-breakout here are a few names to watch:
JB Hunt (JBHT) - Earnings winner breaking out over long-term resistance. This level becomes the risk guide going forward.
Yellow Corp (YELL) - on watch for a continuation move through 8. Target towards 10 in the coming days as a swing trade. 7% risk guide to start. Will add dips and or intra-day continuation and move stop guide up to entry-level once the swing trade gets going. Earnings coming up on November 3rd.
Old Dominion (ODFL) - Watching for a breakout over 305 if the group stays hot. Options are available, but the volume is light across all strikes and spreads are too wide to make it liquid. Must have conviction. My luck I’d bid up the calls, get filled and the stock would pull back causing the bid to fall out again losing 60% instantly. No thanks. I will trade the stock unless the bid/ask of Nov. 19th 320 calls tightens up.
Upcoming IPOs
3 more SPACs on Tuesday 10/19: SMAPU, ENTFU, GTACU
Wednesday 10/20: SDIG - Stronghold Digital Mining
5 on Thursday 10/21: COCO, PX, PTLO, ENFN, WBEV
Friday 10/22: ARIS - Aris Water Solutions
How to trade an IPO without gambling? Wait for the continuation move over the first or second high. Be able to draw the line in your head. GTLB example from Thursday at 97 for the end of day push. Very similar to this Twitter thread from LMND ipo last year over 53.
Currently trading or holding long-term not discussed above:
SOFI, ME, AFRM, NET, ANY, S, CYBR, SNOW, CALX
Current high yield long-term positions:
HNDL, SDIV, EARN, NLY, MBT - will be starting into ARR this week.
Happy Trading!