Before I get into today’s market commentary, I want to make sure you all have the opportunity to sign up for my special post-election options trading webinar this afternoon! Sign up here for free!
As the market digests the political landscape and expectations for policy implications, we are seeing some clear winners and clear losers.
Of course, bitcoin and everything cryptocurrency-related appears to be going parabolic. Solar companies in particular seem to be some of the weakest names.
Jumping into the continuation of these trends is tempting, but it can also be a recipe for disaster if profit-taking shifts momentum from the initial investment flow. So, rather than focusing on the moves that have already been extreme, I’m looking for stocks that have an incredible opportunity to jump in at the beginning of the move that is setting up now.
To find my next setup, I’m starting with a big index that’s been a star in the past, but less-so recently, and that’s the NASDAQ 100 (QQQ):
Tech made new highs, but less aggressively than small caps or the broad S&P 500. But, that said, there’s still clear interest in investing in innovation.
One sub-sector of tech that can never be ignored is semiconductors, via ETF SMH:
SMH is rangebound and showing signs of disinterest on the whole. That’s not normally what I want to look for with an options trade for a leveraged move. BUT, if I dig a little deeper, I can find some really intriguing ideas within semiconductors.
First, if semiconductors on the whole start to get buying, I want to find a strong name within the subsector. One of the strongest is NVDA:
Testing highs, preparing a breakout, and setting up a potentially leveraged upside return is particularly attractive. The biggest flag is that they have earnings next week, so if I am going to try to trade this for more than a week, I certainly would like to hold this position with the defined risk of options.
On the other side, if semiconductors continue to underperform, I can target AMD:
AMD had weak earnings already, and if semiconductors continue to drift toward the downside, AMD could have a very leveraged return with outright put options, particularly if the technical stops get triggered on a move below the lows of last week.
Whether bullish or bearish, there are opportunities in this marketplace. Finding the outlier opportunities is the key for me, and that’s why I put together my Outlier Watch List for potentially explosive options opportunities based upon technical analysis!
As always, please go to http://optionhotline.com to review how I traditionally apply technical signals, volatility analysis, and probability analysis to my options trades. And if you have any questions, never hesitate to reach out.
Keith Harwood
Keith@optionhotline.com
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