Markets continue to show strength on the whole but are consolidating and rotating as we await fundamental inputs.

Earnings as well as non-farms payrolls and the US election are in focus for the markets, and are driving the bus, and as those unknowns become knowns, we will see if a new high for the market is in store.  Let’s review the tech market via the ETF QQQ given the big tech earnings coming this week:

Tech is pressing all-time highs as we prepare for earnings.  If AAPL earnings come out strong tomorrow afternoon, that could be the trigger for further explosive growth within the broad market, particularly tech.

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But for me, I’m looking for names that can remove that fundamental input of earnings from the near-term trade.  Financials have broadly traded through their earnings updates and continue to look strong, while a handful of names have looked particularly weak (such as CROX on earnings yesterday).

A key focus could certainly be to find stocks that have digested their earnings and are not finding major pullbacks or risk-reduction by the bullish investors.  One such name that caught my attention is Las Vegas Sands (LVS):

LVS announced earnings last Wednesday after the market close and had a mildly bullish response.  It also ran up more than 20% through the market rally out of China.  And now, it’s pressing against the highs of the last 6 months, showing signs of investment flows are still coming in.

Add to that the implied volatility is dropping now that earnings are behind us:

*From LiveVol Pro

With a strong technical setup ad implied volatility lower, this could be an interesting opportunity for a call debit spread, which would profit ideally on a continued bull trend for the stock with implied volatility drifting lower to get in line with historical realized volatility.

That’s the great thing about options – if I can find a good technical and options setup, I can leverage it with options and generate a significant return utilizing a combination of multiple market edges.  If casino stocks continue to get market inflows, I don’t need LVS to spike like it did in September to generate a significant return.  This trade is setup such that I’d prefer to see the stock to continue to grind higher and compound the returns of a trend, but a spike certainly wouldn’t hurt!

If you’d like to get a list of more ideas and setups just like this that could be of interest for trading opportunities, check out my Outlier Watch List.

And 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