3 of the Best Trade Setups on Wall Street (CMG PYPL FDX)

Stocks are kicking off election week with one heck of a jump start. The S&P 500 Index soared 1.5% this morning delivering instant gains to stock owners. And unless we see some type of ill-fated reversal of fortune, it’s fair to say the losing streak plaguing stocks across the land is officially over.

3 of the Best Trade Setups on Wall Street (CMG PYPL FDX)

Whether Tuesdays election shenanigans puts the kibosh on our budding rally remains to be seen. But a weekend survey of my watch list revealed a handful of attractive trade setups beckoning to bulls and bears alike.

They all boast low-risk, high-reward opportunities, which when coupled with option trades look downright sexy.

Read on, friends, for three of the best trade setups on the Street.

Wall Street’s Best Trade Setups: PayPal (PYPL)

PYPL
Click to Enlarge
Source: OptionsAnalytix

Paypal Holdings Inc (NASDAQ:PYPL) recently reported earnings and profits rained on shareholders. The one-day 10% pop ushered PYPL stock to all-time highs, busting through heavy overhead resistance in the process.

The post-earnings pullback has retraced further than I would have thought following such an epic rally, but it’s a decent trade setup nonetheless. Friday’s down day filled the earnings gap and buyers finally came out of the woodwork to defend their turf.

If PYPL can remain above its 50-day moving average, this dip provides a nice low-risk trade moving forward. This morning’s up-gap is fading fast, so no need to jump in just yet. I suggest waiting for a break of today’s high ($41.65) to signal PayPal’s next advance has begun.

To stack the odds in your favor, go with a naked put play. Sell the Dec $38 put for 45 cents. Provided PayPal sits above $38 next month, you’ll generate a $45 profit per contract sold.

Wall Street’s Best Trade Setups: FedEx (FDX)

FDX stock
Click to Enlarge
Source: OptionsAnalytix

FedEx Corporation (NYSE:FDX) has been a beast since its mid-September earnings release. Relative strength has been its watchword.

Despite every other stock getting taken behind the woodshed on pre-election jitters, FDX stock has been flying high. And with today’s jump, the transportation titan is notching yet another new 52-week high.

If you think the relief rally in equities continues post-election, FDX belongs at the top of your trade list. Today’s breakout is all the signal you need to hop in. Consider using its all-time high of $185.19 as your target for the weeks ahead.

For this trade setup, let’s go with a Dec $175/$180 bull call spread. It can be purchased for $2.80. The risk is limited to the initial $2.80 debit and will be lost if FDX sits below $175. The max reward is limited to the distance between strikes minus the net debit, or $2.20, and will be captured if FDX stock can rise above $180 by expiration.

Wall Street’s Best Trade Setups: Chipotle (CMG)

CMG stock
Click to Enlarge
Source: OptionsAnalytix

To counterbalance our pair of bull picks, here’s a consideration for bears. Chipotle Mexican Grill, Inc. (NYSE:CMG) shares were slammed on earnings last month. The ailing burrito-chain sliced below major support on heavy volume.

The technicals remain atrocious for CMG with its share price submerged beneath every major moving averages. Rallies should continue to be viewed with skepticism and as potential low-risk trade setups for bear plays.

Its current pop is carrying CMG to the descending 20-day moving average as well as its gap area. Additionally, the old support level of $390 is looming large as potential resistance. Throw it all together and the current upswing has a high chance of failing in the near future.

Consider selling the Dec $420/$425 bear call spread for 85 cents. The trade consists of selling the Dec $420 call while simultaneously buying the Dec $425 call. The net credit of 85 cents will be captured if CMG sits below $420 at expiration. The max loss is limited to $4.15 and will be forfeited if the stock rises above $425 at expiration. To limit the loss you could exit if CMG rises to the short strike of $420.

As of this writing, Tyler Craig held bullish positions in PYPL.


Article printed from InvestorPlace Media, https://investorplace.com/2016/11/trade-setups-cmg-pypl-fdx/.

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