Rotation is the name of the game on Wall Street lately. While the broad market meanders, movement aplenty is transpiring beneath the surface. This morning’s open is a perfect example.
Tech stocks are being tossed out like bad lettuce, and oil stocks are being embraced like an old lover. The discrepancy in performance provides an interesting backdrop for options trading.
Rather than focusing on one sector and running the risk that all your trades fly or die, I suggest a more tempered approach. And in the world of trading, nothing says “temper” like diversification. It’s a truth as old as time and provides benefits for options trading just like other investing methods.
Today’s selections include three stocks from three different sectors To aid in your diversification quest: one retail, one biotech and one technology company. They all boast bullish price action and some of the best setups heading into the new week.
Options Trading: Guess?, Inc. (GES)
Click to Enlarge
Guess?, Inc. (NYSE:GES) shares are a diamond in the rough. Many a retail stock are being bludgeoned to death by Amazon.com, Inc. (NASDAQ:AMZN), and terrible trending stocks litter the sector.
But not GES! She’s been making a solid comeback for months now. The latest surprise was a monster earnings-induced gap which sent the stock soaring.
Since then, GES has held up like a champ, basing sideways just beneath resistance. Meanwhile, the 20-day and 50-day moving averages are playing catch-up to work through the overbought conditions. And that means a breakout is in the offing. It’s a perfect opportunity for options trading.
GES options are dirt-cheap. Buy the Nov 16 calls for $1.10.
Options Trading: Gilead Sciences (GILD)
Click to Enlarge
For our next selection, we’re moving to the biotech space which has been a leading sector of late. Gilead Sciences, Inc. (NASDAQ:GILD) boasts one of the best charts of the bunch making it a top pick for the week ahead.
Spectators analyzing GILD stock price will note it sits in an uptrend above rising 20-day, 50-day, and 200-day moving averages.
The latest upswing transpired on heavy volume showing some serious accumulation by the big boys. Like GES, the recent pause in GILD stock has allowed the 2-day moving average to catch-up. With the stock now rested, the time for its next advance is nigh.
Wait for GILD to break above Monday’s high ($84.28), then buy the Nov $82.50/$87.50 bull call spread for around $2.15.
Options Trading: Nvidia Corporation (NVDA)
Click to Enlarge
Nvidia Corporation (NASDAQ:NVDA) rounds out today’s trio with a textbook bull retracement pattern. NVDA stock recently soared to a new record high at $191.20 on monster volume to boot. But over the past
But over the past week the shining semiconductor has suffered during the rotation out of tech stocks. At $173.28, NVDA stock has now pulled back almost 10% from its highs.
And with the 20-day moving average and prior resistance looming close, this is about as good a spot as any to deploy bullish positions. To capitalize on a potential year-end run in NVDA, buy the Dec $175/$195 bull call spread for $6.90.
As of this writing, Tyler Craig held no positions in any of the aforementioned securities. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.
