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What will move Crude Oil… (*Not the Dow) – Draw on CL Supply?

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Well… Most people are talking about how the Dow Jones could rally up 600 pts, and I can’t stop staring at the Spoos ES moving 10 handles every couple minutes. I sat here feeling confident that we could easily bounce and finally rally higher, as we did all night again, and finally — this time WAS different. We didn’t tank into the end of the day I mean (we ripped up huge, finally squeezing the shorts), *now the real question is, but what happens tomorrow. —- I will constantly use rhetoric to stress that futures are a market focused on what will happen next, not what happened in the past. So with that being said, if you were long the ES today, you made great profits on a 1 lot, if you weren’t, hopefully you weren’t very short. But, that is the past, the trade is done, the move is gone. Let’s move on. — by the time I finish writing this, if you don’t already know what happened in the stock market today, there is your first issue. The headlines popping up on my iPhone are passive, they are old news, the trade happened.

I don’t want to talk anymore about the Dow, I don’t have a position in it, and the record rally opportunity — just took place. But tomorrow there will be new trades to take, even today starting at 5pm.

I want to talk about Crude Oil — When I first started trading futures, there was nothing I feared more than the concept of “shorting crude oil”, that being said, that was the past, and we are focused on the future. So clearly, with the CL trading below 39 a barrel, with record bearishness and everyone screaming we could still go lower. — As a trader, student of finance/markets/economics: I am wondering or dumbfounded how we have still not found “a bottom.”

The number one argument I keep hearing regarding oil is “supply”, people continue to ignore the headlines or other factors that should or could make oil pop higher, and so I would think that until the “supply” story can be exploited otherwise, that argument will keep oil offer.

Well last night we had the biggest inventory drawdown since 2014 in Tuesday API, when it reported unexpected 7.3 million-barrel drop in crude supplies! *Analysts forecasted an increase of 1.9million…

Followed by today, we had EIA results surprising even the whisper # with US DOE Crude Oil Inventories (Aug 21) W/W -5452K vs. Exp. 1450K!

So if the argument is “supply”, yet again, we get draws and surprises to counter than like we did in the past 24 hours with API and EIA… WHY WOULDN’T CRUDE OIL CL BE ABLE TO EVEN END IN THE GREEN, LET ALONE UNCH? *it even almost settled on LOD.

The distillates are clearly not helping, and people are looking at the USD strength, but when the Dow Jones rallies 600 pts and Crude Oil can barely bid higher *after data supporting “maybe we don’t have quite as much over-supply as we thought.” I ask again: WHY WOULDN’T CRUDE OIL CL BE ABLE TO EVEN END IN THE GREEN, LET ALONE UNCH?

So, now where does CL go tomorrow? What will make it move? Take a look at the futures at 5pm and let’s figure it out.

Let’s try again tomorrow. – Happy Trading.

-Bret Rosenthal

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Timing: Traders and investors are NOT feeling ‘saved by the bell’

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Ding! Ding! Ding! – Although, again traders and investors are NOT feeling ‘saved by the bell’… If you called the “bottom” today – It would have had to have been at the 5pm futures open yesterday, or around 1am (while asia-europe traded). We had an over $3000+ move per 1 lot of any of the E-Mini Stock Futures markets – BUT IT WAS OVERNIGHT.

That being said, today, as US Traders came into the market, sure there was a couple of points left to the upside for you to eat like a bird. BUT – just like Friday and Monday sell offs into the close — stocks get slammed again, and your crapping out like an elephant. I agree, stocks will “rally higher again”, but they already bounced overnight, be ahead of the moves, or wait, nobody wants a Monday morning QB.

— Why? —

The answer: “Who cares.”, try not to think, but to trade it. If you are focusing on futures markets, the name of the game is right there — we only “care” about the future. So- it’s best not to get caught up and wrapped up around “Why?” the market is up or down 50pts in a hour. It’s okay to be conscious of where we have been, but focus on WHERE ARE WE GOING NEXT?

If you have ever traded anything before you know “timing is everything”, just like an option has its factors regarding timing, and even just buying or selling stock outright (with no leverage) timing clearly matters — So I think the most important lesson that can be learned today again is just that. Don’t be in a rush to get a trade on, don’t think you will miss the trade or miss out on easy money.

It does not take big size in a market where the VIX is moving 5+ vols and the minis are moving in 3-4% swings. — It takes timing.

I know it is easier said than done, but with these dips, typically “bring in new money or new traders/investors” who have been waiting for an opportunity to “buy stocks”. But as you see, we aren’t going to recover overnight or by the 5pm open, it will never stop moving — All you can control is WHEN you are going to be in and out, so focus on that, define the trade, and then execute it.

Personally I am watching/using the stock future market swings as an indicator / proxy for my other trades. (I’m not going head on against this… yet.), I’m focused on oversold commodities and markets that could show inflation LT. BUT: As for this current “crazy” stock market – When the moment or timing is right, I take my best set-ups and take small trades between the large swings.

Let’s try again tomorrow. – Happy Trading.

-Bret Rosenthal

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I would rather have FOMO than lose my MONEY

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More and more traders are starting to mention the concept of “FOMO” – It is the “Fear Of Missing Out” and it is basically fear/greed wrapped up into one slang word that keeps us in and out of trades… but mostly in them.

Days like today are more than tough, they are potentially game/life changing for many Trader’s careers — BUT, ideally, to “live to trade another day” through these types of markets, is an award and privilege in itself.

Today is one of those days when we look back at the chart, we will be able to point and say “Oh that was “Melting Monday” or whatever we will end up calling it. I, for a long time, would constantly use the lows/levels as reference points from the infamous “Flash Crash” from 2010. The event created more opportunities than just the moment itself.

On Friday, I was long the Spooz ES mini contract, it was already down about 30some points, and I figured after last Thursdays drop, “we could dead cat bounce into weekend at least”). Well I was wrong, (as were many), but I did not blow out, nor did I push against it more. I was using the weekly expiring ES options to leverage up and not only let me get more long deltas in ES, but also protect how much I could lose and how much I needed to hold the position. Overall, with trading, usually you are betting 50/50 in your mind as to “up or down”, so in this case clearly we didn’t go up, so I lost, I was wrong, but I lost what I was willing to lose, didn’t add into the loser, and at the end of the session Friday—- I TOOK THE LOSS.

So sure, that moment sucked and was unfortunate to “lose”–, and the entire weekend, I had more than a little bit of FOMO as I was very worried I would miss out on the “sure to come back rally in stocks”, but clearly it is better to be safe here than sorry, and I get to keep my Money. Which means, “I lived to trade another day.”

Lesson- The market isn’t going anywhere. Don’t sacrifice what you want most, for what you want now. It is better to have fear of missing out (be willing to miss a trade) — than to lose your ability (money) to trade. *Again, simply, “live to trade another day.”

Let’s try again tomorrow. – Happy Trading.

-Bret Rosenthal

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Does Deere & Co (DE) Weak Historical Performance Mean it’s a Good Short?

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Deere & Co (DE) is a manufacturer of heavy machinery and vehicles for agricultural, forestry and construction applications. The stock is currently trading around $91.20 in a 52 week range of $78.88-$98.23. DE has performed relatively well this year with shares rallying 3.2% year to date. Despite the stocks relatively strong performance this year its chart and historical performance record are indicating it might be a good short ahead of earnings before the bell tomorrow.

DE is set to report earnings tomorrow before the opening bell and the stock record on earnings day is extremely bearish. Over the past 12 quarters the stock sold off on earnings day 9 times with an average move of 2.64%. Currently the options market is implying a move of around $3.00 (3.3% ) higher or lower by tomorrow’s close. The stock is selling off today and is now below the Ichimoku Cloud on the daily bar. With a weakened chart setups and a dismal performance record DE is appearing to set up well for a short.

Using the implied move I can calculate a downside target for DE by tomorrow’s close. I will look to set up an options strategy targeting a move to $88.20 by tomorrow’s close. With this target in place I can now set up an options trade.

Possible Trade: Buying the DE Aug 90-88 Put Spreads for $0.50
Risk: $50 per 1 lot
Reward: $150 per 1 lot
Breakeven: $89.50

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Salesforce.com Inc. (CRM) Looking Weak Ahead of Earnings Tomorrow

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Salesforce.com Inc. (CRM) is a cloud computing service that provides customers with customer relationship management platforms. The company’s stock is currently trading around $69.70 in a 52 week range of $51.04-$78.46. The stock has been performing well this year with shares rallying 17.64% year to date. Despite the stocks relatively strong performance through the year CRM is selling off hard ahead of earnings set to be released after the bell today.

The stock has a mixed performance record on earnings. Over the past 12 quarters the stock has rallied 6 times and sold off 6 times with an average move of 6.95%. With stock at current levels options markets are implying that the stock can move higher or lower by $5.35 by tomorrow’s expiration. Although the historical performance of the stock is mixed the chart is starting to look much weaker in CRM. The stock is lower by nearly 3.5% today and is breaking out of value for the month. The stock is now also firmly below the Ichimoku Cloud indicating a move into bearish territory. With a mixed performance history and a weak chat I believe CRM is setting up well for a short position via options.

Using the move implied by the options market I can calculate a downside target of $64.35. I can use the downside target to set up a trade.

Possible trade: Buying the CRM Aug 66-64 Put Spreads for $0.50
Risk: $50 per 1 lot
Reward: $150 per 1 lot
Breakeven: $65.50

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Traders Making Big Bearish Bets in Xilinx, Inc (XLNX)

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Xilinx, Inc (XLNX) is a semiconductor and technology company that develops programmable devices. The company’s stock is currently trading around $42.50 in a 52 week range of $36.24-$48.73. The stock has been relatively weak on the year with shares falling 2.17% year to date. The stock has been on a bit of a rebound however with shares rallying after making recent lows post-earnings. Despite the slight recovery in XLNX options traders are putting on some large bearish bets in the name during todays session.

Earlier this morning a trader bought 8,124 XLNX Sep 40 puts for $0.44 while the stock was trading at $42.74. The stock sold off after the order hit and over 20,000 contracts have now traded on that line. The stock moved to session lows after the order hit the tape and as the stock made lows these puts traded as high as $0.60 on the session making this a very profitable trade. Although the stock is off of session lows these puts are still trading near the trader’s entry price. The stock is below the Ichimoku Cloud on the daily bar so this could still represent a decent short opportunity.

Trade: A trader bought 8,124 XLNX Sep 40 puts for $0.44
Risk: $44 per 1 lot
Breakeven: $39.56

I bought these puts for $0.48 on average and took a profit target at $0.60. Including the other blocks that traded on this line XLNX has traded 4.5 times its average daily options volume today meaning this order is very significant.

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Lowe’s Companies (LOW) Set to Report Earnings Tomorrow Before the Opening Bell

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Lowe’s Companies, Inc (LOW) is a home improvement retailer with over 1,800 locations in North America. The company’s stock is currently trading around $73.22 in a 52 week range of $49.70-$76.25. The stock is seeing a nice move higher today in sympathy with the move higher in Home Depot (HD) after earnings were reported earlier today. LOW has been relatively strong this year with shares rallying just over 6% year to date. The company is set to report their most recent quarterly earnings tomorrow morning before the bell. Based on the strong historical performance of the stock and the solid technical setup it seems like LOW is setting up well for a long ahead of earnings.

LOW stock has rallied on earnings day 7 of the past 12 quarters with an average move of 4.23%. More importantly, the stock has rallied from earnings day through the nearest options expiration with an average move of 4.64%. The stock is also looking strong on a chart. LOW is trading well above the Ichimoku Cloud and both its 9 and 26 period moving averages. With such strong historical movement and a good looking chart I want to set up a long position in LOW. Market makers are currently implying a move of around $2.70 in LOW by this Friday’s expiration so I can use this to calculate an upside target.

With LOW trading around $73.22 I will calculate an upside target of $75.92 and set up a trade.

Possible Trade: Selling the LOW Aug 75-72.5 Put Spreads for $1.40
Risk: $110 per 1 lot
Reward: $140 per 1 lot
Breakeven: $73.60

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Home Depot (HD) Earnings Preview

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Home Depot (HD) is a retailer of home improvement products and services with operations in North America and U.S. territories. The company operates nearly 2,300 stores in those regions. Home Depot’s stock is currently trading around $120.40 in a 52 week range of $82.85-$120.75. The stock has been strong this year, rallying 14.67% year to date. Home Depot is set to report their most recent quarterly earnings tomorrow before the market open and all data points are signaling for a potential bullish trade signal ahead of the report.

HD has rallied 9 of the past 12 quarters on earnings day with an average move of 3.28%. The stock has also rallied from earnings day through the nearest options expiration 9 of the past 12 quarters. The stock is also looking very strong on a chart. Currently HD shares are trading well above the Ichimoku Cloud and both the 9 and 26 period moving averages. With the options market implying a move of around $4.10 by this Fridays close I can look for an options spread that gets me long HD with a maximum profit at the implied upside target of $124.50.

Possible Trade: Buying the HD Aug 123-125 Call Spreads for $0.50
Risk: $50 per 1 lot
Reward: $150 per 1 lot
Breakeven: $123.50

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Traders Betting Big on Tumi Holdings (TUMI) Using Options

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Tumi Holdings, Inc. (TUMI) offers consumers a range of travel and business products and accessories. The company’s stock is currently trading around $20.70 in a 52 week range of $18.29-$25.47. The stock has been underperforming the market this year falling 12.77% year to date. The past 5 days have seen a bit of a rebound in shares however. The stock has rallied over 4.2% over the past 5 days and is seeing another pop today of 2.32%. Despite the more bearish longer term price action in TUMI, options traders are betting on a continued move higher through the end of the year.

Earlier today a trader bought 1,933 of the TUMI Nov 22.5 Calls for $0.90 when the stock was trading at $20.57. The stock rallied after the order hit the tape and this block represents orderflow 8.6 times the average daily options volume in TUMI. Nearly 2,500 contracts have traded on that line now and stock has traded as high as $20.72 on the session. These options have not managed to trade higher on the day but this is very unusual options activity in TUMI. This will now create the largest line of open interest in TUMI Nov options and this trader is likely expecting the stock to continue its recovery after rallying on earnings earlier this month. With options still trading at $0.90 this trade could represent an opportunity to get long TUMI on institutional orderflow.

Trade: A trader bought 1,933 TUMI Nov 22.5 Calls for $0.90
Risk: $90 per 1 lot
Reward: Unlimited
Breakeven: $23.40

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Monster Beverage Corporation (MNST) Earnings Preview

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Monster Beverage Corporation (MNST) is engaged in the creation, design, distribution and selling of monster products including energy drinks, sporting events, Monster TV and Monster Music. The stock is currently trading around $147.72 at the upper end of its 52 week range of $64.27-$155.83. The stock has been out performing the market this year rallying 16.3% year to date. MNST is scheduled to report earnings after the closing bell today, and the stock is down huge, $6.28 or 4.08%, on the session ahead of the close.

Over the past 11 quarters MNST has rallied on earnings day 6 times with an average move of 5.67%. The stock appears bullish on a chart going into the release having traded above the Ichimoku Cloud since July, but is dropping huge over the past week on the daily bars. Over the past 11 quarters MNST has rallied on earnings day to the nearest expiration 4 times with an average move of 4.99%. Investors have extremely high expectations that the energy-drink giant will be able to continue the impressive run of fast-paced growth. With the stock trading at a bearish trend, okay earnings history, extremely high expectations and big money getting short according to Alpha Tracker it is hard to justify anything but a short position in MNST.

The options market is currently implying a move of around $12.9 or 8.8% in MNST by the end of this week giving us targets of $134.82 and $160.62.

Trade: Buy this week’s 138-136 Vertical put spread for $0.50
Risk: $50 per lot
Reward: $150 per lot
Break Even: $137.50