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S&P 500 Market Outlook: Bearish

Protection Trade: SPY $297.51

As markets accelerate its correction lower fueled by coronavirus fears, we would typically use this as a buying opportunity. However, with the recent spike in cases outside of China catching many countries off guard, fear and panic have set in and we see further downside. Use a put spread to protect your portfolio against further downside. If SPY breaks below $275, we would recommend reallocating your equity assets altogether. 

Learn about Hedging Your Portfolio

Keep track of the cases outside of China, published by John Hopkins each day, for a deceleration in cases to remove this hedge. 

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S&P 500 Market Outlook: Neutral

Bullish Trade: KR $28.74 – Consumer Staples

OptionsPlay’s bullish trade for Thursday, Feb 27th is Kroger (KR). KR is part of the Consumer Staples Sector (XLP). XLP has declined 2.71% lower over the past month and its 1m and 6m trend turned bearish yesterday and is approaching its $61 support level. 

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Kroger’s 1m and 6m trend turned bullish on Feb 11th and recently started to test its $29 support level. With a technical score of 10 (out of 10), KR is a strong stock that will likely continue higher. 

As a stop loss, if KR were to trade below $29 for multiple days, this would invalidate our analysis and suggest cutting losses on the trade. We also recommend cutting losses on this options trade if the value of the vertical spread declines below $0.65.

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S&P 500 Market Outlook: Bearish & Overextended 

Markets have pulled back violently and resolved its negative divergence on coronavirus fears. In this type of market, we do not want to chase shorts or try to catch a falling knife. Our initial thoughts are to look for long opportunities from this selloff but prefer to wait for stability before seeking long exposure. On a weekly chart, SPY remains bullish and this pullback puts it back into a better position for a continuation higher. On the daily chart, we see multiple positive divergences that may provide support for a bounce higher. $320 is the new resistance level target to the upside with $302 as support. 

Open Positions:

We have reduced almost all of our long exposure as markets become overextended and seek to add exposure over the next few days. View DailyPlay Trades

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Bullish – ZM $101.76 – Technology

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Market Outlook:
The S&P 500 (SPY) has pulled back on negative divergence this week but remains within a larger bullish trend. We continue to position for a continuation higher but remain cautious of quick pullbacks. 

ZM Trade Idea:
On CNBC’s OptionsAction show on Friday, Tony Zhang suggested that Zoom Video’s stock may rise on earnings following strong revenue projections. ZM has broken out in February and may exceed its 52-week high on coronavirus fears. Expecting ZM to rise on earnings, Tony suggests buying a Feb 28/March 105/107 Call Diagonal @ $5.85 Debit. As of Friday’s close, these calls were trading at $5.95 Debit.

We’ve structured this trade in OptionsPlay so you can analyze and view this trade along with the supporting technical chart at your convenience. You can also view the Options Action’s video by clicking on the following link: ZM OptionsAction Video

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S&P 500 Market Outlook: Bullish

Bullish Trade: ABBV $94.14 – Healthcare

OptionsPlay’s bullish trade for Thursday, Feb 20th is AbbVie (ABBV). ABBV is part of the Healthcare Sector (XLV). XLV has declined 0.48% lower over the past month and its 1m and 6m trend turned bullish on Feb 5th recently bounced higher off its $103 support level.

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AbbVie’s 1m trend turned bullish on Feb 5th and recently broke above its $90 resistance level and pulled back to provide a good buying opportunity. With a technical score of 10 (out of 10), ABBV is a strong stock that will likely continue higher. 

As a stop loss, if ABBV were to trade below $90 for multiple days, this would invalidate our analysis and suggest cutting losses on the trade. We also recommend cutting losses on this options trade if the value of the vertical spread declines below $1.15.

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Bullish – LDPZ $291.60 – Consumer Discretionary

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Market Outlook:
The S&P 500 (SPY) has continued to march higher with strong momentum, providing a higher risk of a pullback. Look for a continuation higher above $334 highs but remain cautious of quick pullbacks. 

DIS Trade Idea:
On CNBC’s OptionsAction show on Friday, Tony Zhang suggested that Domino’s stock may rise on earnings following many consumer stocks. DPZ has consolidated for a couple of months and started to resume its uptrend last week going into earnings. Expecting DPZ to rise on earnings, Tony suggests buying a March 290 Call @ $10.50 Debit. As of Friday’s close, these calls were trading at $11.70 Debit.

We’ve structured this trade in OptionsPlay so you can analyze and view this trade along with the supporting technical chart at your convenience. You can also view the Options Action’s video by clicking on the following link: DPZ OptionsAction Video

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S&P 500 Market Outlook: Bullish

Bullish Trade: PYPL $118.56 – Financials

OptionsPlay’s bullish trade for Wednesday, Feb 13th is PayPal Holdings (PYPL). PYPL is part of the Financials Sector (XLF). XLF has rallied 1.40% higher over the past month and its 1m and 6m trend turned bullish on Feb 5th recently broke out above its $30 resistance level.

Learn more about buying Vertical Debit Spreads

PYPL’s 1m trend turned bullish on Feb 3rd and recently broke above its $118 resistance level and pulled back to provide a good buying opportunity. With a technical score of 7 (out of 10), PYPL is a strong stock that will likely continue higher. 

As a stop loss, if PYPL were to trade below $118 for multiple days, this would invalidate our analysis and suggest cutting losses on the trade. We also recommend cutting losses on this options trade if the value of the vertical spread declines below $1.50.

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