This Stock Just Broke Out, Should We Sell It?

September 8, 2021

Buy Low Sell High

Here’s the first trading lesson I give to anyone I coach.

You must understand it in order to trade.

But more importantly, you must BELIEVE it.

Those are 2 separate things.

Everyone hates losing. But trading requires you to accept it.

People always asks me: “Every time I buy a stock or an option it goes down! What am I doing wrong?”

The answer is simple. “Nothing.”

Let’s look at it from a different angle.

No one can “Buy the Low” or “Sell the High” with any consistency. Not you. Not me. And not even a computer.

That’s easy to understand.

Let’s say that you’re successful at catching the low 2% of the time.

The flip side is that 98% of the time you'll lose on your first buy.

So, when that happens just remember that it happens to everyone, and it’s simply a part of the game.

In fact, before you are REALLY right, it’s likely that you will be REALLY wrong.

Go watch “The Big Short” again to let that last part sink in.

Now, let’s get some UOA…

UNUSUAL OPTIONS ACTIVITY

1. Failing Technicals HERE Bring in the Put Buyers 

2. This Stock Just Broke Out, Should We Sell It? 

3. The Next Big Thing Better Be Big

Let’s get started...


UNUSUAL OPTIONS ACTIVITY PLTR STOCK

Failing Technicals HERE Bring in the Put Buyers 

PLTR Unusual Options Activity 090821

Large Palantir Call buyers have been around since $22 back in July. Earnings were good and the Call buying continued. 

Here’s a good outline of PLTR (with a historical timeline of comments) and the issues facing the company, specifically the mix between the company’s government business vs. its growing Commercial Business.

Maybe the bigger story is the chart….

What Does the PLTR Stock Chart Say?

PLTR Chart 090821

We are on the right-side of the “Momentum Mountain” and I cannot express enough how difficult it is to trade. 

Every move up will draw those investors looking for that left-side “juice.”

Be careful, it’s more often a mirage

The stock has lost some of the symmetry I like to see.

It’s also failing at that $27.50 resistance going back to March.

PLTR Active Option Contract to Watch

Unusual Options Activity PLTR 090821

After heavy Call buying, I always pay attention when I see a large Put Buyer step in.

The PLTR October $26 Puts were bought 11,000x this morning for $1.31. That unusual options activity in PLTR has been followed up with thousands of more puts down to the $22 Puts.

The RR$ for these Puts range from $20 to $23, so a potential pullback here needs to be accounted for. The stock was just $20.50 in July.


UNUSUAL OPTIONS ACTIVITY NFLX STOCK

This Stock Just Broke Out, Should We Sell It?

NFLX Unusual Options Activity 090821

NFLX exploded over the last few weeks and reached new all-time highs.

Today, JPM raises their price target to $705 to $625:

“We continue to like NFLX shares toward year-end based on strength of the 2H content slate, greater distance from pandemic pull forward, stronger seasonality, & the significant global secular streaming opportunity w/NFLX only 20-25% penetrated among global pay TV household’s ex- China & at just 7% of US TV time.”

The chart looks fantastic…

What Does the NFLX Stock Chart Say?

NFLX Chart 090821

After doubling from 2019, NFLX spent a year oscillating between $470 and $570 (and a brief failed breakout to $593).

Over the last 3 weeks, the stock has gone from $520 to the $615.60 high today.

All good. 

But stocks do take breathers. And after touching the high, NFLX reversed to trade down on the day.

It looks like the options market caught a few over excited Call buyers in the morning.

NFLX Active Option Contract to Watch

Unusual Options Activity NFLX 090821

The weekly NFLX September Call options were very active out of the gate.  For example, the $610 Calls traded as high as $9.30. Unfortunately, within an hour they lost 70% of their value.

Not only did the options lose on direction. The Implied Volatility also declined substantially intra-day.

These reversals on good news is usually a sign that the stock is tired at these levels. NFLX did so much work over a year, that I think you should see support near that $575-580 level.


UNUSUAL OPTIONS ACTIVITY AAPL STOCK

The Next Big Thing Better Be Big

AAPL Unusual Options Activity 090821

AAPL has been working on a self-driving car for years. It has been rumored to be their “Next Big Thing.” I am not sure how much they have spent on it, and we may never know, but I suspect it is well over $100 Billion dollars. 

So, the news that their project leader just left worried me. The market didn’t seem to care, which was also a bit surprising.

Today, Baird raised their Price Target to $170 from $160:

“Our latest U.S. consumer survey suggests a continued solid iPhone upgrade opportunity, with results largely consistent with past surveys. Importantly, the survey continues to point to the power of the eco-system, including encouraging interest in a potential future Apple Car. ”

It all seems a bit strange. Especially when you see the chart chugging along without worry.

What Does the AAPL Stock Chart Say?

AAPL Chart 090821

After that huge move from $123 to $150, the stock held firm between $145 and $150 for 6 weeks before breaking out to new highs. 

It’s bullish for sure. 

But like NFLX today, a negative reaction on a positive report is a sign of weakness. And some of the options flow is telling us the same thing.

AAPL Active Option Contract to Watch

Unusual Options Activity AAPL 090821

There’s been Call Selling this morning in the November 19th $155 to $165 Calls. Get a sense of how much is being priced into the stock by looking at the RR$... $170 to $180.

Stocks don’t usually go up in a straight line. 

And a $2.5 Trillion stock is usually hard to move like that.

Consider that every $5 move in the stock at these levels is about ~$85 Billion in Market Cap.

So, a move up to $180 would add another $425Bn.

That’s after the move from June to today, which added more than $700Bn!!!

The market is definitely expecting the Next Big Thing. 

Will it come next week?

Is it the car?

A huge Healthcare product like Insurance?

It better be Big, and it better be Soon!

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Now go make some money!

Best,
Felix

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