Weekly Plan 6.16.24

Good Morning traders-

It is easy to get bogged down by the day to day minutiae and sometimes easier to forget the value of the work we do. I want to kick off the post with highlighting some of my recent calls made here in the Substack- just as a gentle reminder that up or down, does not matter, as OrderFlow is a direction agnostic methodology and if something makes sense (like GME from 12 to 70), it will show up on our radars BEFORE the move happens.

This is going to be a tremendous post- you do not want to miss this.

At end of the day, we as traders are not tied down to any school of thought. We do not have any bias. As traders, we are observant at all times, and focussed on where the puck is going to be. Not linger in the past.

1. NKLA- back in Spring of 24, I made a bullish call on NKLA around 50 cents for it to move higher. This stock at that point did trade nearly up into $1 and has since receded. While this has not gone below 50 cents, you can argue this really has not gone anywhere for last few weeks after that initial surge that failed to hold. I will rate this call as C as it has not moved in last 4 months after that initial surge.

2. MSFT- I shared a bullish level on this below 400 on its earnings which was incidentally low of the move, before it rallied into 430. At 426 last week, I called for a test of 440, which was met this week.

3. AAPL: I have been an AAPL bull from much-much lower levels. But most recently I shared bullish AAPL idea at 190 by sharing an 80 cent CALL for this MOPEX which is now well North of 20 bucks. This again highlights that in markets, it is not about quantity but quality. Would you rather have one call every 3 months that goes from 80 cents to 20 dollars or 20 calls every week that go from 80 cents to nowhere? The choice is simple.

4. TSLA: I shared bullish TSLA call when it was 137 at time of its latest earnings. More recently, I have a bullish short term level of 170 which has held against all odds. But I think not for too long. Read more about it later in the post.

5. GME: my work on GME levels does not need any introduction. GME is a gift that keeps giving. In a sense, you could say anything that is volatile is good for short term traders, like me. And you. I was perhaps only a handful of FinTwit bulls on GME when it was 12 dollars. A few of my friends on X were as well. Well this stock exploded from that level. At one point trading as much as 70 bucks. I know I said I will not be talking about GME anymore here, but it is hard to resist. I think GME could still remain in play as long as the volatility on GME does not die down.

6. NVDA: I have been a long term bull on NVDA in this Stack from when it was 400. or 40 bucks now accounting for the split. Even after its blockbuster earnings, I had a bullish bias calling for 124 when it was merely around a 100 bucks.

These are but a handful of calls made very recently which worked out well on the Bullish side. I could go on by naming ideas like TGT which I shared a low on around 100 bucks, MSTR, Bitcoin, Oil, TLT, MARA and dozens more. As far as the bearish side goes, I have not shared anything on the bearish side yet- which I think will change once we start a secular bear market in the stocks. I think we are probably a handful of weeks away from this. But I need technical confirmation - which I will be sharing once I see it.

Once we start a bearish market, most of my calls will flip to puts. You will see this Blog shift to the bearish tilt. It has not yet happened, I do not know when this transition will take shape, but my point is, the positioning will be adjusted appropriately to account for the tone of the market.

Another subtle but important shift for my readers is that I have been sharing more and more options ideas now in the posts. This has been my long term goal to share more options ideas with folks with a shorter time frame. I developed and perfected an options framework over past 2 years which I feel is getting robust now so I can share more.

As a rule, I do not like options with premiums of 5-6 dollars or more. I also do not like too far out OTM, based on my personal metholdogy. I favor ATM or ITM options, which happen to be underpriced, often times like 1-2 dollars, or even under $1. If I am going to be in an OTM, it has to be a LEAP on something with I am fairly bullish or bearish on (long term macro trend).

As the market tone shifts and volatility picks up, I am confident that we will see an explosion in number of options ideas shared, mostly on the downside. Now as far as the delivery goes, nothing will change for existing members, however, once I feel personally that I am delivering more value in options ideas, the pricing will have to go up significantly. This in my view will not impact any of the existing members and their pricing remains locked. However, I may offer an Options only Substack or something similar, for newer members priced in line with similar options services. Based on market, I think these services are around 300 a month.

I value reader feedback. Feel free to drop your feedback below where you feel pricing is fair.

Everything I share is based on one principle- Volatility and the order flow it generates. Volatility at end of the day dictates both the quantity and quality of the ideas that you can find and share. So for example, if the S&P500 is going to move 15 dollars in a day, there really is not much to share there. In such instances, most of the options will go to 0. This is the nature of 0DTE market. For any option to go up in value, there has to be a range extension in the session. In such instances, I have often seen options priced at 10-20 cents, go up 3X or even more. However, if the range does not expand in the session, these are all going to go to 0. In fact even the options that open ATM at 2-3 dollars, go to 0. This is not something that YOU or I control per se, but is a function of the volatility. I think best trading intraday comes when VIX is exploding higher above 18 and more.

Not when VIX is at 12!

With this out of the way, let us focus on some levels for this next week

All level quoted are now from the September contract. If you have not already, please rollover.

This next week is a holiday shortened week with a bank holiday in the US on Wednesday, and very light event risk on Tuesday and then Thursday.

In absence of major data releases, the market context could remain technically driven.

What does this mean?

Well the S&P500 index has had a recent breakout above this key level. This gap is around 5460 for the cash session, which happens to be the CPI SOC (Scene of Crime).

Due to this reason, 5460 will remain an important level for me next week as well. We are now trading at 5500, at time of this post. This level is an important pivot that needs to be defended by bull and bears alike.

Scenario 1: Dips, if any into 5460 could be supported for a move back into 5483.

Scenario 2: 5480 remains a secondary level of interest. Unless we begin to trade below 5480 intraday, I think this level could provide “Demand zone” on intraday basis for a push higher into recent highs near 5510-5512.

In related markets, keep an eye out on VIX and DXY. I think both have interesting patterns at the moment. If VIX remains elevated here above 13-14, I think it could put pressure on the emini as well, especially if and when we see a Daily close below 5460.

I have been a Dollar bear but there is one key potential surprise in 2 weeks or so when the French hold their Parliamentary elections. I think this has immense potential to cause a spike in the DXY. And hence, a potential drop in the S&P500.

Why is that?

I have reasonable confidence that more right leaning parties are going to win this election and Macron is going to lose. Populist sentiment in the EU is very much against some of the policies Macron has championed. French also have an extremely large deficits due to spend on social-welfare programs. Add this uncertainty to the mix, the French sovereign debt is shaky when compared to the BUND, as a benchmark. The French bond spreads at this time are about 70 basis points higher than the BUND SPREADS. This I believe is going to get worst and put some pressure on EURUSD. Hence spiking the DXY.

Now I am not saying this election is going to be equivalent of Brexit, a “Frexit”, But I am saying this election has potential to derail the EURUSD atleast temporarily. This could in theory strengthen the USD.

Let us now look at some other areas which I like

HOOD

I am liking this action in HOOD. I have been a BULL in HOOD from $12 and it has since almost doubled, trading around 22 now.

I think HOOD on any dips INTO 19-20 may remain supported. I am eyeing the time frame around its next ER which is the week of August 2. I think this stock may have potential to rise to 30+ as long as we hold 20 on HOOD. See below for my post from February .

GME

As I said earlier, I think GME remains in play due to very high volatility.

However, volatility cuts both ways. I think GME bulls have an upper hand as long as we hold 23.

By saying hold, I mean we do not begin to see consecutive back to back closes below 22-23, on longer time frames. Like Days or weeks. It is about 29 now.

Now are there any short term options that make sense in GME?

First off all my approach to options is very different than others. First principle I assume in options is that most options inevitably go to 0. This is important to understand as it impacts everything else- if I buy a 5 dollar call, knowing that it is most likely going to 0. So buying a 5 dollar call is less favorable than buying the same call if it is 1-2 dollars. Common sense but easy to forget when blinded by FOMO.

Let us look at the July 19th Option Chain for GME and see if we can glean some clues now.

Note: I am sharing this as an educational exercise in how I approach options and how I view them in my mind. This is simply an educational exercise on analyzing these options using my method (Tic OPEX Method or TOP).

Let us zoom into the 36 CALL. It has a 250% IV and a Delta of more than 50 and is now bid around 5 dollars.

Yes, at 29 a trader could buy this for $5 and it is not impossible for him or her to eke out a gain in this due to very high IV.

However, for me, this CALL is not great from risk to reward. So how will I approach it?

I watch if GME dips into 23 or so. If it does, based on the current IV, greeks etc, this OPTION CALL could be 2.5-3 dollars. At 2.5 dollars, I do not have to see the GME close above 41 to be profitable or Break even on EXPIRY date. I have now bought myself more wiggle room- just by waiting. In fact, if we dip lower in the stock next week, the price of the CALL will lose its value even faster and may be it can be had even for less than 2 bucks.

Now let us say you wait and GME never dips. So what? It is like a train. You miss one, another one shows up.

Thus, if come next week or next 2 weeks, GME dips to 22-23, majority is busy losing their minds, we in this Stack are watching this 36 CALL. Is it 2, 3 dollars? If so, it now makes sense from a risk to reward perspective. If the geeks don’t change a lot in the short term, can the option go back to 5-6 dollar? Yes, I think it can.

Now many may ask why not do the same option for June 21 expiry? It is much cheaper now. So is it not better?

No. Cheaper is not better. Price in option can be cheaper but that could be deceptive. DO not fall for such shenanigans by the so called experts that it is cheap. It is cheap for a reason- that is probably not gonna trade.

Shopify

SHOP

I like SHOP as it has very little debt. This is one of the top Canadian companies. It has some tailwinds like the Bank of Canada has started cutting rates so this will allow some Canadians to have some extra cash leftover to shop.

Atleast if you believe the bank analysts, the company is set to increase its revenues handsomely next year and then some.

So what are some Support and Resistance levels I like on SHOP?