The market is calming down and seems to be settling into a more bullish setup, but the potential for pain is still there.
With mega tech earnings this week from stocks like Apple, Microsoft, Amazon, and Meta, and Non-Farm Payrolls on Friday, there’s certainly cause for uncertainty. But, when there’s uncertainty, there’s also opportunity.
Before we get into new ideas, let’s review the idea discussed last week, where I highlighted the potential opportunity in BIDU:
BIDU started strong with a move above $87 on Wednesday, and continued bullish to end the week at almost $91, with a peak price of $91.68. All in all, a bullish call setup turned out to be the right trade idea here as the stock appreciation matched my technical analysis expectations and AI-predicted setup.
But now, it’s time to move to a new trade possibility, so I’ll review the broad market to get a better sense of the big picture.
Let’s look at the S&P 500 to see what can be determined about the technical setup of the market:
SPY is trading above the April 9th highs and appears ready to settle into the range between the March 31st low and the March 25th high for the time being. Of course, there are many fundamental inputs that could change that, as previously mentioned, and we also can’t forget tariff updates or other unexpected news.
With that, I’m not necessarily looking for a stock that has major exposure to all of the main known fundamental inputs I’ve mentioned, so I’ll be avoiding tech stocks and the risk associated with correlation to big tech earnings. Rather, I’d like to find a stock that should move independently of their behavior.
One interesting name with a bullish looking setup appeared in my AI scans this week and looks to be an interesting opportunity for the next week or so – Walmart:
Walmart has a great technical setup for a potential breakout as it tests the upper end of the range that has been rejected for 2 weeks. If it can break out to the upside leading into earnings, it could generate a nice return for me, particularly if I utilize the leverage of options. The May 9th $96 calls, for example, are currently trading $1.65, and if the stock breaks out of the consolidating rectangle, this could generate a significant return.
Of course, I have to factor in that earnings are on May 15th, so I’m not looking for a trade that would hold until earnings, but rather a short-term swing trade, which is generally my preference with a short-term option breaking out of a short-term consolidation. So, the opportunity lines up very well with my traditional technical analysis applied and AI-screeners helping me identify the trading candidate. And that’s the kind of setup I like to see to create increased odds of success when the market is uncertain!
If you want to learn more about utilizing AI for predicting dynamic markets and the incredible opportunities that can be captured utilizing state-of-the-art technological advancements in trade recognition, just send me an e-mail and I’m happy to talk through the leveraged opportunities that I’ve historically identified by combining AI and options analytics!
And as always, please go to http://optionhotline.com to review how I traditionally apply artificial intelligence, technical signals, volatility analysis, and probability analysis to my options trades. And if you have any questions, never hesitate to reach out.
Keith Harwood
Keith@OptionHotline.com
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