The Big 3: JPM, TLT, GM

get your podcasts. Welcome back to trading 360. I'm Marley Kayden. It's time for the big three. We've got three stocks three charts and three trades for you. Rick Duquette will take us through the charts here to take us through the trades. Don Kaufman the co-founder over at Theo Trade. Don great to have you on. Got some data this morning. Didn't do a whole lot. As I'm looking at the big board. ADP a little weaker than expected. But everybody seems to be holding their breath for the jobs report on Friday. Yeah. You know are we really holding our breath though for the jobs report. Does it matter at this point. I mean on one side we have the fed that looks pretty much intent on raising rates. And the other side of it we've got the Treasury that looks pretty intent on keeping those rates lower. And what are you stuck in the middle? Exactly where I am. In fact, a lot of the trades I'm going to discuss today are going to be largely predicated around a lot of this uncertainty on the rate environment. All right. So then let's talk about how to play this environment because you're very good about bringing stuff to us, making the distinction about trading opportunities versus long term investments. So you've got JP Morgan Chase as your first one. What are you seeing in JP Morgan right now? Uncertainty. A lot of uncertainty. In fact I'm a little surprised at some of the price action inside of the financials in general not just JP Morgan but really the the entire Xlf the financials complex is surprising that it's it's been bid up. And I, I do have the feeling that maybe it's more of a rotation right now. We're not necessarily buying semiconductors. They're stuck in a bit of a range. But the financials do continue to appreciate. I am I'm actually going to take the other side of that. You know, when does that larger degree of uncertainty come roaring back into this. And so what's the uncertainty right now? Traders probably look at this. And most traders know this. It's yield curve uncertainty. You know, and I'm right there with everybody else. I don't know what that yield curve is going to look like three months from now, six months from now, nine months from now. I think it's it's next to impossible to try not only to predict that, but to really look at this. Are we going to really flatten the yield curve out? Are we actually going to see an inverted yield curve, which could actually be a sign of recession? Any way you want to put this. Okay. The banks have got to be a little bit nervous. There's an incredible amount of uncertainty as to what the fed number one does. At least the Fed's path looks a little bit more clear. Looks like they're going to have two hikes, you know, into the end of the year. But the Treasury how do they actually fit into this. Because that could really damage. Again a lot of these financials. JP Morgan specifically I'm looking less at the technicals. I know the stock is near an all time high right now. But all I'm going to do is take a short position. Some of this uncertainty starts to creep into the marketplace. I am going out to the Nov 20 expiration. So I'm going to give myself a little bit of time. You know the nice thing is volatility in the financials is still relatively low. And you've got midterm elections coming up okay. Unknowns in terms of interest rates. And yet the volatility still low in here. So I'm going to buy the gift of time knowing that vowels a little low. Nov 20. I'm going to buy the 340 puts. I'm going to sell the 330 puts against it. This is a $10 wide spread done for a $2.90 debit. All right. So as we look at the chart for JP Morgan Chase, it certainly had momentum on its side throughout the summer. As Don highlighted, we are less than $10 off of those 52 week highs. So what are you seeing in the technical setup here. Right. So earnings propelled us above our old highs that we saw here near about 344 or so from their 366 50 was the high point there. So we have made a short term downward sloping trend line in blue that has been broken. Now the place to watch here is our white trend line connecting our low point near 344 with our subsequent lows more recently. So some horizontal levels to watch, obviously. 366 50 the old highs stand out, but relative lows to the downside come in near 35344 and 335. So those levels could be potential support if things do start to falter. If we do start to get more of a downside move. So our moving averages show a confluence. Here we have our exponential moving averages, our dark blue five day our teal 21 day. Those come together right around 356, 357 or so, which is also roughly in line with our white trend line. So this gives us a notable potential breakdown point here. If it is breached, that could open the door then to testing our gold quarterly 63 day EMA coming in at 344 RSI trending upward. Here we are above the 50 mid line. But you also could argue there is a downward sloping trend line as well to give us this more triangular shape. So look for a breakout beyond either of those trend lines to give further clear clarity about which direction price may be heading. So our volume profile in this case shows we have a node a concentration of trading activity here 353 to 358 if we were to slip below that point, we have another pocket of activity around here in this region. 330 to 337 or so. Not really a whole lot to break our fall until we get down to this area, which matches up with our range bound here and our old highs here. All right, J.P. Morgan right now at 35879. That's about $8 off of those highs that we saw earlier this year. Now the next one here Don you are this is another you bought us a bull sandwich again today. And you're bullish on the iShares TLT Treasury Bond ETF despite there being a global bond sell off. So take us through the thesis here and what you're expecting in bond behavior over the coming weeks. Come on global bond sell off. This is the time to take advantage of this kind of price action. So the bond vigilantes might be showing up. There's some sell side activity in the bond world. Now look I look a lot at the futures products. I look at the Zn, which is of course the ten year Treasury note futures. I look at the ZB which is the 30 year treasury. You know bonds. The TLT is a very nice blend if you will, of both of those. Now why would I want to sell a put. For those of you that are not aware of selling a put, let's talk about a little bit about strategy selling a put. In this particular case, I'm going to be selling an 80. Put all the way out to the Nov 20 expiration and selling that put implies I'm actually willing to get long TLT meaning I'll actually buy the bond ETF itself. Okay, so why do I actually want to take this position. Forget for a second. Okay, about looking at the chart. We're going to leave that to Rick a little bit. Okay. I believe that the statement's already been made. The Treasury is going to come in here and they're going to support this, you know, yield curve control by any other name is still yield curve control. You can call this Operation twist. You can call it a version of quantitative easing. Okay. But Scotty being the Treasury has mentioned that they are going to come in and they are going to be buying the longer end of this curve, which kind of supports the thesis of this trade. I'm not trading against the fed. You know, it's the fed might be raising short term rates. I'm trading with the Treasury in this particular case. And that is I'm going to sell puts. And if I do get put the TLT great. If I don't look I'm going to sell the 80 put Nov 20. This put can be sold right now for about a dollar credit. So if I do get put I'll get put at 80. But my initial purchase price is about $79. So my all in price is about 79 bucks. Obviously, again, you have to be comfortable with the idea of selling a naked put okay to want to get put shares of this ETF. All right. So as we look at the TLT ETF here, what are you seeing in the technical setup here. And do you see the potential for an opportunity in the near term. Right. Always good to make sure we understand the mechanics of assignment risk and everything like that. In the case of a short put sale. So in this case we had a downward sloping channel type shape here that gave us our lows 8117. Now we have broken above that channel here you could draw a different boundary line. Now a good trend line really usually connects three or more points here. So we just are trying to trace our recent trajectory here with this line. But our white line here, we were tested around 8320 or so. That was around where we saw our brief foray above our previous peaks there. But it quickly collapsed here. Now we've retreated back down here below the 82 mark, 8117. The ultimate low point here for the past 52 weeks stands out. Meanwhile, further to the upside, 8430 and 8480 also stand out. So if we do move lower, as we said, it would take getting to 79 for that trade to start to hit its breakeven there. So that would be a good ways to the downside still here. So our moving averages five day and 21 day are roughly at between about 82, 26, 82, 62 trending downward here long term, our 251 day EMA also has a downward slope here. So if we do start to push above those moving averages once more, those are the earliest, the shortest ones, the least significant ones. But they are early warning signs of potential trend change. So that could be an important thing to look out for. RSI below the 50 mid line you could draw this very gradual upward sloping trend line here that could be in play. So look for a push back above the 50 mid line here. Volume profile in this case shows that we have a node in this area right around where we are now near 82 to 83 or so. Things are a little more scantly traded here. We have our point of control all the way up here near 8714. That is the most heavy trading area on our chart. All right. Now we are at 8180 pretty much at the flat line today. But let's talk about General Motors. This is an interesting one. They've been trading pretty sideways over the last month over the last year. They're still holding on to about a 50% gain. But a lot more uncertainty on the table for GM right now with tariff uncertainty rate uncertainty. I know you said that's part of your theme here. So how do you see it affecting GM. Yeah you know it's really interesting because this is one where I don't typically pull up this chart all that often. Like GM is not necessarily in my crosshairs. I like to trade a lot of liquidity and so forth. But I mean, GM is definitely a tradable, you know, product, no question about it. But it's not one. As I said, I pull up very often. And when I did pull this up, I was surprised to see this is basically just off of its highs 91 being the high. And it had a very sharp reversal off there. So, you know, it's it's obvious I'm going to take a short position in this one. I am going to look for a bit of a bearish trade, but I'm going to tell you exactly why. So how many different unknowns. And as I said, you know kind of pick your poison. You've got geopolitical risk that's still on the table. You got gas prices that are incredibly high. You still have inflation, which we're going to try to knock down by doing what? Raising rates. I mean, as I said, pick your poison in here. This does not seem like a great time. It's a formidable position to want to be long, if you will, General Motors. And yet the marketplace has just kind of glossed over this. It's all going to be okay. It's all going to be okay in the end of the year. Meanwhile, I think that this sharp reversal off the 91 handle means something. And I think we're actually going to go towards the lower end of that range, which is all the way back down to the 70 level. And that's exactly the way that I'm going to trade it. But this one, I'm going to give myself a little bit of time in GM because it's a bit of a slower moving animal. I'm going to go out to the December 18th options expiration. Again these 18 options expiration. I'm going to be buying an 80 put again buying an 80 put selling a 70. Put against it. Now that 8070. Okay. Spread that 70 short. Okay. That is exactly where I think the bottom of this channel lies. So buying the 80s, selling the 70s. This one's done for a $2.30 debit. This is a what I would, you know, call kind of a cheap shot. The downside you do hit 70. You know, you're golden on this one. You're going to make what, $7.70 on a, on a 230 investment. But we do have to pull back quite considerably. And it's between now and December options expiration. All right. So we're looking for about a 15% pullback here Rick. For this trade I can see we already have a downward sloping channel on the technicals here. What are you seeing in terms of of the setup. Right. So that is the most prominent area to be looking at for our chart here. This shorter term downward channel starting with those previously mentioned. Highs here 9185. Another repeated short term ceiling came in at 88. So that marks our relative highs that the bulls would want to recapture and try to reestablish some kind of upward trend. Meanwhile we had lows here near 80 for another dip here near 7079. And then a floor here near around 75. So for now kind of just staying within our our channel boundaries here. After that push above our previous highs into just shy of 92, our five day exponential moving average and our 21 day exponential moving average line up just above 85. So that gives us a confluence point to watch out for. In this case, because we are below this confluence it would then be resistance. So now that we're breaking down below it, as I said, this is the early warning sign that the trend could be shifting. Right now we have a push below both of them. It's seeming like it's solidifying here as the day goes on. The next test would be our 63 day quarterly EMA and gold here, 88.37 for the other shoe to drop, so to speak. So RSI gives us another bearish signal though we are dropping below our 50 mid line here as well as breaking our green trend line. So the bearish evidence here based on this these technical factors is starting to kind of mount here a bit for right now. So now our volume profile shows that we have broken through this small node here between about 86 to 87 or so. The point of control down here 81 would be another notable test here. That's our heaviest trading area. So if we do break lower, be on the lookout to see if this particular area holds on as well. All right. Right now for GM we are at 8455. We're down a little bit more than a percent on the session today. Don, really appreciate you being with us and walking us through those trades, but also explaining the importance of understanding the types of trades. Appreciate the