The Big 3: LOW, COST, MSTR

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 as always here to take us through the trades today. Don Kaufman the co-founder at Theo Trade. Don great to have you on. Kick things off how we always do. I'd love a big picture market thought from you on what we're seeing. I was talking about ASML not even an hour ago, and as I was talking it, it dipped into the red. Despite those numbers, we got along with a lot of the other chip names today. Yeah. No, you know what? The market as a whole right now is still this this game of musical chairs. And that is maybe a little bit out of semiconductors. The beneficiary happens to be predominantly the financials right now. Frankly I'm a little surprised at ASML not in terms of the earnings report but really the price action and the underlying the desire right now to be in the semiconductor space simply is not there. And I think that that's a bit of a broader concern. We're seeing some wild rotations, you know, maybe into AMD or out of, you know, micron. But the buy side activity that is happening is not persisting for more than, you know, maybe 24 hours at most. All right. So let's dive into the big three then. I know you've done a lot of these rotation plays with all the rotation we've seen. You've got Lowe's as your first pick here. I mean trading lower year to date but pretty sideways over the last month. As I'm looking at the chart. Walk me through your thesis on Lowe's. Yeah. Lowe's is to me less about this rotation game, less about musical chairs and much more about well, just simply breaking the low. Lowe's trading in and around the 210 level. I think we're going to see a retest of like, you know, literally like three year lows here, which takes it all the way back down to about $180. You know, the interest rate environment, it just it doesn't really set up well for anything that's interest rate sensitive right now, whether it's housing stocks, whether it's homebuilders, whether it's home improvement stores. And Lowe's right now looks well positioned to be able to break those again, Lowe's up as such, I'm going to go out to the September options expiration. Can you give us a little bit of time. You know 60 some odd days. I'm going to be buying the 195 puts selling the 185 puts against it. As I said, I have an expectation that the underlying is going to trade from, you know, in and around the 210 level where it's kind of been channeling for a period of time, but it looks, again, ripe to actually break into new territory to the downside. Maybe retest 180 from like three years ago. So this $10 wide put spread is done for a $2.75 debit. And again, nice defined risk trade doesn't expose you to, you know, huge amount of like earnings related risk offsets the volatility. I really like spread trades when it comes to options. All right. So as we look at the chart on Lowe's are you seeing a potential technical setup for us to move lower in this name and perhaps get down near that 180 level that Tom was mentioning? Yes, it could be possible because our downtrend is still in play. We had our highs that came in after earnings here falling off from those previous highs near 293. But after earnings we had our spike up to that that point here. Now we can see that we have connected this trajectory with three of our highs. We are still remaining below that level. Meanwhile our short term uptrend that began with these lows near 203 has been broken. At this point. We had another small gap downward here between about 217 to 220 or so. So that remains as a resistance zone to consider. Now our relative lows come in here near about 207. And then finally 203 40 as we said. So that gives us perhaps a supportive zone to be on the lookout for. So some interesting boundaries to consider planning a trade in this name. When we think about our moving averages, in this case here, our five day EMA in dark blue that represents one week is about where we are right now. So 21129 is where that particular indicator comes in. We can also see then our 21 day EMA and teal comes in near about 216. Finally, the one to really look out for our 63 day quarterly EMA and gold. 223 or so. That one lines up very closely with our trend line at this point. So this gives us one of those confluences to be on the lookout for, for greater potential resistance. If we do start to approach that boundary once more. RSI just moving lower. Not really a clear strong trend line or anything at this point here, but we can see that perhaps in the short term getting a bit of a bounce here, but below the 50 mid line still when we think about volume profile we do have a small pocket of activity right here near about 207 to 210 roughly. But most of the heavy trading activity is just between a very broad range of 215 to 260. A particular spike here around the 235 level roughly stands out, as does here around 246. All right. So as we look at lows we are trading up on the day. We're up about 2% for lows at 211282. Your next pick here is Costco. I mean a name that pretty consistently is is favored. But year to date surprisingly only up 6% for this name. They just put out some good monthly sales numbers for last month. How are you looking at Costco right now, Don? Yeah. Here's here's my bullish trade of the of the day. And it's it's going to be in Costco. So there's two primary reasons that I like Costco to the upside here. The first one being this happens to be kind of rotation like Haven. That's that's the kind of marketplace that we're in right now. And I do believe we're, you know, we've already rotated towards the financials. We've come out of the semis into the financials. Maybe we've come out of the semis back into some of the the bigger, broader tech companies. Right. Mass market cap. I think we're actually going to rotate now towards some of the beaten up consumer staples. Consumer discretionaries one of which is is none other than Costco. That's the first reason I like it. The second reason is that this stock has actually been channeling in and around $1,000 for the mass amount of this year, and it's broken a little bit lower, maybe gets a little bit of a bid below it, but if it gets that slight bit below, it's going right back into that channel. And that channel is like 950, you know, 1050. But 1000 has been like literally where it's traded the majority again of this year, which you'll see in just a moment when Rick actually brings up the chart. Nevertheless, the trade here is the August 21st expiration. So not going extraordinarily far out in time. Just going to do a nice bullish spread here. Looking for some movement here in the very near term. So Aug 21 I'm going to buy the 960 calls again buying the 960 calls selling the 970 calls against it. It's $10 wide call spread. This one is done for a $1.70 debit. I've gone a little bit further out of the money here. Why lessens the cost of the spread? The bottom line is, hey, maybe I am wrong. Maybe this thing sells off. I can only lose $1.70. But if I am right, it's going to leave a phenomenal upside opportunity. So in this particular case, I am taking a shot looking for the stock to get back to 1000. But I'm paying a very minimal amount for that shot. All right. So as we look at Costco knowing that in the time of this trade, we don't have an earnings event or anything to contend with. What are you seeing in the technical setup and the possibility that we break out of this range and head back towards that 1000 mark? Sure. So a sharp drop off that we had after these highs, 1096 50 from their earnings worsen the situation seemingly. We had some highs that came in right here. But then the trend line accelerated to the downside more you could see connecting these two highs. Duplicate it, put it across the lows. Gives you this channel type shape here. So we can see then some horizontal areas that really stand out. One is that we had repeated highs here near about 970. We had a gap here 948 to 936 roughly. Then we had our relative lows that we hit recently near 907. So if you were to backtrack a little bit to. 895 also represented a small gap here and then a subsequent low, not the greatest, most standout supportive area, but maybe something to consider if we do continue moving lower. So finally or not finally, rather. But next we see our moving averages. Five day EMA in dark blue here. 92531 has been an upside boundary for the past few sessions here. If we do start to break above that level here, our 21 day EMA and teal is still within the boundaries of our channel. That comes in near 944. We also have our 251 day EMA here in orange, representing one year that comes in at 96157. So that would be the most significant of our four to watch out for. The longer the time horizon that the moving average takes in, the more significant it is if it is breached. Our RSI shows kind of a triangular type shape here, very modest sloping trends to the upside and the downside converging toward each other. We are below the 50 mid line, so look for a possible breakout for further directional clues, especially if we do start to push to the upside. Look for a break above that 50 mid line. Finally, our volume profile study shows 933 to 960 is a standout heavy trading area. It also includes our point of control near 945, the heaviest trading area of all. We also have the area here nine 908 to 921 roughly. That's around where we bottomed out. This would be another possible foothold for the bulls to keep an eye on. All right. Right now as we look at Costco, we're about $75 off of that thousand level that Don is looking for here. But we are slightly higher on the session. Next as we look to strategy, really going to pivot here to something tied to Bitcoin, which if you want to talk about range bound, we could talk about Bitcoin's performance of late, sort of trapped in this 60 to 65,000 range, down about 25% year to date strategy down. More than that, though, after they abandoned their plan of never selling Bitcoin in the market. Did not like that very much. Don. So how are you looking at strategy right now? Yeah. Once again we're doing a bear sandwich here. Bearish trade a bullish trade and a bearish trade here on on strategy. And this one is largely predicated on yes some of the price action that you've seen inside of strategy lately is not a positive. But you know look buy all the Bitcoin you want okay. This company can do just that. It's not going to save the share price no matter how many different debt offerings, secondary offerings they do. It's simply not going to save the share price. I think that investors are getting a little bit disillusioned right now with the with the firm and with ultimately the the strategy in play. But look, once you start listing a product like Bitcoin on a platform like a thinkorswim, that product, no matter what we might think about crypto, whether you know, you're, you're into it, whether you're not okay. Bitcoin listed on a major trading application. Okay makes it immediately correlated okay with other asset classes. And I continually hear, wow, it's a unique asset class. It's not a unique asset class anymore. If you can trade stock in two seconds later, trade options, a moment later, trade futures, and then actually, you know, sell a little Bitcoin over there. They're all interrelated. And at this point in time, okay, I think you have to be very concerned because it looks like we're still ready to continue to break down in Bitcoin in general. Again, it's not only the strategy that's in play at MicroStrategy or strategy. It's literally okay, a break lower inside of the crypto products, specifically Bitcoin that I'd be concerned about. The way I'm actually going to trade this though, is I'm going to buy kind of a far out put spread far out in time and far out of the money because this underlying strategy, it can move. So I'm going all the way out to the Oct 16 expiration. So this is plenty of times 90 plus days, right. I'm going to buy an 80 put and I'm going to sell a 70 put against it. The stock's actually hovering in and around the $100 level right now. So I need a fairly precipitous break lower. We've seen exactly that in my channel for a period of time. It's why I'm buying myself time. But this $10 wide put spread has done for a $3.10 debit. Trying to find, okay, the least expensive way to take a big broad shot at being bearish not only in the crypto product Bitcoin, but more specifically in strategy. All right, so as we as we look at strategy, what are you seeing in the tech. I mean obviously you can see from the chart it's been moving steadily lower along with Bitcoin prices. But the bigger hiccup for strategy was the departure from the original business thesis. And we saw some massive drops on that. But as far as the the very short term action that we're seeing, what's the technical setup here? -77.7% during the past 52 weeks. So certainly a very difficult chart for the bulls in this name here. Downward sloping trend line here is beginning with our highs that we saw after our last earnings event. You know, kind of roughly just connecting these high points here. By that measure we have broken beyond the trend line. Not really seeing any kind of strong bounce though kind of more of a meandering sideways price activity. We did hit the lows here 8181. That's our green line. Some other levels that stood out to me was a relative low here that became highs more recently near about 104 118 low point, low point, low points here and then a high point after the breakdown. So that that stands out as well. Finally another relative high here near 136. But to be sure you know making new lows further and further across this past quarter, not what you'd want to see at all if you were bullish here. So our moving average picture is we are between our five day and our 21 day dark blue and teal, 96, 37 or so, 100 293. At this point, those could be some very short term boundaries to watch out for. RSI is improving somewhat. We are out of the oversold area. We are making very modest new highs above our previous peak. But we still remain below that 50 mid line here. So that's what you would want to see. If you're bullish would be a crossover above that level. And for price to make new highs in tandem as well above its previous highs. So very very heavy volume recently is what stands out to me. These all represent volume spikes where volume was 50% above the 50 day moving average of volume here. So a very heavy trading activity, relatively speaking, at these lows near about 85 to 105. I do notice unfortunately too that we are below the point of control, the heaviest trading area of all. And our volume profile 118 to 140 with the point of control being at 136. So move below that heavy trading area typically. Again, not really what you would want to see if you're bullish. So that now becomes a potential hurdle for the Bulls to cross over once again if we do start to rally. And right now strategy seeing about a 1% pop today as we are seeing Bitcoin also higher on the session, they tend to move together. Don really appreciate you joining us for big three as always and actually having a bullish trade in there too. I do like when you bring three little bears though. So please feel free to do that w