The Big 3: GLD, COST, USO

difference when you have someone that actually cares. Welcome back to trading 360. I'm Marley Kayden. It' time for the big three. We've got three stocks three charts and thrades for you. Kevin Green will be taking us through the charts here to take us th the trades today is Don Kaufman. Great to have you both with us. Don. Woulde to get yourhoughts on what we're seeing here ahead of this sale. We've got t year touching levels we haven't seen in two plus decades. How are you looking at the action this morning? Well, at least for for today, the bonds have stabilized to a to a larger degree, but it's far from over. There's no question the sell side activity specifically in the in the bondures this morn definitely struck fear into the hearts of of traders andven more specifically saw the Nasdaq start to pull back a litt as the as the bond market actually hit some of the lows. So as I said, we've stabilized for. Well right now, but this appears to be far fro over. Yt certainly does seem that way. And we'll of course be keeping anye on that sale in a few hours here. But let's dive into the big three hou've got GLD as your first trade today for the big three. So what's your thesis on GLD right now. So GLD has actually seen a rather sharp pul Obviously thisis a lo. dollar as the U.S. dollar is ripping to the upsid which has a lot to do with the bond market of course Right. So people actually converting into dollars, that's actually in turn hitting gold to a l degree. I think that this is, wellverdone at this point. It's a very sharp pullback from the 430 l down to the80 level. As I said, I think the upside. I am looking for a the tradable bounceng more. And I want to really emphasize that tm not here ao get long gold. I am looking for what we term as traders that quintessential rip your face off rally. That is a pop back to the upside. And I think that that's going to be tradable in the gold market. And to to go ahead and trade that and define risk. I'm going to go out to the 30 options again, 30 options. That's the Oct 30th expiration. I'm going to buy the 380 calls buying the 380 calls, sel the 385 calls against it that spread. It's $5 wide call spread is done for $1.40 debit. Again just s term bullish inside of gold. Looking for that again quintessential rip back to the upside. All right so looking for a shortm move higher. KG as you look at the technicals for GLD. Are you seeing the possibility t we may rip in the near term. Well I think if we look at the one year daily chart you could actually have that trade set up in the event that we actually go back down around that $360 level. And if you're looking at the chart, here's the reason why we obviously have seen gold move to the upside or GLD move to the upside. Around this time last year,had a nicetle breakout, but we've been making lower highs ever since. And now we had a predominant in an impactful downtrend line from the highs that actually was broken. After we consolidated a little bit back between July and early August, we retested the 200 day movingverage. But we alsohen failed. We failed the 200 day, the 20 day, the 50k within this trading range between 360 and around 384. But because of that consolidation that we had previously back in July, you could say maybe some buyers would be willing to step in around those levels, may not want to step in at these current levels. RSI making lower highs, making lower lows. Ma is trying to flatten out. I think that would be one of your first signals, a rip your face off rally and trying to retest some of those key m averages could take plac. But Marley I would think that a firmer area of support probably a better entry for a lot of instnal investors thanthese cure have right now, given the interest rateonment. All right. So looking just for a short term pop here, as Don highlighted, he is not long on gold just looking for a move higher in the near term. KG as you look over a longer termrt for GLD, does the trend stay intact. I mean the trendstay intact. I mean you're looking at higher highs and for the most part higher When you're looking at the the three year weekly chart. But you kind of at this setup and you could say that maybe we are in this thirdd if you look at the trend line from the lows you kind of move that over, you're looking at around the 355. Once again, 360 leve is your firm area of support before we kind of move higher. So if you're a Elliott wave theory type of person or a Dow theory type of trader or technical trader, for the most part, this looks like we are in the midst of the third wave here. We hit that trend line, we bounce right back up, try to recapture the 20 week moving average. That's when you can get a little bit more bullish on the RSI as well as MacD still in a bearish formation for for the weekly chart. All right so wet GLD on the session. We're down about 1.7%. As we're also seeing gold lower on the session by about at pick here is Costco. And we've talked a lot about the consumer and a lot about trading down to this club and warehouse level. How are you looking ato right now, Don? I'm actually going to be looking for a short position. I'm using the most recent what we term bid back. It's actually kind of the opposite, if you will, of a little bit of the the gold trade that is gold. I'm actually looking for the rip back in this particular case in Costco, I'm actually using the most recent bounce that we've seen. And where did that bounce actually originate from? Well first of all, Costco was all the way up just shy of 1100 sold off the way to the 880 range. And here we are with a nice bounce back to the upside. Well I'm going to use that bounce t shortnto this. I think that there is a downtrend now that is rather intact. I think that this bounce right now is nothie than a al bounce. And again I'm going to go ahead and short into it. In order to do that I'm actually going to buy an out-of-the-money put spread. Now I'd like to use out of the money, you know, put spreads in this particular case to control my volatility risk, to define my risk in the trade. A really just to se, look, I think that Costco will at minimum test and retest the 900 range. And t exactly what this trade is set up for. So I'm going to give myself a little bit of what I term the gift of time. I'm going to go out to the 18 expiration December 18th expiration. I'm going to buy the 930 puts again buying the 930uts selling the 920 against it. So it's a full $10 wide put spread done for a $2.80 debit. So again out of the money spread looking for a retest at minimum to the 900 level. And this trade works. All rSo we're looking for a minimum of a $20 move to t downside. More like $40 move to the downside. KG when you look at the technica setup here, are you seeing any bearish signals. I mean Don and I are usually on the same page for a lot of these charts. But I'm going to have to disagree with them, at leastor the daily one now. And here's the reason why. If you kind of look at is stock is that actually does like to consolidate and break out to the or break to thedownside. Wt year, the stock was making loghs as well as lower lows, but found some volume and found some buyers at around this 850 level. And I do have that highlighted. We saw this break to the upside a idation and then this blow off top. When we got to the $1,096 level. And it has been stair stepping down ever since. But here's the reason why I get a little bit more bullish rather than bearish on September 25th. You're going to see this very really really big green b engulfing candle. And this actually did close abov 20 day moving average, which was acting as an area of support. We had a we rechecked that movingrage. We continue to move higher. Today we were breaking above t 50. You're kind of looking at the 962 level or that 200 day moving average test here. Over the next couple of days, you have that MacD in a bullish formation with the 12 EMA above the 26. And you have RSI making higher highs. Now if we go to the weekly chart I'll give maybe aittle bit of credit here. The weekly chart kind of shows this p uptrend. A bull flag pattern that we kind of but of coming ba and retesting that bull flag does get you back down to around $900 level before you mov higher. And we are seeing the 20 week moving average in blue acting as an area ofesistance. The only rwhy I say not so fast though, is the M Looks like it is going across in a bullish formation. And the MacD crosses on the w for Co usually translates into 3 to 4 of bullish price action before we see a pullback, no matter how small the cross. y a pretty decent base here. So this is a big test. We are seeing a stair step. But this is still a stock that's in a primaryrend which is still to the upside here. All right. So inrimary trend to upside a rare disagreement between KG and Don at least on the daily chart there. So then Don let's see if you guys are in agreement on how you're looking at the United States Oil Fund, ticker USO here. W are your expectations for this one? Well, first of all, I like it. He's taken the other side. Remember something KJ I'm you know look I'm not wrong. I'm just often very right. So with that jumping into a USO. So you know I've been taking a look at oil a extensive a recently. Andf the real standouts inside of oil. It's not that oil is starting to see a little sell side activity. I mean that's that's look that's just price action. That's that's what price action does right. Some sell side activity in there. What really grabbed my attention inside of oil was the skew in the optio chain or if you will lack thereof. Now for those of you that do not speak options geek, what I'm talking about specifically with the skew is we're really not pricing in right now what we term upside tail risk. It's like the market right now in oil has a no Okay, of a rip back to upside, which is, you know, look, I can sit here and I can talk about geopolitical risks, which are going to be very evident, you know, and are very evident, oby, in the Middle East, the election, even though the United States may d nothing between now a election, I think that there's still considerable geopolitical risk, because, again, in the Middle East, they realize the United States is pro not going to do anything between now and the election. But pushing all that aside, I don't see, okay, a lot of, again, skew to the upside in the oil market. And it really I think that the the trade in here is just priced very, very effectively because of that m that, again, traders are not looking at oil and saying like, hey, it could oe upside. And I like that positioning. So in USO, I'm going to go out to the 30 options expiration. It's not that far out the Orc 30. I'm going to buy the 148 calls and I'm going to sell the 153 calls against it. This one'sone for $1.80 debit. What I'm looking for, okay, is just a quick returnk to the upside and ultimately reignite, if you will, some of this implied volatility skew that just seems to be know, lacking the market right now. Looks at oil and shrugs its shoulders says yeahthing. Everything's going to be okay if it's not actually work out ver nicely. All right. So what are you seeing Because as Don just highlighted the geopolitical risk concern still very much prese Even just overnight, we had the Saudi Aviation Authority saying to airports were attacked. We do have oil holding just 90 in terms WTI. But what are you seeing for USO in the tech right From a technical standpoint the trade does make sense. I mean's kind of lookingit and saying hey there's left side tail risk that could be potentially happening. That would be kind of downside equity. But if you're looking at it from a technicalandpoint,y chart, this, this ETN, if you will, had consolidation, a breakout obviously geopolitical risk kind of playing into that. But we have seen well defined channels that have been established, especially ascending channels. Now, we did actually get a break to the downside in July. And this actually did the theher, high higher low thesis. We did see a little bit of a low on this ch but it was actually able to recover. And it has now establ itself in another ascending channel. We're getting close to the area of support. In fact, we did test it test it yesterday. And you can see a little bit of a reboun to the upside. And you can say, okay, well, the USO could go back to that153 levelw it back on September 24th. Tha does make sense. But RSI making lower highs. MacD in a bearish formation. But if we go to the next chart I just want to highlight something with this ETF or this ETN if you will. This is a combination of futures contracts as well as swaps. So this one has actually been outperforming for the most part c oil. And that's why we actually see back on September 15th U making new highs in the cycle. While crude oil itself is actually making new cycle highs. And so this ETF or ETN has been actually to benefit from the spread between the futur contracts. So th is a tailwind for the ETN right now, but could a headwind in the future. If we do see a calming intentions or if we start seeing the crude curve normalize here. The technical setup looks reaood for Don tactical trade. Short term trade does make sense. But over d actually have some negative or headwinds against it just because of it's structured. All right. But right now, Don, just looking for a quick move only in through October 30th in this example trade here. Really appreciate you both being with us today for the big