The Big 3: KSS, SHOP, MSFT

Welcome back to Trading 360. I'm Marley Kaden. It's time for the big three. We've got three stocks, three charts, and three trades for you. Kevin Green will be taking us through those charts. Here to take us through the trades today, Don Kaufman, the co-founder of Theo Trade. Great to have you both with us. Don, I love having you on a big data day and we got the CPI this morning. Hotter than uh expected. We're seeing yields rise. Would love to get your thoughts. You know, I think this uh CPI data point is nothing more than a fuse in a marketplace that's been really kind of a pool of uh of gasoline. It's been a powder keg out there for a marketplace. And uh this CPI report just uh just lit that. Look, I don't think it's going to make any material changes necessarily for the Fed. I know the probability shifted dramatically today for the Fed fund futures, but uh the reality there's probably one more rate hike. Uh but the marketplace obviously not reacting very well uh at this point in time. That being said, look, the advanced decline in the S&P is still 5050 and that to me is one of the most bothersome aspects though of this marketplace. >> All right, so let's dive into your big three and where you're potentially seeing some opportunities then in the current market. You've got Kohl's as your first pick here. Koh's under pressure today. They had mixed secondarter results. We continue to have conversations about a consumer who's under pressure and tightening their belt. So, how are you looking at Kohl's? >> Yeah, you know, it's interesting. Kohl's uh just as of late has really been quite the rip to the upside. And again, I'm saying that as I'm surprised and this one actually kind of caught me a little bit off guard and I'm going to actually take the opposing side of it. Now, look, I am going to build a short position. I'm going to build a bearish position using an option spread. Before we get there right now, what do I see inside of, you know, some of the price action? I am basing my bearish position predicated on the idea that in the last four consecutive weeks, the market in Kohl's has actually outstripped with the implied volatility of the options denoted. Meaning that, okay, we are literally four weeks in a row, okay, gone too far, too fast. If the options market said we were supposed to move $3 for an example, the coal stock is moving four or even $5. So we've done that in again consecutively four weeks. It's a statistical anomaly if you will to a bit of a degree. I'm just looking for a very brief okay kind of violent pullback and we might be seeing the beginnings of that today. I'm just going to go to the November 20th options expiration in this case. And I'm going in there fairly shallow. I'm going to use what's termed an in-out spread. One strike in the money, one strike out of the money. I'm going to buy a 22 put and I'm going to sell a 20 put against just a $2 wide put spread done for a 90 debit. This trade is all about being defined risk, right? Okay. The absolute, you know, most I can lose is 90 cents. My upside is limited, but I'm just looking for a little bit of violence in terms of a pullback on Kohl's. >> All right, KG. So, as we look at Kohl's and at this chart and the technical setup, are you seeing the possibility that we see a swift move here in the near term? >> Maybe not a swift move, but we are maybe at a area of resistance when you're looking at the stock here. We have seen kind of a lot of volatility when it comes to this name. Obviously uh around the middle of this year we did see around May or so the stock actually hitting down to around $11.38. Buyers have stepped in ever since here. We have been trying to establish this kind of expanding megaphone pattern. Now I will say that it's a little bit more bullish than bearish. A little bit of a higher low scenario here but we are hitting the upper end of resistance. Yesterday we did have kind of this uh inverse inverted uh hanging man candle or this inverted uh hammer candle at the the top of a trend that does signify a potential reversal here. And what you're looking at as a support area of around $1882 that aligns with the 20-day moving average. If we break below that, you're looking at the 200 day as your next area of support here. Now, if you are able to see a breakout from $22 and you're able to break out even higher than that, you're looking at another $2 higher to around 25 $24 or so. Uh so this name once again expanding megaphone pattern a little bit more bullish and bearish but we're hitting an upper end of resistance. You could say over the next couple of weeks maybe we do get a pullback. If we go on the longer term time frame here we are making higher lows but making lower highs. This is a wedge pattern when you're looking at the weekly chart and we are hitting the upper end of resistance of that wedge on the three-year basis as well. So even coming back once again coming back and trying to test around that $19 to $18.50 50 C level, that 200 period moving average uh before trying to break out higher. Seems like it could be in the cards. RSI is making higher lows. MACD in a bullish formation. 12 EMA above the 26. Once again, on the daily chart, you can make the case that we might be in for a little bit of a pullback, maybe a $150, $2 to the downside here. That would be in Don's favor. >> All right. As we look today, uh we are down about two and a3% for Kohl's. We're trading just north of $20 a share right now. Don, I want to jump to your second pick here. You've got Shopify certainly has had uh some momentum on its side, but some volatility along the way. We've been moving higher uh since mid July. We had a little dip in September, but it seems to be ripping again. So, how are you looking at Shopify right now? >> This is another one I'm actually going to take advantage of uh a bit of a short position, and I'm doing so simply because this is kind of what I've termed it's going to run out of juice. It has everything to do with in the very near term we're seeing what's termed a gamma squeeze and that is this is retail trade rushing in buying calls on the underlying and literally forcing market makers if you will to buy stock. The stock starts to spiral if you will to the upside. Now [clears throat] Shopify has actually kind of tagged if you will the equivalency of an all-time high. It's basically neck andneck with an all-time high set back a few years ago. But it feels again like Shopify has actually run out of juice. The momentum is fading in here. And it can fade very, very quickly when retailers all of a sudden the, you know, the retail trade is disillusioned. They're not necessarily buying calls in there like they would. And again, that juice can run out immediately. As such, I'm looking for again uh a quick and shortterm kind of violent pullback. In this case, I'm even going to shallow up the expiration more. I'm going to go to the O30s. So, I'm giving myself a very short period of time over here. Looking for a quick pullback. O30. I'm going to buy the 165 puts. Again, buying the 165 puts, selling the 160 puts against it. It's a $5 wide put spread done for a $1.70 debit. This one is again all about standing in the way of a freight train, but that freight train looks like it's actually coming to a stop. As I said, kind of running out of juice. Looking for a quick pullback in here in Shopify. >> All right, KG. So, we've got a a potential freight train on the loose. Are you also seeing it slow down when you look at the charts? >> Uh, it's hard to make that case here, but we can uh identify some areas of support and resistance to maybe uh say that a pullback in the near term over the next week or two weeks could be in the cards here. Obviously, this name has seen a lot of volatility. This time last year, the stock was trading at around $180 and we did see kind of the stairst step to the downside here, especially after earnings. uh the the stock has been able to kind of break down uh leverage that 200 day moving average as an area of resistance and continue in a flush. Now, we did get some buyers to step in at around the $94 level back in around May or so and we have been making higher lows ever since as well as higher highs if you're just looking at that channel. So, that is relatively bullish and we are hitting the upper end of resistance when you're looking at this channel. So, a pullback could be in the cards here. But, if you're looking at the candle structure, we had a bullish a very bullish candle about two days ago. Yesterday, a little bit more of an indecision or even a dogey candle for that matter. And then uh today we're kind of setting up once again for one of those kind of shooting stars or those inverted hammers at the top end of a trend. That could signify a move to the downside. Now, one thing that is also very kind of bullish for this game is the 20 EMA, the 20 SMA is above the 50 SMA here. Uh but a pullback could be in the cards. You're looking at around the 150 $153 level is that area of support. And if we do get a breakout, you're looking at an extension of around $30 from the top end of that trend. So around $210 to the upside. RSI did just cross below the overbought level. And MACD is starting to hinge a little bit, maybe trying to roll over. Those two indicators are just showing that price momentum at least in the near term has kind of stalled out, but you need to see some follow through. We also have a gap that needs to be filled as well over the last couple of days. that could be also an attractive area for some sellers trying to knock this name down. So, I I would say it is still relatively bullish, but you could get a pullback over the next maybe three or four trading sessions before trying to move higher. >> All right, so a little disagreement in the technical setup here, KG, as we look over the longer term chart. Is it still sending bullish signals? >> Uh, it yeah, I would say so. I mean, you're making higher lows, higher highs on the uh weekly chart. Well, you kind of got a little bit of a breakdown here. We're pretty much getting closer to the upper end of the range, but the upper end of this range here is still looking at around $189 to let's say $190 or so. RSI making higher lows. MACD in a bullish formation. This is more bullish than bearish. Uh if this candle does kind of if we close the week and this candle formation is then the is where it is right now. Uh basically we explored higher highs uh but we were able to see some sellers kind of stepping in and even closing low on the week. That does give you maybe a sense that in the near term more sellers are kind of taking profits and buyers are trying to step in here. But you still have a little bit more wiggle room to the upside before you hit a complete stop on that trend line. >> All right, so Don, let's drive into your third little bear today because you brought us three little bears. You've got Microsoft here and we've got Microsoft's earnings much closer than the other two names. They're just at the end of the month on the 28th. Uh kind of middle of the pack right now for Mag 7. I think dead in the middle actually. But how are you uh how are you approaching Microsoft right now? >> Yeah, this one again as you uh mentioned a moment ago, this is going to be a bearish trade in Microsoft. Look, Microsoft at this point in time, I think we can make a lot of, you know, technical arguments maybe why it's actually being bought. Look, there's just not a lot else to rotate into. I mean, you know, it's bad when we start buying Walmart again. Like, I don't think that that's necessarily a positive sign. I don't think it's a positive sign we're buying Microsoft either. Didn't I hear just, you know, matter of a few weeks ago that software is dead? It's dead as dead can be. Of course, you're going to make the argument then, you know, that, you know, Azure is going to save Microsoft. Look, neither here nor there. The reasoning behind my Microsoft position is I think we're starting to we're right on the cusp, if you will, of sellside activity in the marketplace across the board. So this last trade here, this this bearish traded Microsoft, this one transcends just Microsoft. This is about the entire marketplace. We have seen this rotation game day in and day out. Look at the advanced decline line today. You're still seeing a 50/50 advanced decline line today with the S&Ps facing almost a 1% loss. NASDAQ right now is down, you know, 1.2% with a 50/50 advanced decline line. the rotations need to cease and I think that Microsoft is actually going to be in the forefront of exactly that. You'll know when they start to sell Microsoft, they start to sell Apple, they start to sell Nvidia that the marketplace as a whole could finally start to descend. Microsoft, again, we can argue all day long that software is dead or software is not dead, but again, it's being rotated into at least for the time being when the marketplace realizes that, yeah, there's a little bit of a bearish tone out there. Okay, Microsoft gets sold along with it. As such, I'm going all the way out to the D8 [snorts] expiration. So, the D18, the reason I'm going so far out in time is look, I, you know, I'm making a case that the whole marketplace is going to actually get sold. Um, but the bottom line is I can't necessarily time that. So, I'm going to give myself just over 60 days. I'm going to be buying the 520 puts, buying the 520 puts, selling the 510 puts against it. It's a full-fledged $10 wide put spread done for a $310 debit. Uh yeah, I'm all beared up with uh with no place to go right now, Marley. >> All right. All beared up with no place to go, but a longer term trade on this one. We do have an earnings event in the middle. KG, but a little bit of time to digest after that. More than a month in fact, following the earnings report. What are you seeing in the technicals for Microsoft, Kevin? >> Well, Don, taking a shot at Walmart. I mean, Don, it makes kind of sense, right? at a consumer staple trading at 37 multiple in this type of market. Uh, you know, I get where you're coming from here. Look, Microsoft is actually looking like a decent setup, but a pullback could be in the cards here. And if you're a bull, you probably would like to see a pullback in this name. Kind of setting up for this kind of breakdown that we saw this time last year, making lower highs, making lower lows, uh, leveraging the 200 day moving average for about maybe a month and a half, two months before breaking down. We did get a little bit of a double bottom pattern taking place at around the $350 level and we have been able to try to recover some of those losses. Now those uh gains that we have seen have been on an accelerated basis compared to what we've seen this name do in the past and now we're kind of retesting this 540 550ish area. Yesterday we did have a shooting star pattern once again a little bit more of a reversal. Today a little bit more bearish down about 1% but you do have an area of support here sitting at around $523. That's just basically this channel line that the that Microsoft was consolidating in for the last two months between August and October or so. But if we break down below that, you're looking at the 20-day moving average and then the 50-day moving average. RSI is a little bit in unique here. We have made lower highs, but we still have higher lows. MACD in a bullish formation, 12 EMA above the 26 EMA. This is a basing pattern here. The reason why I say if you're a bull, you'd like to see it kind of pull back. You can kind of get a little bit of a cup and handle pattern on the weekly chart. And that's what we can actually go to next is that weekly chart is showing a potential breakout maybe a potential rejection but even if we come back maybe consolidate around the 480 485ish area and then try to make make a move higher that can give you enough momentum to kind of break through RSI making higher lows MACD bullish formation 12 EMA above the 26 EMA. This is a big consolidation, a potential breakout, but once again, the velocity of the move is, I think, more of a concern for Dawn than where the price is for this name right now. And I would agree with that. Technically speaking, hitting an area of resistance. Let's see a pullback or potentially a pullback here over the coming weeks. >> All right, we've got Microsoft right now down about a percent on the session at 53798. And again, that earnings event on October 28th. Appreciate you both being with us for Big Three today. Don Kaufman, co-founder of Theo Trade, and Kevin Green joining us as always. KG, I'll talk to you a little bit later in Market on Close.