The Big 3: XLI, IBIT, META

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. Don Kaufman the co-founder of Theo Trade. Great to have you both on Don. Love having you with us on a fed day. I can't wait to hear your thoughts on what we might see from the markets this afternoon. Well, you know, it's to me it's still a little bit difficult to believe, right? 90% probability right now that there's going to be 25 basis point hike. And I say a little difficult to believe because everything that's going on in Main Street is so far removed from what we're seeing on Wall Street. There's a lot of pressure, obviously, on the consumer. We can all look at oil prices and agree on that. Diesel prices agree on that. It's quite the shock to the system that maybe we haven't even really felt just yet. So although difficult to believe yeah, they're going to raise 25 basis points. It's it's really going to come down to though what, if any, guidance Kevin Warsh gives. I believe he's actually going to be the the dovish into the future. Not really providing any guidance but just dovish into the future. You know hike today and wait and see is is really what the message should come out to be. All right. Well we'll we'll know here in a few hours. But let's dive into the big three. You've got your first trade today XLE the industrial sector ETF industrial sector under a little bit of pressure over the last month here. How are you looking at industrials right now as a contrarian. This is the first trade here is very much largely predicated on what the fed is going to do. And you would think it would just maybe be some oil prices is putting you know the industrials under some pressure. I think it goes far deeper than that. I think the US dollar is also going to play a large role in this as well as the bond market later in today's session. But I'm a contrarian in here. What we're seeing in the XLE if we take a look at the chart which you're going to in in just a moment, is just wildly oversold conditions. I mean this has had some fierce sell side activity. One of the things that that I look at, and I'm very much a quantitative trader, I look at what's termed expected move. And that is what the option market depicts week to week risk to be. And in five count them five consecutive weeks, the XLE has actually exceeded, hit or exceeded its lower edge of expected move. That's how the option market again is looking at risk. So it says it's supposed to move three bucks. It's moving beyond that. Or that full $3 and five consecutive weeks is statistically wild. Oversold conditions. I'm looking for just a brief but violent move back to the upside. As such, I'm going to take an OC 16 Oct 16 expiration. I'm going to buy the 172 calls, 172 calls and sell the 177 calls against them. It's $5 wide call spread that I'm purchasing. It's very slightly out of the money looking for what we kind of term a little bit of a rip. Back to the upside here, possibly some short covering, possibly some new money coming in in a very, very beaten down sector. This this $5 wide spread is trading right now at about $1.30 debit. All right Rick. So as we look at the technicals here for Excel I are you seeing the potential over the next month for a snapback rally. You know one of the things about technical analysis that confuses people is it's often viewed as trying to be predictive when really we're just identifying key support and resistance levels as potential opportunities, regardless of whether you're bullish or bearish. That's up to you as a trader. So that being said, it is a pretty compelling area we find ourselves at right now because we had a repeated floor right around here near 169, and that's roughly where we've bottomed out now. So we have at the bottom of a rather extended downside channel that was formed shortly after our highs. We find ourselves sitting now at a repeated floor of support. So if we were to get some kind of a bounce, it would be quite interesting to see if we can start to make our way above the boundary of our channel here. I can't help but notice as well that today's candle is a harami type candle, a smaller green candles, real body completely contained within the previous day's larger red candles. Real body, real body being the distance between the open and the closed. So the opposite of an engulfing candle suggesting a shift in momentum. So in this case, it could be a sign that downside momentum is starting to wane here. So we can also see if we were to move lower though the gap would be filled near 165. It has not been filled yet here. So that would be another area to watch to the downside potentially to the upside. 172 would be another gap filled. 176 would be another high point that we had during our decline. So here we can look at our moving averages here and giving us again another piece of interesting evidence here. Our long term 251 day exponential moving average is at 16815. That's our orange line here. That's around where we've had our lows repeatedly here. So the longer term moving average, the more significant it is as a source of potential support here. So we have now have a confluence here of our moving average and our previous extreme lows that we saw RSI managing to stay above the 30 line there. That represents the oversold area. So also seeing a little bit of bullish divergence here. Price making repeated lower closes, RSI staying more consistent and being on the verge of breaking above its own downward sloping trend line there. So again as well, when we look at our volume profile study, we have a node here between 163 to 166 to the downside to the upside, the heavy trading comes in between 172 to 176. All right. And right now as we look at the XLE the industrial sector ETF we're at one 7018. And again this is short term play here just over the next month looking for a move to the upside where we're not seeing a move to the upside is in this next one the Ibot Bitcoin ETF. We got the vote on the Clarity Act yesterday did not go in the favor of the crypto industry and is on hold at least past the midterms, perhaps into next year. How are you looking at Ibot, Don? Well, that's that's it for me for me being bullish there, Marley let's let's get into some of the bearish trades. That's where I live. That's what I know. And I bit is is going to be one of those bearish trades. Look you know Bitcoin in general and crypto in general got a nice bid under it a few weeks back. And it has done absolutely unequivocally nothing since. So you got your little rally here. But it just does not seem that the some of the investors, if you will, that have been really beaten up, disillusioned by this particular product, Bitcoin in general, they're not returning. So we rallied as I said, it flattened out and it feels like we're actually starting to roll back over. And that's exactly the way that I'm going to trade it. I'm not going to overthink this one. I just do not think that your your crypto investors are going to rush back into the marketplace. I bit is going to fade specifically with, with Bitcoin kind of fading. And as I said, that's exactly the way I'm I'm going to trade it. I'm going to go out though to the to the Nov 20 in this particular case. And the reason I'm going all the way out to the November expiration, you know, we can talk about yeah, we got to pass through an election. And there's a lot of uncertainty between now and then, but it just really comes down to I'm buying quite a large spread in a 40 some odd dollar product, I bet is a 40 some odd dollar product. The Nov 20th expiration, I'm going to be buying the 40 puts and I'm going to be selling the 35 puts against it. Again, it's a full $5 wide put spread done for a $1 debit. So this is an out of the money put spread when you risk a buck to be able to make five. Although the trade has inherently a lower probability associated with it, that lower probability also coincides to a much higher payout. If we're right in this particular case being right, what does it mean? It doesn't mean just getting under 40. It means getting down in and around that mid 30s level, which is plausible and well has happened in in quite some recent trade. All right. So let's look at it then the chart for a bit here. I mean we can see it's significantly fell off. We're back in October here which is when we saw Bitcoin hit its highs up north of 120,000 or so. We have made a bid of late but nowhere near those levels. So what are you seeing in the technical setup. This might sound ridiculous, but believe it or not I try to keep these charts more simple. So when I have some of these lines, sometimes like 47 is just like kind of the even number, really kind of what I would do is more like kind of this general area that we had right here. So like 46 to 47 because that was where we saw repeated lows, higher highs here and highs here once again. So kind of it would be more like a resistance zone that we failed at recently here. Now after this sharp rally to the upside we have broken through our blue trend line. We have this more wedge type shape here with price falling downward, our downward sloping trend line is in play. And we just had this not great piece of news for the crypto industry. So when we look at that here, one area that stands out potentially could be this high that we saw our green line here near 42 as a supportive area. It would be fairly close to our trend line as well from there. Perhaps another high here near 36 could stand out as an area to watch out for. So kind of the opposite of our last chart in which we have rallied, we had a sharp rally to the upside. We kind of failed at this resistance level. And then we just got, as I said, not the greatest news here for our regulatory prospects changing here. So now our moving averages are clustered together. We have our 521 and 251 day EMAs. Exponential moving averages all together from 40 to 44 or so. So if we were to break lower, then the 21 day EMA representing one quarter is what could be tested near 4046 RSI also moving lower in jeopardy of breaking its green trend line and the 50 mid line at the same time. So if that were to happen concurrently with price, that would be more of a bearish confirmatory signal there potentially. So our volume profile here shows 43 to 45. Is the heavy trading area matching up with our recent range. Meanwhile to the downside down here roughly 35 to 39 is the heavy trading area here with our point of control coming in at 3643. All right right now as we look at it we're at 4281 for a bit. We are down more than a half a percent on the session. Your last one here is meta. And Don, I have to say, I do appreciate whenever you try to throw a bullish trade in there for us, because I know you are our resident bear and that is your default. So it's always fun for me when you have one. But how are you looking at at meta? Because I'm going to, I'm going to bet you're going against the hype here with this name. You know I am. I have a love hate relationship with with trading meta. It has nothing to do with the products, just a love hate relationship with this with this particular product. But at this point, this is very much a big time technical kind of resistance, which Rick is going to display to you guys in just a moment, somewhere in or around this kind of six, 86, 85 level has been a big time kind of resistance. And, you know, you can see the marketplace today fighting, literally fighting right in and around that level. I've also seen, though, some heavy call buying even this morning, which is incredibly bullish activity in there. But it faded and it faded very, very quickly. So all I'm going to do in this particular circumstance, I'm going to bear up, but just minimally very short term before its earnings. I'm just going to go out to the 909 expiration. I'm selecting that simply because I want to trade this a little bit more in the here and now in the present, you know, giving myself, you know, three, four weeks is more than enough time for a little bit of a pullback. And that's all I really need. So expiration I'm going to buy the 675 puts. And I'm going to sell the 670 puts against. It's just a $5 wide put spread. Looking for the underlying under 670. This one's going for a 235 debit. It's very close to what I would term like kind of a risk one to be able to make one. But given the fact that meta has been fairly volatile, especially in this range, I think that there's a decent probability of this playing out in the in just the next couple of weeks to come. All right. As I'm looking at that break even, it's just about $4 below where we're trading right now. Rick. Right now we're at 676 and 50 or so. What are you seeing in the technical setup here and any of the levels that Don was just highlighting there stand out to you? Right. So again, approaching a significant resistance area after a sharp upside rally here. So I believe probably what Don's referring to is these two highs that we saw again giving us this resistance zone. So here between about 687 to 692 really stands out as an area to watch out for in this in this current situation here we did break above our long term downward sloping blue trend line. We did also break through this gap that was formed here near 659. So the gap has been filled. So an interesting setup now to be sure here because if we were to break lower once again, 638 to 626 is where we have another gap. If we were to push higher above our resistance zone, we do. We then have a another prominent gap here, a high, a subsequent low, and another high there near 742. So a lot of levels to keep in mind here, quite, quite a gappy chart, particularly, you know, noticing that there's a lot of very noticeable gaps here in this in this situation. So our five day EMA and dark blue 66114 is where that short term moving average would register here. So if we do start to break below our channel, that could be one point to watch for potential support. RSI also pushing into the overbought area 72.8. So RSI is often typically interpreted as a sign of strength to come in a trending market here. But what I noticed is that we're in kind of more of a rangebound area here. We have our repeated highs around the same area. We have repeated lows around the same area too. So that kind of would be probably the opposite read. Then more like the name sounds. It could be a sign that things are getting a little overheated. As we approach the top of our range, we are near the point of control as well. Coming in at 65864, our node in general 649 to 676. All right. Meta right now is at 67585 trading close to a percent higher right now on the session. Don really appreciate you joining us for