Ignore the Headlines: These 3 Trades Tell Me to Stay Bullish
The headlines make us feel like the stock market should be barely treading water.
Rising Delta COVID-19 variant cases are bringing about a return to mask mandates, and even vaccine mandates to employees of the federal government and certain public companies.
Those who were in the market last March might have painful memories about such headlines…
That’s why on Thursday, I showed you a great way to profit from a worst-case scenario — a second economic lockdown.
Just the day before, though, in our first-ever Monthly Market Outlook, I showed you I was still bullish over the month of August. And I’m not alone — Mike Carr agrees.
Now, there’s nothing wrong with a little hedging. I like to think of it as portfolio insurance, in case the unthinkable happens.
But the major indexes are still hitting all-time highs. The trend right now is up.
And you may be shocked to see the number of bullish bets still rolling in.
This tells me right now’s not the time to prepare for another big crash. In fact, just the opposite. This week, I’ve got three bullish bets to put on your radar where traders are putting down some serious money despite the uncertain market environment.
Let’s dive in…
Ignore the Headlines, and Watch These 3 Bullish Trades
First up, Analog Devices (Nasdaq: ADI). One trader scooped up 5,000 of the September 17, 2021 $180 call options for $4.20, a $2 million bet. After the stock went sideways for the first five months of the year, some would be hesitant of the recent uptrend.
But the trend is your friend. And with the stock making higher highs and higher lows as it pushes higher, why not ride it a little longer?
And with this strike price, we can see this trader is just looking for more of the same. No long-shot bet here.
This trader is simply riding that uptrend. Based on the chart, we could easily see this stock rise above $180 in the next few months…
A move like that would potentially double their money, without even breaking out of this price channel.
I also spotted some bullish activity on AbbVie (NYSE: ABBV). This time, the trader is betting on a breakout.
They purchased 11,000 of the November 19 $125 call options for $1.44. That’s $1.5 million on the line over the next few months.
And they need a big move. With a $125 strike price, they’ll need to see a double-digit move in the stock price for a potential triple-digit gain in the option.
ABBV will report earnings late October, so that could be the catalyst that helps this stock break out to the upside.
ABBV is also forming a textbook rising wedge pattern on its daily chart…
That’s signaling a major move is coming in one direction or the other. This trader is betting on it to take place to the upside.
They get in now, and could benefit from a rise heading into earnings. Then they can reevaluate the trade ahead of the earnings announcement and see if they still want to let it ride. If you caught our monthly market update last Wednesday, I had the energy sector on my must-watch list for an area to make profits this month.
Now, NOV (NYSE: NOV) wasn’t one of the three hot stocks I liked, but it did pop up on my unusual options scanner for this week.
This trader went with a slightly out-of-the-money strike price to bet on a roughly 20% move over the next three months. They purchased the November 19, 2021 $14 call options for $1.20 last week. That’s more than $1 million on the line — enough to catch my attention.
And with energy on my bullish radar for the month of August, I had to bring this one to your attention today.
Its price chart is a thing of beauty, too.
There are two major levels to watch: a key resistance in red across the top and rising support on the bottom give us a clear uptrend.
But it’s the recent downtrend we want to watch, highlighted by the dotted red and green lines. The trader is betting this downtrend simply won’t hold.
With the stock trading at a major support level and on the verge of breaking a very narrow downtrend, there’s a lot of reasons to be bullish on NOV at this price.
3 Bonus UOA Trades
Before I sign off, there’s some other standout activity I want to mention.
We saw more bullish action on JD.com (Nasdaq: JD) to add to what we saw last week. A buyer bet $1 million on the stock to rise from now to September with an at-the-money strike price.
Last Thursday I highlighted a trader betting on a second economic shutdown with puts on American Airlines Group (Nasdaq: AAL). But I have to point out that there was one trader putting a few hundred thousand bucks into calls that expire this Friday. So it’s not all bearish trades on the stock.
But I also spotted another pandemic play last week, this one on cruise liner Carnival Corporation (NYSE: CCL). They scooped up 8,000 November 19, 2021 $15 put options for $0.67, more than $500,000 on the line.
Like American Airlines, Carnival would be one of the most vulnerable stocks to a second shutdown. So this is a wise hedge — if you think that will happen…
Chad Shoop, CMT
Editor, Quick Hit Profits
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Investing has consumed my life since college. While double majoring in finance and economics at the University of North Carolina at Greensboro, I founded the university’s economics club, joined the finance club and participated in the Chartered Financial Analyst research competition to represent our school.