Hey Five Star Traders,
As I’m sure you’re aware by now, some huge news broke early Friday morning (10/2/2020). President Trump tweeted that him and First Lady Melania have tested positive for COVID-19. This of course, was an unexpected announcement and will no doubt have a rippling effect on many things including the market. Of course there are many questions:
“How will this impact the election?”
“Will Vice President Pence have to assume duties?”
“How will this impact his policy, or markets, if any?”
These are questions we don’t have the answers to, but ultimately it’s our job as traders to prepare for risk, and most importantly, find opportunity in uncertainty.
Of course, with this, and any unsettling news, I always hope for the best outcome, while of course, sending good thoughts for the health of everyone involved — but it doesn’t erase the fact that as traders, we have to analyze and adjust – and decide what to do next.
How might the market continue to react?
Overall, the most important fact to remember is that the market hates uncertainty — and we should expect volatility. The news of President Trump’s positive test clearly falls within the category of “uncertainty,” and we all know his tweets will give us constant updates that will likely move the market.
Initially, today we saw a gap down overnight but surprisingly, as of market close on Friday, the market held up, which is a positive sign for the bulls along with a potential buy opportunity — especially among companies that have been thriving throughout the COVID pandemic. Overall, these momentums of uncertainty means volatility galore, which can be great for options traders if you’re on the right side of it.
Which is the right side of it?
For me, I’m eyeing key COVID stocks. What do I mean by this? Key COVID stocks are the companies that have not just remained strong, but have benefitted from the pandemic. Here are some of my favorites:
- Peloton (PTON)
- Chewy (CHWY)
- Walmart (WMT)
- Teladoc Health (TDOC)
- Docusign (DOCU)
- Zoom (ZM)
- Amazon (AMZN)
- UnitedHealth Group (UNH)
How am I trading them?
- PTON is currently in a short squeeze. I took profits yesterday on this one in the Mastery, and I’m eyeing another fly at the $120 target zone.
- CHWY looks great on the 195-minute chart, so I added an unbalanced fly along with long calls in the Mastery program.
- I love the pullback in CHWY today, along with the 195 min squeeze. I’m long the stock and am eyeing long calls in the November monthly series.
- WMT is a great COVID winner, and I’d like to target $150 with some bullish flies. Currently, I’m long the stock but I don’t have an options position as I’m waiting for a pullback.
- TDOC is a solid COVID winner, and I am planning on trading this one higher into the earnings report.
- DOCU doesn’t have a squeeze but I like the pattern and hold of the 50 SMA, along with the fact that it’s a key COVID stock. I like selling put credit spreads here along with buying the stock.
- ZM is a volatile ticker, but I have a $550 price target – one that should be considered lofty but possible.
- AMZN is soft today after the noted 19,000 employees getting COVID but I expect it to shape up. Currently, I am targeting $3400 with a butterfly in my Mastery program.
- UNH has a solid daily setup, along with earnings coming up. I like this one for a run into the October earnings season.
As for today, it’s Friday – so I’ve primarily been managing positions instead of adding trades, but after the dust settles from the weekend, these are the tickers I’ll be looking at first thing Monday!
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