Market Backdrop
PPI came out this morning unchanged. The Dow slipped into the red, but most major averages closed green. Chasing stocks here is hard. There is no reason to be bearish, so a balanced approach works best: buy things that lag, sell things that look overdone. Retail sales come tomorrow and could either confirm the CPI print from yesterday and the PPI print from today, or turn things around.
Sea Limited (SE) - Put Calendar
Earnings were mixed. The numbers were not great. The stock ran up a lot, could not extend those gains, and now sits down about 3.5% on the day, down about the same year-to-date, and down close to 30% over 52 weeks. Price is 123.55.
There is a big gap from about 115 up to 125. Price has moved back into that gap. Implied volatility rank is low, at 23.61, below the 24.5 mark, after earnings and in general.
The trade is a put calendar: August 21 versus September 11, the 115 put, sitting at the bottom of the earnings gap. It was trading about a dollar and may be a bit higher after the drop. If held until September 20, the model shows a return between 1.9 and 2 to 1.
Technical levels:
- 115 (green line): a notable high and the opening of the earnings gap.
- 124: the low point first reached after the upside gap, which price is now moving below.
- 132: the high water mark after earnings.
- 148: a high point not tested for a long time.
- The trend is accelerating up; an old blue trend line gave way to a steeper one, though earnings rewrote the setup.
- 5-day EMA at 122.55; price is about a dollar above it.
- 21-day EMA (one month) and 251-day EMA (one year) sit right on top of each other near 112-113, another support area.
- RSI: no longer overbought, with a bearish crossover below 70, and price moving below the shorter-term green trend line - more weight in the bearish column.
- Volume profile nodes: 102 to 113, and 120 to 135, with a smaller node near 145.
Zillow (Z) - Iron Condor
Real estate has been under pressure across the industry. Zillow had good earnings and momentum over the past month, but it is going nowhere. Until green shoots appear in the housing market, that does not change. Good earnings hold it up while the bad market pushes it down, and that tug-of-war should continue.
The trade is an iron condor built to sit and stay: September 21, the 25/30/37/42, sellable for about $150. Implied volatility rank is a bit north of 50, lower 55% of the time over the last 52 weeks. Price is up 3.7% today at 34.49, but under pressure on the six-month, year-to-date, and full-year charts.
Technical levels:
- Break evens fall near 29 and 39.
- 29.23 (green line): the 52-week low.
- 39: a series of low points and a later high point - the top of the range.
- A gap near 36 and a short-term ceiling near 37.
- A very slight upward trend line along the lows and a longer one along the highs form a triangle, which points to lowering volatility that often comes before a bigger move on a breakout.
- 5-day, 21-day, and 63-day EMAs cluster around 33 to 35, matching the low-volatility read.
- RSI sits just above the 50 midline after taking a hit from earnings; watch for RSI to break in tandem with price.
- Volume profile nodes: 31 to 36, and 42 to 47.
- Zillow shows a stairstep pattern: consolidation, a large break, another range, another break - very common in stock trading.
Vertiv (VRT) - Broken Wing Call Fly
Vertiv is AI infrastructure, riding the AI trade but trailing behind it. It is up about 80% year-to-date with some pressure over the past month. Price is up more than 1% today at 291.89.
The trade needs work first: it wants price above the 50-day moving average, roughly 299. The setup is an August 28 320/330/335 broken wing call fly, bought for about 140 if price clears 299. Maximum reward is $8.16, for a 6.14-to-1 reward-to-risk.
Technical levels:
- 315: a relative high point.
- 338: a repeated ceiling.
- 286: a recent high that flipped to support (resistance became support).
- 275: repeated highs that became lows multiple times - a strong level.
- 264: a gap that never filled, still an open question.
- Moving averages are mixed: the faster 5-day EMA is below two slower ones but starting to cross above them, with the 5-day already crossing above the 21-day.
- 63-day (quarterly) EMA in gold at 292, lining up with the downward-sloping white channel line; pushing above that boundary would be a notable breakout.
- RSI is crossing above the 50 midline, so momentum is improving above both the midline and the trend line at once. A breakout on top of that would be a strong bullish development.
- Volume profile nodes: 253 to 275, and 300 to 330 - potential consolidation zones on the downside and upside.
