Puts, Calls, and Squeezes: Three Different Ways to Profit This Week

It’s Monday, and we’re still in the middle of earnings season.

But this year, investors are being blindsided with lots of twists and surprises.

Which is why today, I’m going to talk about how to trade the market this week.

Year-over-year earnings growth was expected to be 26% this quarter – a strong number in any environment, not to mention a year-long pandemic.

However, there’s a big catch this time around: valuations.

Companies with high valuations are getting punched down after their earnings reports, even when they’ve posted strong results. We talk about “sell-the-news” situations a lot here, and this quarter has turned into the textbook example.

Of course, there are a few exceptions – in fact, my bullish trade list for today has a few of them -but in general, the market has become intolerant of high valuations, especially in the technology sector.

Following this morning’s news, I’ve identified the three stocks that you can use to position yourself for profits this week…

This Week’s First Profit Play:

Put options on Facebook, Inc. (NASDAQ: FB)

Shares of FB hit new highs after their earnings report last week only to see the sellers start squaring up on the stock. Immediately after the stock hit $330, right after the earnings report, the “sell the news” crowd chose FB as a new bear.

Facebook shares were downgraded to a “hold” this morning by Citigroup, the third downgrade in a month as the analyst community begins to see the writing on the wall for these high PE ratio stocks.

The charts are telling me that FB will trade to the $275 price over the next month or so, which has me looking at the July puts as a hedge.

This Week’s Second Profit Play:

Call Options on Jacobs Engineering Group Inc. (NYSE: J)

J just announced earnings this morning. The stock beat expectations and raised their guidance. With a PE ratio of 35 you would think that I’m shorting it on a valuation move, but in this case I’m making an exception.

J is what I consider part of the “rebuild” trade that is going to drive a strong part of the market for the rest of 2021. The company is an engineering firm out of Texas that serves as a global engineering and construction company, just the type of business I want to own as the world emerges from a pandemic and countries start to rebuild infrastructures.

My charts have been suggesting that an increase in bullish volatility was in the cards, and today’s earnings report should get things started.

Ideally, I want to buy the stock at $135, but this stock is in a parabolic climb with a target price of $160, so I’m not going to get too picky over a few bucks.

As an options trader, I’m looking to leverage some of the longer-term trends in J‘s stock price.

Specifically, I’m looking at the October call options which I may be adding to my Night Trader portfolio this week. Night Trader is my elite service, where I personally give you the exact options trade and options ticker. For more details, please call 1-877-211-3024.

This Week’s Third Profit Play:

Hyperdrive Watchlist
Shah Gilani is known as “the man who calls it all.” And that’s because he’s consistently predicted the biggest moves in the market. I’m talking about the rise of ecommerce, the death of retail, and the biggest stock run in history.

And you can find Shah’s next prediction right here.

See, Shah’s watchlist is loaded with stocks about to make a fast move to the upside. Click here to see it.

This Week’s Fourth Profit Play:

Shares of Callaway Golf Company (NYSE: ELY)

This is part of my “get out there” trade along with names like Thor Industries (THO), Potbelly Restaurants (PBPB), AMC (AMC) and Camping World Holdings (CWH).

Sure, a lot of these names have been on the move higher as the vaccination efforts pick-up speed, but we’re only in the fourth inning of a nine-inning game as I see it.

If you follow me, you know that ELY has been on my list for a while and the company is next on the tee box with their earnings report after the close on Monday, May 10. But there’s more to ELY than just being part of my “get out there” portfolio that has me trading it this week.

Shares of ELY have been doing a little consolidation dance over the last few weeks. That sideways activity has “throttled” volatility in the stock or made it “quieter” than normal. This type of activity usually occurs ahead of a “volatility event” that accelerates stock price. Today, my charts are telling me that the acceleration is going to take the stock higher.

We recently saw a “silver cross” pattern form as the stocks 20-day moving average crossed above its 50-day moving average. Volume is coming back into the stock while we’re seeing a “buyer’s strike,” telling me that the stock is “in play” ahead of its earnings call.

Now, last quarter we saw ELY shares slump after their earnings as the company missed expectations. That’s part of the reason that the stock has traded in this low volatility trend sideways. But a return to bottom line growth will get Wall Street swinging on this name again as seasonality and the reopening trade provides more fuel for ELY shares.

I’m targeting a move to $35 on any earnings success as traders will be crowding into these shares just like they did on Acushnet (GOLF) shares last week. As a kicker, short sellers have been increasing their bets against ELY as the earnings report approaches meaning that a short squeeze rally is also on the table.

I’ll be keeping you updated with all the new, profitable trades that I see pop up.

In addition, I’ll continue to help you build the best summer 2021 portfolio possible, so look for my next Straight-Up Profits article.

Until then,

Chris Johnson

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