Editor’s Note: This is the Bullseye Trade that Jeff Bishop sent out to his subscribers last week.
I have to say, I was very happy with last week’s idea on shorting MRNA. The trade worked out beautifully, and it was a very hard one to mess up since it went down nearly non-stop for 3 days. The options had a nearly 200% possible move in the process.
I really liked how that played out, especially since I was wrong about the direction of the market. I expected things to tank last week, but we had another strong week for the market instead.
This week, I am still a believer that we will see a slight pullback, but only around 2-3% from current levels. I think the bears are so desperate for any dip right now that they will continue to cover positions into any dips. In fact, they might even get emboldened to build bigger short positions (I pity them if that’s the case!).
Overall, I am anticipating a lot of “chop” this week. That back-and-forth trading action can be killer for trading options if you don’t get a clear direction one way or the other.
My problem with buying the best stocks I love right now is that they are all very extended. I can’t find one great stock that I want to buy right now. I am ready to load up on a pullback, but assuming I have to make a trade today, it is very tough out there.
It pains me to say it, but for my trade idea this week – I am breaking some rules.
The stock I am going after this week is not a strong earnings winner. It is not fundamentally a great company. In fact, I think there is a decent chance it will go bankrupt some time this year.
This is a very high-risk, but possibly very high-reward type of trade if it works out.
That being said, I am looking to buy Carvana (CVNA) calls this week.
There is a lot to discuss on this one, so it is important that you join my live session @ 11am EST today.
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Back to the pick of the week…
You must be asking yourself, “If it is such a trash company, why buy CVNA?”
My answer is that in the short-term, it just doesn’t matter how terrible the stock is. If you zoom out and just look at this idea from a technical perspective (that is, just looking at the stock chart), it is a pretty amazing setup.
If you are a member of my “Bullseye Unlimited” program (and you better be!) you will remember that I picked this last week, when the stock was around $10. Then it shot up to nearly $20 the very next day, and the options moved well over 400% following my alert.
Not to say that will happen again, but it proves that this is a powder-keg opportunity right now.
The short interest in this stock is off the charts. I am sure the move last week both trapped a lot of recent shorts and had a lot of new ones added.
But here is the thing… even though CVNA pulled back to $14’s after touching $20, it hasn’t budged since. I think shorts are in a big mess right now and if the “Apes” get their way, they will push this stock right back up soon.
If that happens, I think we could easily see CVNA trade over $16 soon (which would be profit target #1 for me), and if it gets really spicy, we could see a move into the mid-$20 range.
I am fully aware that this trade could fizzle out and the “apes” might not have further luck with this.
If that happens, I am going to use $11.80 as my stop loss on the trade, though I would certainly keep an eye on it for another entry soon if I get stopped out of it in the next couple of days.
This is going to be a wild week of trading. CVNA is no exception. The options market is pricing in a huge move for the stock right now (implied vol is nearly 300%!).
That being said, I am not going to trade as big of a position as I normally would. I think trading a “half-sized” position for me this week makes the most sense.
My Trade Details:
- CVNA Feb 24 2023 $15 Call near $3
- Stop: Close below $11.80
- Target 1: $16.50
- Target 2: $21.50
Have a great day, and make sure you join me @ 11am today for the live training session!