Market Overview

Marketfy Maven

Sign up to get updates and product information from this Maven

Nicolas Chahine

I am from Main Street not from Wall street yet I have a 90% success rate on credit spreads. Prior to trading full time, I climbed the ranks of the corporate finance world. Then in 2000, I branched...

>> Read more from this author

Options Outlook For The Week Of April 7: Don't Try To Catch Falling Knives

This week is all about building shopping lists in case traders stabilize and shrug off these fears of this Friday sell-off being a precursor to something much nastier to come.

If drivers are on alert for accidents, they tend not to happen. Usually traders get hurt most when they get blindsided.

The fundamentals have not changed much in over a year. The 'recovery' is still creeping slower than traders want and that's why the Feds are still propping markets up.

So for this week, step back and look for some good quality names that have been tossed with the trash:

  • Google (NASDAQ: GOOGL): been treated like a MOMO with no earnings. This could have been exasperated by the confusion that the split caused. Trading platforms have yet to properly represent the new tickers so traders are confused.
  • Apple (NASDAQ: AAPL): is not so much a good long idea for a rebound. Though it will hold up well in sell offs, it won't rally much without headlines of flying cars.
  • Mastercard (NYSE: MA) & Visa (NYSE: V) are looking inviting at levels that are humbling for such quality companies. Concerns are litigation issues, but given the recent beating they took, the downside has been greatly reduced.
  • Baidu (NASDAQ: BIDU): Like Google, it prints money so it will be a leader on the way up.
  • Priceline (NASDAQ: PCLN): is at a well-consolidated level here. It does need to based here on Monday. Friday's move was on big vol.
  • Amazon (NASDAQ: AMZN): Yes, it's a 'frothy' name but with street cred. Friday's market violence heeded waiting a bit longer for signs of green.
  • LinkedIn (NYSE: LNKD): A good lotto play? Probably below $180.00 as was witnessed on Friday. This is a really important level and it is likely to catch a bid here. It is important to note that the issue has completely retraced its move from the last 12 months or so.
  • Another crazy lotto is Lululemon (NASDAQ: LULU). The issue held up well on Friday and IF markets settle then it will spring.
  • Netflix (NASDAQ: NFLX): getting to compelling levels, BUT this sell chug is too scary so be wary of rushing in.

Cautions:

  • Goldman Sachs (NYSE: GS): three falling peeks could have another $7.00 to go from here.
  • Salesforce (NYSE: CRM), BlackRock (NYSE: BLK) and VMware (NYSE: VMW): Exercise caution and potentially avoid.

The bottom line: Don't try to catch any falling knives that have no solid earnings and look to nibble onto quality names. Those will have strong fundamentals. And even then, the best bet would be via longer dated options possibly even leaps.

Then traders can put those leaps to work by selling against them nearer date legs to further reduce entry points.

Check out the video below for a recap of this week's outlook:

Posted in: Previews Options Pre-Market Outlook Markets Trading Ideas