Flash memory and semiconductor producer Micron Technology (MU) reported Q3 earnings last week that easily topped Street estimates. Earnings hit $1.88 per share, more than double from a year earlier and 10% greater than the consensus analyst estimate. Revenues jumped 36% from the year before and beat the estimate by $160 million. Moreover, MU expects further gains in Q4 that are well above analysts’ projections. The reaction from the Street was modestly positive, though there were some concerns over MU’s cost structure.

The stock’s post-earnings price move was anything but positive. The shares fell 5.7% the day after the report and continued lower, bottoming at a 10.6% decline in Thursday’s trading. That low brought the stock to its 200-day moving average, which hasn’t been tested since last October. Friday was an encouraging day for MU, as the stock bounced 2% higher to log its best day since earnings. The 200-day sits at the 75 level, which is where we are placing the short put of our bullish credit spread as we look for trendline support to hold. Note also that the 75-76 area has provided strong support several times throughout 2021.

If you agree that MU will stay above its 200-day moving average, consider the following trade that relies on the stock remaining above 75 through expiration in six weeks.

Buy to Open MU 20Aug 72.5 put (MU210820P72.5)
Sell to Open MU 20Aug 75 put (MU210820P75) for a credit of $0.60 (selling a vertical)

This credit is $0.04 less than the mid-point of the option spread when MU was trading at $78.74. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $58.70. This trade reduces your buying power by $250 and makes your net investment $191.30 ($250 – $58.70).  If MU closes above $75 on August 20, both options will expire worthless and your return on the spread would be 31% ($58.70 / $191.30).

Facebook (FB) scored a big win in court this week when a federal judge threw out two complaints – one from the FTC and one from several state attorneys general – that it violated antitrust laws. Antitrust clouds have been looming over FB and its mega-giant tech brethren for some time, yet these stocks keep on ticking. FB reacted to the news by hitting an all-time high. But the stock was in rally mode well before the court win, gaining 40% in the past four months. Love it or hate it, FB has a deep roster of legal and lobbying talent that will draw out the regulatory process, if not water it down in the end … whenever that might be.

In the meantime, the stock keeps on chugging. In fact, FB’s market cap crossed the $1 trillion mark this week. If the market is a forward-looking mechanism, then it doesn’t appear too worried that regulators will ultimately prevail. Looking at the options market, out-of-the-money calls are priced higher than the corresponding puts in the 21 Jan 22 series, suggesting that the market sees more upside. The 20-day moving average, which is at 340, has guided the current rally since March. The stock is currently 4% above this trendline, so we’ll use this as the basis for our put credit spread.

If you agree that FB will stay above its 20-day moving average, consider the following trade that relies on the stock remaining above 340 through expiration in seven weeks. Note that FB reports earnings on July 28.

Buy to Open FB 20Aug 335 put (FB210820P335)
Sell to Open FB 20Aug 340 put (FB210820P340) for a credit of $1.50 (selling a vertical)

This credit is $0.07 less than the mid-point of the option spread when FB was trading just below $355. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $148.70. This trade reduces your buying power by $500 and makes your net investment $351.3 ($500 – $148.70).  If FB closes above $340 on August 20, both options will expire worthless and your return on the spread would be 42% ($138.70 / $261.30).

PLUG is a hydrogen fuel cell provider based outside of Albany, NY. The company reported earnings on Tuesday (June 22) after a delay due to some accounting issues. While earnings missed the mark, PLUG’s strong current and projected revenue growth is considered more indicative of the company’s potential. The company also has a strong cash position on its balance sheet. Wall Street generally approved of the numbers, as several analysts raised their price targets.

After a 75% plunge from late January through early May, the stock has been on the rebound, gaining more than 70%. The recent strength has caused the 50-day moving average (blue line below) to turn higher for the first time in three months. Also in play is the rising 200-day moving average (red line below), which sits at $32.50. This trade relies on PLUG staying above the $30 level through the end of July, so support at the 200-day is critical.

If you agree that PLUG will ride higher along its 200-day moving average, consider the following trade that relies on the stock remaining above $30 through expiration in five weeks.

Buy to Open PLUG 30Jul 27 put (PLUG210730P27)
Sell to Open PLUG 30Jul 30 put (PLUG210730P30) for a credit of $0.95 (selling a vertical)

This credit is $0.06 less than the mid-point of the option spread when PLUG was trading just below $32. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $93.70. This trade reduces your buying power by $300 and makes your net investment $206.30 ($300 – $93.70).  If PLUG closes above $30 on July 30, both options will expire worthless and your return on the spread would be 45% ($93.70 / $206.30).

Chewy (CHWY), the online pet food and supply retailer, reported impressive earnings last week that beat estimates on profits and revenue. Adding to the good news, CHWY raised its full-year 2021 revenue guidance, although it lowered Q2 guidance due to short-term supply chain issues. 

The stock started 2021 on a solid note, gaining more than 30% through mid-February to hit an all-time high. But then like many “pandemic stocks,” CHWY dropped sharply, falling more than 40% during the next three months. However, the shares have been on the upswing for the past month. In fact, the stock has moved above its 50-day moving average, a trendline that has flattened out after its first decline since late 2019. We expect CHWY to continue its uptrend, staying above the 50-day. The short put of our credit spread is just below the 50-day, so support at this trendline should keep the spread out of the money.

If you agree that CHWY will stay above its 50-day moving average, consider the following trade that relies on the stock remaining above 76 through expiration in six weeks.

Buy to Open CHWY 30Jul 72 put (CHWY210730P72)
Sell to Open CHWY 30Jul 76 put (CHWY210730P76) for a credit of $1.40 (selling a vertical)

This credit is $0.03 less than the mid-point of the option spread when CHWY was trading above $78. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $138.70. This trade reduces your buying power by $400 and makes your net investment $261.3 ($400 – $138.70).  If CHWY closes above $76 on July 30, both options will expire worthless and your return on the spread would be 53% ($138.70 / $261.30).

Square (SQ) is considered one of the most innovative companies in the payment processing space. That said, the stock has done what most tech stocks have done so far in 2021 … gone nowhere. In fact, the shares are up less than a percent this year. Moreover, SQ has been in a trading range between 200 and 280 for most of the past seven months.

Despite the sluggish overall performance, we are keying on the support of the 200-day moving average, a trendline that currently sits just above 210. Other than a handful of daily closes below it in May, the stock has respected the support of the 200-day, most notably during the past week. Moreover, we’re using a bullish credit spread, which does not require the stock to go up. Rather, all we care about is that the short put remains out of the money. That’s why we’re banking on the support of the 200-day (blue line), as our short put is at the 210 strike (red line).

If you agree that SQ will stay above its 200-day moving average, consider the following trade that relies on the stock remaining above 210 through expiration in six weeks.

Buy to Open SQ 23Jul 205 put (SQ210723P205)
Sell to Open SQ 23Jul 210 put (SQ210723P210) for a credit of $1.80 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when SQ was trading above $219. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $178.70. This trade reduces your buying power by $500 and makes your net investment $321.30 ($500 – $178.70).  If SQ closes above $210 on July 23, both options will expire worthless and your return on the spread would be 56% ($178.70 / $321.30).

The iShares Transportation Average ETF (IYT) is a price-weighted ETF dominated by rail, trucking and freight companies. The top 10 holdings comprise 77% of the ETF, with nearly half of that coming from four railroad names – Kansas City Southern, Norfolk Southern, Union Pacific and CSX. Other familiar names in the top 10 include FedEx and UPS.

The transportation sector has been hot since the March 2020 bottom, as shown by IYT’s gain of more than 130%. The ETF hit a record high a month ago but has retreated 4% in the past month with rising fuel prices (crude oil hit a two-year high this week) taking a bite out of profits. The overall uptrend is intact, however, guided by IYT’s 50-day moving average. The trendline’s steady increase has hardly changed during IYT’s recent sideways price action. More importantly, IYT has not closed a single day below the 50-day since February 3. But now the trendline is being tested, as IYT sits just one percent above this support.

We’re banking on this support holding and for the long rally to continue. Our credit spread’s short strike is below the 50-day, so a hold at this trendline would keep our spread out of the money.

If you agree that IYT will stay above its 50-day moving average, consider the following trade that relies on the stock remaining above 265 through expiration in six weeks.

Buy to Open IYT 16Jul 260 put (IYT210716P260)
Sell to Open IYT 16Jul 265 put (IYT210716P265) for a credit of $1.45 (selling a vertical)

This credit is $0.03 less than the mid-point of the option spread when IYT was trading above $270. Unless the ETF rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $143.70. This trade reduces your buying power by $500 and makes your net investment $356.3 ($500 – $143.70).  If IYT closes above $265 on July 16, both options will expire worthless and your return on the spread would be 40% ($143.70 / $356.30).

Pandemic? What pandemic? FL, the ultimate in a brick-and-mortar, mall-based store, has been a monster performer this year. The stock is up a gawdy 50% and has more than doubled since last August. The company reported stellar earnings on Friday before the bell that easily topped expectations. Earnings came in at $1.93 per share compared to the $1.12 consensus analyst estimate. Sales hit $2.15 billion, which made the $1.9 billion estimate look silly. Of course, sales were higher than a year ago during the pandemic. What’s impressive is that FL topped its 2019 Q1 performance as well.

Prior to earnings, the stock dropped nearly 13% in three days after hitting a two-year high on Tuesday. But FL rebounded on Friday, gaining 2%. More importantly, the shares found solid support at their 50-day moving average. This trendline has been instrumental in supporting FL’s nine-month rally. In fact, the stock has closed below the 50-day just twice since late August. Currently, the 50-day sits at 59, while the stock is just below 61. At the current rate of incline, the 50-day should be around 60, which is where we’re playing an aggressive credit spread.

If you agree that FL will stay above its 50-day moving average, consider the following trade that relies on the stock remaining above $60 through expiration in eight weeks.

Buy to Open FL 16Jul 57.5 Put (FL210716P57.5)
Sell to Open FL 16Jul 60 Put (FL210716P60) for a credit of $1.00 (selling a vertical)

This credit is $0.05 less than the mid-point of the option spread when FL was trading just below $61. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $98.70. This trade reduces your buying power by $250 and makes your net investment $151.30 ($250 – $98.70).  If FL closes above $60 on July 16, both options will expire worthless and your return on the spread would be 65% ($98.70 / $151.30).

On Tuesday after the bell, EA stepped into the earnings confessional. Results on the top and bottom lines lagged analyst expectations, but bookings came in higher than company estimates. Moreover, EA upped its guidance for FY 2022, as user base growth achieved during the pandemic is expected to remain intact. The Street appeared confused by the report, as the news was greeted by a mix of modest target price increases and decreases. However, the important number is the average $163 target, which is 17% above Friday’s closing price. 

Though the Street appeared mostly relieved that EA’s post-lockdown slump was less than feared, the stock fell for three straight days. But the fall covered a modest 2%, as daily lows were well supported by the 50-day moving average. This trendline, which is turning higher for the first time in two months, sits above the $137 level. Meanwhile, the 200-day moving average is in place above $135. With this solid downside support in play, we are looking at a credit spread with the short strike below the 200-day at the 135 strike.

If you agree that EA will stay above its 200-day moving average, consider the following trade that relies on the stock remaining above $135 through expiration in five weeks.

Buy to Open EA 18Jun21 130 Put (EA210618P130)
Sell to Open EA 18Jun21 135 Put (EA210618P135) for a credit of $1.20 (selling a vertical)

This credit is $0.06 less than the mid-point of the option spread when EA was trading at $138.62. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $118.70. This trade reduces your buying power by $500 and makes your net investment $381.30 ($500 – $118.70).  If EA closes above $135 on June 18, both options will expire worthless and your return on the spread would be 31% ($118.70 / $381.30).

On Wednesday, PYPL blew past earnings estimates, as profits jumped 84% from a year earlier. The EPS of $1.22 easily beat the consensus analyst estimate of $1.02. Revenue was up 29%, also beating expectations. For good measure, the company upped its guidance for 2021. The news was greeted by several target price updates. The average price target is now above $317, which is 25% above Friday’s close.

Although the stock is up about 2% since earnings, it hasn’t blown anyone’s hair back so far in 2021, as the shares are up only 8%. In fact, they’ve been flat for 3-1/2 months. But a longer-term view shows the stock’s monster uptrend since the March 2020 bottom – it’s more than tripled – is alive and well. The rising 20-week moving average has guided the rally nearly perfectly, allowing just three weekly closes below it during the past year. This trendline is sitting near 255, so we’re looking at a put credit spread with the short put sitting below the 20-week.

If you agree that PYPL will stay above its 20-week moving average, consider the following trade that relies on the stock remaining above $250 through expiration in six weeks.

Buy to Open PYPL 18Jun21 240 Put (PYPL210618P240)
Sell to Open PYPL 18Jun21 250 Put (PYPL210618P250) for a credit of $3.60 (selling a vertical)

This credit is $0.05 less than the mid-point of the option spread when PYPL was trading at $253. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $358.70. This trade reduces your buying power by $1,000 and makes your net investment $641.30 ($1000 – $358.70).  If PYPL closes above $250 on June 18, both options will expire worthless and your return on the spread would be 56% ($358.70 / $641.30).

On Thursday, CAT did something it’s done for the past three quarters – it easily topped earnings estimates. The company reported $2.87 in adjusted earnings versus the projected $1.95. Sales ($11.9 billion) also soared past estimates ($10.5 billion). The numbers were well received by Wall Street, as a couple of brokerages raised their target prices. But analysts overall are less than enthusiastic toward the stock, with more than half rating the shares a hold or sell. That seems at odds with the stock’s performance, however. CAT has more than doubled off a low from last May and is up 25% for the year. The stock should benefit as more analysts come to their senses and jump on CAT’s bandwagon with upgrades.  

Despite the impressive performance and target price increases, CAT is down 2% since earnings. But this is a good thing. Why? For the fourth straight quarter, CAT declined after blowout earnings. But in each of the previous three quarters, the decline was perfectly supported by the rising 50-day moving average. In fact, the stock has closed below this trendline just two times going all the way back to mid-May of last year. The 50-day is currently sitting just above the $226 level. Given the previous post-earnings pullbacks to this support, we’re looking at a credit spread with the short strike below the 50-day.

If you agree that CAT will stay above its 50-day moving average, consider the following trade that relies on the stock remaining above $225 through expiration in five weeks.

Buy to Open CAT 4Jun21 222.5 Put (Cat210604P222.5)
Sell to Open CAT 4Jun21 225 Put (Cat210604P225) for a credit of $0.85 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when CAT was trading at $228. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $83.70. This trade reduces your buying power by $250 and makes your net investment $166.30 ($250 – $83.70).  If CAT closes above $225 on June 4, both options will expire worthless and your return on the spread would be 50% ($83.70 / $166.30).