I was the lone bear on the call yesterday…Outnumbered 3 to 1.(If you didn’t catch our latest Options Arena, don’t worry. It’s over on our YouTube channel for you to view at any time.)But if you listen closely, I think you’ll see we’re actually all on the same page…Expect some short-term strength, followed by more weakness.I just expect that weakness to come sooner rather than later. And I’m not the only one…The Big Money is already betting millions on a renewed decline as this bear market rages on.And one trade I found just makes plain sense.If you’re also expecting more weakness ahead, you may want to follow this trader’s lead…
This Trader’s Saying No to ON
My unusual options scanner picked up a massive $2.4 million bearish trade last week.ON Semiconductor (ON), which focuses on the electric vehicle industry, has rallied over 20% in the last month. But one trader thinks this rally has overstayed its welcome…They bought themselves time, betting on a continued decline with the September 16, 2022 $60 put options.All told, at $6.50 per share and 3,692 contracts, this was a multi-million-dollar trade.That’s more than enough to catch my attention. But you know the drill…Let’s take a look at the chart and see if my analysis backs this BIG Money trade up…
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ON has been trading in a descending triangle pattern since the start of the year. And after its most recent rally, it’s right under a major resistance level…Resistance levels are important to watch. Oftentimes, they help you exit a trade before things go south.Now, ON also happens to be in the yellow (i.e., weakening) quadrant on my Profit Radar.And if it follows the same rotation that nearly every stock does, it’s headed straight for the lagging quadrant…If you’re familiar with my Profit Radar, you know what that means. ON will trail the market in the coming weeks.On top of all that, I believe we’re in a full-blown bear market. The broad market is due for more weakness after this brief rally…And ON will be no exception.So I have to hand it to this trader — this is a pretty smart play. I imagine they’ll be pleased when September rolls around.
Is This the Perfect Trade?
Now, if you’re like me and turning more bearish each day, this trade is worth a look.It’s about as safe as trades come in this type of market, with a key resistance to watch and plenty of time to play out.Heck, the stock could stay within the triangle pattern and you could STILL almost double your money.These are the kinds of trades I’ll be looking at as the market continues to climb.It could still run higher in the short term, but I see it giving way to more selling pressure as we head into the second half of the year.
Regards,
Chad Shoop, CMTEditor, True Options Masters
Chart of the Day:Gold Is No Longer Yellow
By Mike Merson, Managing Editor, True Options Masters
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This isn’t a chart of a cryptocurrency, or ARK Invest, or Tesla…It’s gold, priced against the Invesco DB Commodity Index Tracking Fund (DBC).Gold, as I’ve pointed out a few times in the past year, has not been showing up for work. It’s meant to protect wealth in times of high inflation and stock market volatility. But it hasn’t really done much of either.In fact, gold is at the same price it was 2 years ago… and 10 years ago — when we didn’t have quite these same problems.And that becomes even more painfully clear when charted against the gas- and oil-heavy DBC. From the peak in 2020, gold is down by 62%.It appears “liquid gold” is now simply “gold” — at least in the eyes of investors. Continue betting on an uptrend in oil and gas.
Regards,
Mike MersonManaging Editor, True Options Masters
