Weekend Trader Alert

Weekend Trader Alert

March 19, 2023

Open Positions Update

There are no portfolio updates this week.

The following is this week's recommendation:

Baidu (BIDU)

Place a limit order to buy the Baidu (BIDU) May 19, 2023 140-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, March 17, this option was offered at $17.55. BIDU closed at $146.84 on Friday, March 17.

Do not attempt to enter this position after Monday's close.

Please use the following guidelines to manage the position:
  • Exit the position if the option is at a 100% gain from your entry price.
  • If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, April 17, close the position.
  • If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
The shares of Baidu (BIDU) are breaking out in a bull flag pattern, staging a hard bounce off their 200-day moving average while conquering the +20% year-to-date level and coming just shy of their year-over-year breakeven.

The security has also pushed back above the $140 region -- which has controlled price action for most of the year -- as well as their year-to-date anchored volume-weighted average price (VWAP). With potential tailwinds coming from a tech rally as the Dollar Index (DXY) falls, now looks like an ideal time to buy BIDU calls.

It's also worth noting that short interest is up roughly 80% over the past couple months. Rapid hikes in short interest in 2021, 2017, and 2013 all led to rallies.

The security's Schaeffer's Volatility Index (SVI) of 51% ranks in the low 16th percentile of its annual range, indicating options players are pricing in low volatility expectations right now. Plus, BIDU’s Schaeffer's Volatility Scorecard (SVS) is on the rise, which has typically been a bullish signal in the past.  

Our recommended May 140-strike call has a leverage ratio of 5.4, and will double in value on a 19.2% pop in the underlying shares.

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