Freaky Fast Outlook (NET, NTAP, NVDA, PYPL)

On to the N’s as we continue to look at what the week ahead looks like for our Freaky Fast Folio positions.

First up is NET, which is the ticker symbol for Cloudflare, a company that protects websites from shady looking people like the guy in the hoodie in the above diagram. Cloudflare has been very, very good to me. I’ve been in it or trading around it from the low 20s. This is yet another company in that fantastic software sector, but it’s nowhere near the most highly rated at Investor’s Business Daily, ranking just 32nd in the group. I am bullish on NETs future, but not enough to hold more than a few shares of this through the earnings report Thursday afternoon. I’ll be taking the majority, if not all, of my profits on this one sometime this week. But if it can clear that recent swing high at $42.60, there’s a good chance it gets to the mid 40s before it reports.

Definitely a pretty chart. I’m sure I’ll be in this again someday.

There’s not a whole lot to say about NTAP. This was a lottery ticket of an option play that I threw away $45 on. It made one quick run from $43 to almost $50 right after I bought it, but it immediately reversed and fell before I could take my profits. My August $55 call would need to do a lot of work to not expire worthless. Oh well. It does have an earnings report two days before expiration. Ideally, it would run up to its 200-day moving average (around $50) before then and I could salvage some equity there. Gross looking chart.

NVDA is a fun one. This best-of-the-group semiconductor maker is up about 40% since breaking out of an 18-month base. Semiconductors have been killing it, and the recent reports from AMD, AAPL, AMZN and others suggest strongly that NVDA will have very good news when it reports on August 19. My favorite way to trade options is with out of the money diagonal spreads, and my favorite way to purchase a diagonal spread is to leg into it.

Knowing that NVDA was reporting on the 19th, I purchased the Aug 21 $500 call for $310 back on July 21. The plan was to then sell the earlier expiring August 14 $510 call, after NVDA had run up to $450 or so. Instead it went pretty much sideways and our position currently is worth $317. At current prices I could sell that call against the one I own for about $55. That would give me the following profit outlook. The blue line represents profit or loss at the August 14 expiration. I would then still own the Aug 21 $500 call and have multiple good choices.

But that’s not what I’m going to do. Some good action at the end of last week makes it look like I will still be able to sell the desired Aug 14 call against it for a better price. You can see that we rallied above a short-term downtrend line to end the week, setting up what looks like a nice, quick run to the $450s.

Last up for this group is PYPL. I’ve been in PYPL since it crossed $100 on April 6. It’s been quite a run!

I sold out of all my PYPL stock on 7/10 when the stock had a poor day following what should have been a bullish reversal the day before. Not liking the chart action, but still liking what the company was doing, I put on an options play into earnings instead. I did my standard spread, buying the Sept $210 calls and selling the August $220 calls for a net cost of $146. PYPL crushed on its earnings report last week, and my current profit graph looks like this.

I’ve got about $240 in profit as we stand, but you can see from that graph just how tenuous it is. Drop just a few dollars and I lose all my profits. Rise just a few dollars and I make hundreds. In these situations, I find the best thing to do is go to the hourly chart and draw a line in the sand. My line in the sand is going to be the 21-ema on the hourly, the yellow line.

I don’t expect to be in this trade much longer. I’ll either get stopped out or I’ll take profits when it looks like its running out of steam. But now that it’s acting well and earnings are in, I’ll probably be back in the stock soon.

I’ll be back later to conclude our positions. As always, questions or comments are welcome below.

Surely goodness and mercy shall follow me all the days of my life.

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