The Big 3: MRK, GILD, XOM

difference when you have someone that actually cares. Back to trading 360. I'm Marley Kayden, it's time for the big three. We've got three stocks, three charts and three trades for you. Ben Watson will take us through the charts here to take us through the trades. Today is Dan Deming managing partner at Cam Financial. Great to have you both with us Dan. We've got nearly green across the screen. The Nasdaq still ab third of a percent lower as we're seeing some heavy weakness in tech. The neo clouds really driving a lot of that. We'd love to get your thoughts on the marketction today. Yeah. This is an interesting day to say the least. The last couple of days really, Marley, with the unwind that's taking place ae of the parts of the tech sector, yet you're still seeing a significant rotation b yesterday, even in the S&P was strong relative to a 1% down move. And so this rotation that we did see this earlier in the year, it feels like it's starting to unfold a little bit here as we enter the fourth quarter. As you know, some of the dynamics in the market as far as valuations, earnings cycle that's coming out. And Ite undervalued sectors in the mark now looking much more attractive at these levels. where you are seeing someabout opportunity right now to make some example trades here. Merck is your first pick and really outperforming the market today. They're up 2% i earnings coming up at the end of the month here. So what do you like about Merck right Yeah health care is a sector that I think that hastainly shown the ability to defy some of this recent selling pressure, a stabilizer m forward. And it looks poised to me. It looks poised that it's going to continue to outperform the market moving forward. A think that'she focus of today with both Merck and Gilea But yeah, I like Merck here as we're starting to reverses downtrend that's been for the last month and a half or so. And today it like we're potentially going to break out of that downward channel and be interesting to see what Ben has to say. But I think there's a possibility here. We could see higher price action now that it has found some stability. All right Ben, so D wants to know t. What are you seeing about the potential for an upside move as it's found some stability. And are you seeing stability for sure. And Marley you look at the one year chart here and see that M has been one of those stronger performance and performethe health care sector at all. And so you look at maybe a little bit of si movement mid year, but now we've seen the backdrop of a pretty strongun, really from the July August earnings time frame. Then a little bit of a pullback off of some of theseous highs up around that 157 area or so. That downward c that Dan described. We're now seeing that little bit of a break this morning as investors who are watching some of their concentrated tech positions fall, maybe reaching for some Merck produre on the shelf as well as in their portfolio. You see that break abov diagonal resis along with that and reinforcing that is this momentum shift. You see that the that momentum indicator that we use oftentimes has been falling along with price now breaking out of that diagonal dnd line. So indicating that maybe there is a bit of a momentum shift, maybe there are some her, if we look at a three year chart here that I've got lined up on the next chart, it looks even a little more interesting because you have that perspective for maybe a bit of longer term bull flag bounce, taking the price outt from a measureme perspective out to around that 170 mark. Of course, that's not a guarantee. That's just what technical analysis might suggest here. Marley. All right. Dan. So Ben is also seeing the potential fo momentum to move us higher. So then how would you look about trading Merck for example purposes? Yeah. I think, you know as it's regaining its footinere. To me the trade example I you know, thought process was to define risk but still offer the ability to capture a continuation of this move and up to that region that Ben pointed out. So today's trade example isuying the November 1st 5165 call spread. You can b that for about $5.35, 2 to 1 risk reward ratio on this trade example. But again, allows us to capture a continuation and a potential breakout to new highs up to 165t month alsoarnings announ in it. And also the final piece of this trade example is defined risk to the downside. All right so then let's jump to your next one here. We' got Gilead Sciences. They've hit a new high today. They are up three and a third percent. They've had a really strong run. They have this so tumor partnership that seems to have a lot of optimism tied to it. When I was looking through some of the analyst notes, they also have the same earnings date as Merck at the end of the month. So how are you looking at Gilead right now? Similar. Ns istle bit different sector. And I think it's kind of a hybrid between the healthcar and the at biotech relative strength in the last several month particularly in the last few days, again, a sector that shows the ability to counteract some of the selling pressure in the tech sector. So that's the reason I chose focus on this name today, and also because of the fact that whe look at the action now, we're having a big move higher here today, but it looks poised to continue to maintain this upward price action. All right.t Gileadences touching a high today, a new high, does it look like it can continue to make new highs in the near term. Well you know, Mar this is a this comes kind of as a culmination of a longer term matter of fact, three quarters of the year building this kind ofing base, if you will. And almost you could describe pd handle type of pattern with kind of a flat handle over here on the right hand side under that. 153 resistance. Now we get the g up and that breakout and a little bit of a ga rally perspec with some high momentum momentum not up into thatrbought range yet or that extreme range, which would suggest that maybe there is still some room to run. However, you watch this candle today, this kind of shootingstau see a little bit of price discovery up in those highs. It's coming off of those highs just a little bit. The other thing to think about here isthag into this earnings annout is alr relatively high. In fact it's as high as it's been in tt three earnings announcements for this stock. And so that may s some investors perhaps trying to fade this upward gap a lit bit here wit high implied volatility. Marley. All right. So then as we look Gilead here we've got that new all time high. We've giv back about $2 of it right now. But still up three and a third percent. 15859 for Gilead Sciences. So, Dan, then how would you think aboutding this name? Are you including the earnings event in the trade. Yeah. Marley again November options trade example. This one is a l bit moreressive in the sense that to me I thi Gilead is going to con to maintain upward price action. And if we do see a little bit of some downward price action going down t that 155 level post earnings announcement, I think that's a level that it's a little more compelling to possibly pick up the. So today's trade example is a risk reversal that's selling a put and buying a in November. Selling the 155 put buying the 165 call. You can do that for a small credit. When the stock was trading right around 159 an again allows for participation to the upside if we maintain this upward action. Now, that appears to be breaking out. And if there is so weakness, you know, as Ben pointed out, the high implied volatility going into announcement is also priced into the November options. And so therefore I think that picking up the stock below 155 for longer term hold is another aspect to this trade example that I think is a good set up here right. And your break even just a little north of 154. We're at 15861 right now for Gilead. Again touchin new all time high today. I'm very curious to hear your outlook for this last one. You've got ExxonMob We've got oil a little bit higher today. Don seem to have discussions about a resolution to a lot of the geopolitical risks that are ongoing. But a very interesting chart here. I'm eager to hear from both of you on this one. But Dan, walk me through how you're looking at ExxonMobil right now. Yeah. I this area. Marley. You couldin look at Marathon Petroleum, you could look at Conoco as one as Chevron as well. I mean, they're all showing significant strength here. The reason I chose Exxon for the trade example today is because it's a little more liquid, more activity there i options market. And also just from a sheer momentum point, continuing to maintain this upward p action. And you know, again, I know that oil's potentiallya high here that could we could see some downward price actio have honestly, until this most recent back up to But at the same time, it has not impacted the the integrators. I mean, you know, like Exxon and Chevron. So I think that th still opportunity here, even if crude peaks orossibly moves lower. All right. So let's dive in her Ben, to Exxon. I mean we saw a huge move to the upside on the onset of what's going on with Iran. Then we saw some pullback. We've had a volatove to the upside to say the least running through late summe fall. But what ar seeing in the technicals here. Well and I agree withI mean I thin is a really interesting chart especially amongst the large integra In fact this is t largest of the integrated oil companies. And you got to remember that they giveth and taketh away because they suffer from production costs as well as benefit from high crack spread nk end. So there is kind of that push and pull here. But at the same time, look at this stock in mid year from January through like the June July time frame. And you had a larger head and shoulders potential reversalex building. You had a smaller head and shoulders reversal com building. N one of them got anywhere near completion on that break after the June July time frame. And then we get this very strong rally to the upside. So it's almost as if this is very hard for investorse support levels. Doesn't mean won't. But you get a break it above the 170 which has been tested now once, tce, three times resistance level. You get the breakout and a litt of a gap up and sell off today on oil moves. At the same I think it's more of the same. We get these very strong gap moves that may be just a little bit of a pullback from a momentum standpoint. You get a little bit of a shift to the downside. Implied volatility relatively flat on this name. And I think if anything you see a pullback back down to that 170 support before potentially another bounce and leg higher. It's import point out though this is also back up. You k where we are today at or just beyond a three year high. So we are at some highs where some profit taking maybees a little senseor some investors. Marley yeah. And as you men that we are at that three year high. We've come off about $3 from it. But touching another high today. Now Dan, I know you do your own line were your was yours withn what Ben just broke down the Pretty similar. Yeah. You know we're we're challenging and potentially breaking out from I believe it's the end of March levels. again, it's been able to find some footing here and maintain this upward price action. And I think, you know, when you look at just the general tone in the market here, today's trade example i by right in this game, owning the stock is something that we have. We have Exxon and some o products.so it's been a long term hold. So I think that d then right the January 1st 95 call for about $3.75 here allows to collect some premium over the nex quarter. And again it's interesting. Ben saw the same thing I saw lowers the break even closer to that 170 level. And I think if do see a little weakness in the next month or two, then possibly 170 wo a support level. And again, this premium collection allows the break even to move doser to that level, but also gives a solid range to the upside if we maintain upwa price action. All right. So the potential for a move lower but then a move higher. You've got a longe dated trade there to be able to wait this one out. Exxon seeing a move lower today on the session though. We're down about 1% at 17508. But we did touch another high about a three year high earlier today. Really appreciate you both beth us for big three