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Swing Trade Ideas – April 9, 2020

Market View

USA markets are negative in premarket, ahead of the unemployment report. European and Asian markets are up so a mixed equity outlook. Bonds are higher with a steeper curve which is negative for the US markets and financials.  Oil is higher on the expectation of OPEC+ cutting production. VIX is higher reflecting the uncertainty ahead of the unemployment report. Market reaction unknown in advance but would lean to short trades if market reacts negatively and the converse if market is positive. Today’s trade idea is leaning short so will be helped by a negative market reaction.

Stock Idea: SBUX

SBUX is warning that Q2 earnings will be 50% compared to last year.

Expect Q3 to be  impacted worse than Q2 and for negativity to extend to Q4. Also withdrew full year guidance. SBUX stock price is down 18.4% YTD but only 4.73% Y-Y. Stock is expensive relative to the 2020 financials.

A short trade is a trade idea. Levels to watch are 65. 60 and 50. These are fib retracement levels. Expect SBUX to drop at the open.  Shorts are tricky trades and one must be open for the stock to be bought back, especially if the market should be strong. Options can be used to define risk with a put debit spread. Breakout above recent highs would negate the thesis.