hey there, live at the nasdaq in times square the guys are getting ready for the show behind me here's what's coming up next it's looking just downright bad for tesla shareholders the stock falling into a bear market if you think this trade is going to get even uglier, mike khouw will tell you how to profit from the wild ride. plus there's one semiconductor stock that's surging this year. and dan says if history's any indication this stock is about to go parabolic. he'll tell you how to get in on the run for less and -- ♪ party time excellent >> it's party time for tech stocks as the nasdaq just looked

in an historic winning streak. if you missed all the fun, don't worry, the chart master will tell you how to catch the rally. it's time to risk less and make more the action begins now. >> and we start off with a party in tech after the nasdaq's epic winning streak check out the fang trade amazon, netflix, google rallying facebook standing in the corner during all the fun down 2% the chart master says the beaten-down social stock is about to play catchup. casually dressed carter. >> snow day. facebook, there's an opportunity as a catchup trade it has lagged and it as was one of the most punished from its peak the first slide shows some of that from the peak in september, october '18 to the christmas eve lows and back. what we've got is microsoft,

google, amazon you see the numbers. apple, facebook, netflix, of course, really the ones that were destroyed so facebook, i want to zero in on that. it has lagged and i think there's opportunity at this point. so very simple chart it's only about eight months i would just point out that this low right here is the christmas low. so if you zero in, what we know is the stock makes a new low, it undercuts its october low. but that is not the case on a relative basis which is to say that as it was selling off, it was outperforming the s&p. and that sets up what has been since not only an absolute winner but a relative winner i think that's part of the opportunity. the chart itself, many ways to draw the line. focus on this gap. a heavy volume thrust. i think we're going to get another one. draw the lines as follows, you've got something of a head and shoulders bottom this well-defined top and of course you get that

massive breakout and then this flag another way to draw the lines, just that, this pennant this flag, this triangle. what i'm thinking is that you have this initial heavy volume thrust, you're going to get a second one all coming from the point at which it broke out, we do it again. one more where might we go? i put those same lines in. let's just do it put in our head and shoulders bottom put in our flag. here it comes again. and fit has premises right i think we're going to thrust like that, thrust like that the reciprocal is what we did on the way down after gapping down we had this very well defined triangle what happened? we did it again. got the reciprocal going on here i want to play for a meaningful bump higher and catchup trade. >> mike? >> the preceding babiness we saw in facebook was news driven, a lot of negative news

in that time the company has proceeded to get cheaper and cheaper. that's really the issue. the company is not trading at an expensive multiple it's still growing it has a huge mode around its business it's trading about 18 times next year's earnings and they essentially own their entire space. if you're saying, back in the day when television was first coming out and you could essentially own the entire industry, what would the appropriate multiple be? this is probably going to generate something like $25 billion in free cash flow in 2020 so when i look at something like that, i think, targeting the level that you were looking at, also trying to minimize my premium outlay looking out to may, you could put on the 150, 165, 175 call spread risk reversal for about even when i was looking at this earlier today. selling the 150 puts at 385, buying the 165 puts at 770, and then selling the main 175 calls at 385 net net you're not putting out any premium to put that trade on that's going to start kicking in

$2 up from where the stock is currently trading to the downside you could be forced to buy the stock at $150, which is ase that to be the wrong direction on the trade. but here's the other thing you're going to be owning it at an even cheaper level or valuation than we're currently seeing. >> what i think is interesting about the setup is expectations were very low into this last prem, therefore they outperformed and the stock had this big gap because the stock's consolidated well above the highs over the last month, i think expectations are low. i think what's important is we know why earnings are not going to grow in 2019. but sales are expected to grow 23% to almost $70 billion. when mike talks about a mode, here's the thing we head into april, say the next six weeks as we get closer to their earnings, this stock may start moving up into that. the way mike set this up, it's not costing him any premium.

as the stock moves closer to the shortcut strike he's going to have losses. as it moves into the call spread he's going to have gains he's got this good trade structure on, if knock at all happened, no crime no foul i like the setup because i think expectations will be low if the stock continues to consolidate into earnings. >> to your point, if you go through earnings and nothing happens this trade is likely going to make money. why is that? because options premiums are elevated when you have that catalyst once the news comes in, a lot of that premium comes out where is it going to come out? on the wings the 150 put, the 175 call that you're short, those will likely decay more if the stock lands here after earnings. >> to summarize the principle, after a major reset in any direction, think about the plunge in august almost a year ago, you consolidate and get a follow-through move to the downside the resciprocal is in play here

the presumption is you're going to get a second relating higher, get long. check out the surge in semi stocks up nearly 20% despite trade tensions and global growth fears. dan thinks there's one chip stock that could be about to rip any higher. >> let's talk about western digital. a lot of old timers know this as a disk drive company they because san disk, makes a flash that goes into devices you know about these guys are exposed to cloud, mobile, a lot going on here. this stock was a disaster in 2018 with a peak to trough decline of about 70% but the stock's up 40% this year it's kind of caught a little bit. i was looking at it because the president of the company was speaking at morgan stanley's tmt conference while i wasn't expecting a lot, i thought it was going to be interesting to see how the stock reacted to whatever he had to say. the talk was yesterday the stock got creamed into the talk but it caught a bit

afterwards listening to the conversation there wasn't anything great there. talking about large inventories, talking about lack of pricing power, talking about the global economy and when that pickup's going to be, working down inventories, all this stuff. it's all second half of this year but the stock has rallied a bit off those lows it's up 40% on the year. the technical setup is interesting. i have two charts. i'll let carter speak to them after the fact look at this one-year chart, well-defined downtrend that it had been in. it bottomed out on christmas broke above the downtrend line here's the really important part it was able to actually get back above 50 today, and that was the breakdown level from the fall. i think that's a really interesting setup that was able to hang out here for a little bit. the five-year chart i think is really interesting too look at this massive double bottom that it might have put in, 40% bounce tells you that there's a little bit of a bottom here what do we need now? a catalyst, right? to propel this thing higher.

sentiment bad, analysts hate it, they're not going to report earnings until late april. i think this thing sets up decently for a call spread because if the news gets incrementally better, and on that earnings announcement in late april, this thing's going to act like a coiled spring, in my opinion so to me i think you look to may expiration where the stock was trading at 51.50, buy the may 50, 65 call spread buy one of the may 50 calls, selling one of the 65 calls, breaks even at 54. make up to 11 between 54 and 65. then you lose up to 4 between 54 and 50 and the full 4 below 20. key thing, this trade is $1.50 in the money here already. so i'm kind of playing from a position of strength i'm really defining my risk to that $50 level that it just got above here i leek this. it's not exactly an earnings trade. this is a bit of a momentum trade. i would maybe even consider

taking this off if it was up near 60 prior to earnings in late april. >> you know, it's interesting when you look at a situation like this you're probably thinking to yourself, all right, spending $4 in premium, stock is currently trading -- seems like a lot of money, 8% of the current stock price. consider how far this stock has moved and over such a relatively short period of time up 40% essentially from the lows in a period of time shorter than what you've got from now to the expiration of this trade take a look at how much this stock typically moves around earnings the answer is quite a lot. we've seen multiple double-digit moves in the single day following the earnings release that's the kind of situation where you actually can be justified in spending a little bit more premium than you otherwise might in stocks we commonly talk about. this thing can really move. >> dan has touched on literally the two key things from the technical point of view. it's the current circumstance, which is established down trend that's starting to stop not only going down but turn back up. where is that happening? the former circumstance, a prior low. so the long-term chart, the

double bottom, exactly right but it's why the current stock is bottoming, the current action is very developmental. couldn't be better >> as carter would say, a bearish to bullish reversal. here's the most important part looking at the longer term charts, the price action this week i listened to that conversation of the president it didn't sound good it got hit initially but it calm at the way back to that key support level. i think this sets up for a bounce in a good market with incrementally better news. everything "options action," check out our website. sign up for our newsletter more than 100,000 of you already have do not miss out. here's what's coming up next. turn the car around! >> tesla shares are taking a turn for the wor mike khouw thinks this could just be the beginning of a total u-turn plus calling all options action fans. reach into your pocket grab your phone.

tweet us your questio question @optionsaction. if it's nice, we'll answer it on air. when "options action" returns. i don't know what's going on. i've done all sorts of research, read earnings reports, looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪

all of you. how you live, what you love. that's what inspired us to create america's most advanced internet. internet that puts you in charge. that protects what's important.

it handles everything, and reaches everywhere. this is beyond wifi, this is xfi. simple. easy. awesome. xfinity, the future of awesome. (indistthat was awful.tering) why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade. shares of tesla hitting the skits falling back into a bear market as ceo elon musk warns the electric vehiclemaker will not be profitable nft first quarter.

wall street reacting in a series of notes, barclays calling it tesla's un-iphone moment questioning if the move is an act of genius or desperation morgan stanley warning the decision gives bears more material to work with than bulls. how should you play the stock in mike khouw's "call to action." >> tesla obviously a very interesting situation. elon definitely has the cool factor i'm not just talking about him and his company. the model s proved to be one of the best cars ever made, quite an achievement when you consider there weren't really any electric cars on the market before that came out the bad news is that competition is finally on its way. audi, jaguar, bmw, mercedes-benz, and porsche are all coming out with electric cars those that have been seen so far are looked at very favorably by the press. finally, and this is an issue for anybody trying to build an electric car, particularly for tesla because they only build electric cars, electric batteries are exceptionally expensive.

take a look at what he's saying he can do, sell a car for $35,000 that has a 60 kilowatt hour battery these batteries are in the neighborhood of $7,200 general motors bolt, which is chevrolet, that also has a battery about that size, they don't make any money on the car. that's okay, it helps offset the fuel economy issues on light-duty trucks on which they do maybe money the e-golf, they're selling a car for about the same amount of money, they make monthlies of them, making them at $35,000, with a battery half the size when i was looking at this you can see the volatility that we've seen fairly range bound one of the things that helps the stock bounce like this is the fact that it has an enormously high short interest. at some point he's probably going to have to raise capital if he does that could increase the float. that's one of the things that could put a lid on the stock options premiums are

exceptionally high i'm looking out to the april-june 250 calendar put spread sell at 7 bucks, buy june put at 18.25, spending $11.25 net net if you hold this until after those april puts expire, obviously you need the stock to be below 250 until that time, this will be most profitable if the stock declines down to that 250 level. that may seem like a big move, it really isn't when you consider that there is some leverage here, it's a very volatile story, there are a number of headwinds, they may need to raise capital. i think people are starting to have doubts about whether or not elon can talk the stock up >> all right, so down to 250, which would test its most recent 52-week low. so carter, what do you see in the chart sfts. >> that's just it. this frankly -- anyone has a chart they're looking at, it looks like an ekg chart when you go to the doctor, it goes up and

down, up and down the past three years. it has no character, which is to say we're looking for well-defined opportunities like wdc, a bearish to bullish reversal, something's about to break out or top out this is meandering around with no direction it's lost. >> given that? >> the trade's really interesting. we know that 250 level as big bottom level from 2018 looks like it was prior resistance before that it's established a new range mike's trade gives you optionality here it could be just a good little trade if the stock were to work back down towards 250 to that short expiration strike. but it could also be the sort of thing where it sets up where you end up financing that longer dated 250 put with the short dated short one. to me i really like this trade because, like carter said, it's been moving around a lot there's probably a better chance if it goes back toward 250, then back up well closer to 350, which has been a level where it's found resistance lately i like mike's trade.

>> i think the issue we ought to think about, what's going to get the took to go significantly higher we've seen weakness. we have a lot of storm clouds brewing. it's going to have to be something pretty miraculous, and of course that s.e.c. thing to worry about. i'm not yet in this structure but i will be adjusting to either this one or something close to it depending where the stock opens on monday. general electric's nightmare has turned into a dream for shafrlders this year that's good news for one of our traders. got a burning question for one of the traders you are in luck because we are taking your tweets later in the show what do you look for when you trade? i want free access to research. yep, td ameritrade's got that. free access to every platform. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely.

do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪

♪ ♪ our new, hot, fresh breakfast will get you the readiest. (buzzer sound) holiday inn express. be the readiest.

i've done all sorts of research, read earnings reports, looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪ welcome back to "options action." ge's nightmare has turned into a dream for investors. here's how dan cashed in on the move >> on "options action," it's how we electrify profits, risk less so we can make more, and that's exactly what dan did with his bullish bet on ge. dan thought the ge nightmare

could be coming to an end. >> the last time this stock was a hat size, it did capitulate down near that $6 level. it came back really quickly. >> but buying the stock after that could be risky. so to play for a bounce, dan bought the march 10 strike call for 50 cents now to make money, dan just needs general electric shares to rise above $10 by more than the cost of the trade. or above $10.50/50 mar-- but spending 50 cents to bet on ge chill out, lady. so to cut costs dan then sold the march 13 call for 10 cents and created his call spread. here's how it works. between the 50 cents he spent on buying the lower strike call and the 10 cents he collected by selling the higher strike call, he reduced the total cost of his trade down to just 40 cents. and now to make money, dan just

needs ge shares to rise above the strike of the call that he bought by more than the reduced cost of the trade. or in this case, $10.40 by march expiration >> it's alive! it's alive >> maybe so, herr dokter, but remember, there is a tradeoff. since dan sold that higher strike call, his profits are capped at $13. since the time of the trade, ge shares fell to the devilish $6.66 level. and then soared more than 50%, meaning this trade looks pretty good now "options action" fans all over the world want to know one thing. what will dan do now ♪ let's do the time warp again >> okay, so this trade expires in two weeks dan what do you do >> you had that news about divestitures, the stock gapped up, trading close to $12 in the

premarket that day it gave back a lot of those gains very quickly for whatever is going on, a lot of investors are happy with the gains off the lows last year, but weren't too excited after kind of digging into the news. i think this is one that you probably see some support at 10 bucks. you probably want to roll this trade out. the company's going to report their q1 earnings in mid-april probably a day before april expiration maybe you roll whatever gains you have in a trade like this maybe up until the april 11 call to play for that earnings event. >> one thing i'd say is that the trade actually proved its worth when the stock fell, not the subsequent gain. that's the reason you sometimes put on these options trades rather than buying the stock because that would have been a bitter pill to swallow. >> the big week, it's about the gap that occurred monday if you want to call it flag, it's this quiet low-volume reaction to the heavy-volume gap. the presumption is lows are in, higher prices ahead. >> i think 10 looks like a good

support level. probably good resistance at 12, 13 that is why i chose that 13 strike to sell versus the call spread to me maybe it looks like 11, 13 call spread you roll until april. up next, your tweets and the "final call. see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade ♪ ♪ our new, hot, fresh breakfast will get you the readiest. (buzzer sound) holiday inn express. be the readiest.

what do you look for i want free access to research. yep, td ameritrade's got that. free access to every platform. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely. do you just say yes to everything? hm. well i say no to kale.

mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪ we've got time for one tweet. what are your thoughts on gld at 123, healthy retreat or break in technicals i'm in the april 126 calls carter >> it was a bad day, it was all simultaneous for gold for tlt bonds and yen. but it also is still within the bounds of a normal give-back after the very impressive 15% move off the low i would tolerate a little bit more, stay in the trade or roll out. >> i would actually roll your strike down. i like being long gold i'd just use a lower strike call. >> "final call." carter >> well -- facebook, get long.

>> i like what elon's doing but i think tesla has some problems so use calendar put spreads. >> western digital, i like playing it with call spreads. >> does it for us. see you back here next time at 5:30 the following program is a paid commercial presentation for total gym fitness. [music] everybody work out. feel the energy. build a better body. the best you can be. another body easy as 123. oh. ahh. better body as easy as 123 with total gym. i feel fabulous and when you