>> right now on options action the chart trifecta that is penny a gloomy picture for the economy and potentially the markets in the second half of the year. plus the energy trade we will drill into it a little bit. check out renewing a bet on renewables. later searching for answers on google and where it goes next. this is options action. stocks finished the first

trading day of the third quarter solly in the green but there is some concern the second half of the year may look like a historically bad 2022. the chart that has you concerned is semi conductors. why? >> this is a pretty grim one. we did finish higher on the day today and that is not how we started out at all. first of all we happen to own micron and some taiwan semi as well. that is after these things was pretty beaten up, and i have to give jim cramer some credit because on wednesday morning, after these things have been severely punished, he was saying he thought the micron sector would drag the section lower and the story was grimmer than what the tape was telling us. i think that is one of the think this earnings season will tell us is we think we have priced in a lot of bad news and

then the news just keeps getting worse. >> also get worse in a very short period of time. micron talk to investors beginning in june and came out at the end of june with an updated outlook, and that seems to be the reoccurring theme is companies get guidance and weeks later they cut the guidance and say things got even worse. >> that is exactly right and it is guidance moving for me, and we have seen a lot of multiple contractions this year and going forward what could drive the market slower is the revision lower, and i think the one thing that we have to keep an eye on is the energy prices. the big contributor to cpi right now is the higher gasoline prices, and this is putting a pretty heavy weight on consumers as we saw the university of michigan expectation index come out with the lowest reading since the 1980s, and this is why we look for exposure here in the market.

>> you are taking a look at technicals on a commodity that is give you some pawls about where the economy is headed from here. >> it is important and it is a great industrial metal, copper, use widely and it reflects a robust period, and here is a chart of copper. the first thing to consider is if this is a double pop? on the next chart it is and very well defined. the next chart you can see we have broke a trend. let's look at one more chart. what are we down to? we are not quite down to the level of support and my thinking is we will get there, at least another 6-7%. let's look at the gold and copper ratio. this is gold first and i should clear that arrow because i

think this is what gold is going to do, hold trend and go up. look at the racial on the next chart and this is very important. this has all the elements of a bearish and bottoming out action. gold is the most recognized and time-tested safe haven in history, and it tends to be a barometer where copper is a single asset with all engines firing. with the gold and copper ratio is rising it is a very defensive warning sign for the economy. let's look at the minors. these are the junior minors, the most destroyed. they have been like a pinball machine, and they had been working in this channel almost perfectly. what i am thinking is we are going to move to the upside. whether or not it is m&a, or if

it is a better time to be in gold or a lot of things. >> thank you carter for that and mike what is the trade? >> i think it is important to remember that the minor is, we saw gold that it has weekend somewhat and maybe not as much as some people would expect. if you are taking a look at the minors and why had they come down so far? a couple of things going on. higher rates mean a higher dollar and the minor as we are thinking about them is the end product goes up, and in the form of energy cost and reagents what they use in the mining process. the final point i would make is gold is usually correlated to a real yields. base for the first time i have got down to levels like that, and they have bounced back. gold hung in there a little bit

and i think that is a bit of a cautionary tale for us. one of the reason i think the junior minors are interesting is they do trade at a discount about 14 times earning relative to gdx. these are smaller companies but not necessarily small as a top five are between maybe one at 5 billion. what i think we do is take a look at that chart that carter has and we are seeing that that channel goes down to 30 and what i was looking at september at the 34-39 call and risk reversal. when i put these trades on i am looking to do it with no outlay in premium. selling the december call and the last places that i sought resulted in a small outlay of 13

equivalent, and the idea is you would get near exposure if we languish and stay in the channel and it bounces along the bottom to the $30 level that is essentially where you would get lost. we have to break down and usually take some long exposure and take a look at how far we have come. it has been a long way down and that is one of the reasons i'm using five dollars between what i am buying and selling. >> tony do you like this trend? >> i do, and i think the most important thing to look at is the u.s. dollar, the relationship between gold and the u.s. dollar. i think go should be quite a bit higher than what was right now. all-time highs if it had not been for the strong dollar. the rates in the market we are seeing a bit of fading here and a bit of a top in the u.s. dollar, and there is a potential for gold to rally.

not only are the junior gold miners relatively cheap valuation, they are light on gold. if we see him move on gold, and that is why i particularly like this, especially using options. using this call spread risk reversal, the thing when you are selling a downside put and using the premium to finance the 34-39 call spread and effectively getting it for free in exchange for the obligation to buy the etf, down from 30 which is about 10% below what we close today. >> from gold, is there a better way to play the meta name if you think the tech struggles are here to stay? >> i think the names are still bondable and i think there is significant downside for the alphabet. we have seen that the stock has a broken trend back in april,

and they have declined 20%, however, recently over the last month we have seen a bit of a consolidation i think is another opportunity to play lower. i think the most important chart to pay attention to is alphabet, relative to the technology sector and the market. what we have seen with the relative ratio charts is underperformance, relative to the sector and market since october of last year. that points to where this is headed after this period. i think if you look at the business i think a lot of investors would potentially try to argue, trading at 16 time mixtures earning this is relatively inexpensive. but if you consider the fact that what we have only seen so far is multiple contraction. what we haven't really considered is growth will be negative, and 52 out of 53

analysts maintain a buy rating on this particular stock. if we see an earnings miss and some downgrades, i think this is the type of stock that could unravel quickly. the trade chart that i want to use is to play for this potential unraveling, similar to what we have seen here in meta. i'm going out to august and by the vertical here, because the alphabet is an expensive stock the option is very expensive. using an out of money put spread that cost $50.60, i am only risking about 70 basic points of the stock's value. >> mike, you look like you are in deep thought. i can see a preview of all the traders. so what you think? >> i think the spread makes a

lot of sense. because of the current valuation and because the company cash flow generation to get a downsize move it will probably be relatively modest and using that spread helps the cost of entry for making a bearish bet. there is one of the point that he made and i think is the important one generally. we do that when everybody is on one side of the boat that presents some risk. i think there might be some opportunities long because i think the valuations, and if we are wrong the boat is going over. >> carter, tell us about the boat. >> here is the thing. you just heard why options are so important. you have google trading at a below market multiple and below

the covid low. doing it through options and in this case a put strategy is on the way to do it. semester to come a two for one energy plan and details next. for everything options action check out our newsletter. much more options action right after this. trading isn't just a hobby. it's your future. so you don't lose sight of the big picture, even when you're focused on what's happening right now. and thinkorswim® is right there with you. to help you become a smarter investor. with an innovative trading platform full of customizable tools. dedicated trade desk pros and a passionate trader community sharing strategies right on the platform.

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>> welcome back to options action. crude road than 2% to start the second half of the year as they run up against capacity constraints. there is a lot of demand for old industry and there is a way to put oil to work in your portfolio. >> as we was looking at the g7 meeting one of the think that became clear is all of the aspirations moved to other form of energy, petroleum is where it is still at and likely to remain for the foreseeable future. the business that rockefeller went into when he got into cleveland, ohio, and this is what we will look at today. you can have the guys who out there drilling and looking for oil, and the processing, and

the utility portion of it and we talk about pipeline, and this is what you are going and buying at the gas station. i like philip 66 and one of the reasons i like them is they have a very diversified footprint. the sources of crude are well diversified. this is a good margin business. it is going to stick around for some time and the other thing is it is reasonably priced. we can take a look at the more than nine bucks a share that the company is expected to earn in the years going forward. he said maybe the forecast is not so good and they are overly optimistic, and when you take a look at the average over the last 10 years, and the company was trading at potentially the same valuation as it is now.

it is actually trading less than his ford estimate right now. i understand there is a lot of volatility and i think the way we can take a look at getting some long exposure, using a diagonal call spread. i was looking at the august call spread, and selling them near august at 97.5, and it was significantly less than the difference between the strike. this is a way to get some long exposure and take advantage of the fact with all the volatility we have missing in the sector, you can also look to collect some premium. >> what is your take carter? >> the fund first.

no drawings and no lines and let's look at the next chart. this is great to the federal reserve bank and to the analyst, and how is it that this stock has stopped to the penny each time? is it enterprise value? it has nothing to do with any of that. what it is is this. it has stopped to the penny at these converging trendlines. what we know is this stock has dropped final chart 40% down to the line it has bounced off of over and over again. i will bet that it will do it again. does it have to? no. >> tony, meantime, you are looking at it through a different light.

>> i am looking at the solar engineers -- industry because we have seen a rotation looking for opportunities in the second half and i think this is one worth taking a look at. we have seen this stock has recently formed a double bottom, and after declining 55% from the september peak of last year, that happens to be the same breakout level that we saw in december 2020. the client that we have seen here in the solar industry is perhaps coming to an end and now is opportunity to gain some exposure. the more important chart to look at is the relative chart relative to the market. in spite of not new absolute highs, relative to the market we have seen breakouts to the upside. that is a sign that investors

are stepping back into clean energy after staying away. if you look at the industry, as long as energy prices continue to remain elevated, it makes the economics of converting over to solar to be quite compelling. the reasons for that is i like to look at potentially selling some premiums here. there isn't a particular catalyst for because this is an etf stock, and i'm going out to the august expiration, a 64 put vertical. this allow me to collect 39% of the vertical with, and gives me an opportunity to take advantage if the etf stays where it is, and if it declines a little give me an opportunity to own this particular etf from where it is currently trading.

this gives me long-term exposure to the second half of the year as we are seeing rotation into clean energy again. >> i tnkhi it has all of the elements and i am bullish. >> up next we are answering some of your most burning questions. more option action right after this.

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so we gave 'em thinkorswim® web. because platforms this innovative aren't just made for traders -they're made by them. thinkorswim® by td ameritrade >> welcome back to options action and time to take your tweets. the first one asked that two weeks back you show the charts filling the gap to the upside. what do you say? >> absolutely. that would be from friday, june 10, and that is about 5% higher. >> let's go to our next tweet. what is in the charts for ibm? what do you think tony? >> carter is the one who brought this up about a month

ago and despite iv -- ibm hasn't broken out in a relative basis they have broken out to the sector and i think they are going to head higher. >> i concur. >> the utilities broke under their trendline and recovered, and would you recommend a 75 call spread? >> i actually like excel you and i think this is where it might make sense, and bear in mind you will have a dividend in september so focus in august. >> on june 2 a traitor bought $17 calls and sold them for a $.40 credit and a $2 million credit. what is the strategy here? >> when you are doing that basically you are expecting a near to -- term move and not a

large one. which is chris is a company will be reporting, and this is a bit more deep into the pledge usually for most people. >> carter, what is your take on snap? >> it lost 85% of its value. >> up next final call.

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buying in alphabet and i see a rotation into solar. >> might? >> a lot of people buying electric cars but a lot of people will continue to drive the gasoline ones. >>