right now on options action, big friday rally helps the major indices salvage most of what was looking like a pad week after a solid one last week. meanwhile the daughter were -- dollars starting on outwards projector he. and heading into the heart of earnings season, find out why it's time to make a play on healthcare. the healthcare heavyweights on the long side.

we are live from the nasdaq market site and its option to action. let's get right to it. the dollars seen a steady climb but the technical is pointing to some currency concerns. the chart master has the charts. >> everybody on one side and also it's right to take the road less traveled. two lines into colors and very straightforward. the u.s. dollar and the euro are largely the inverse but it's about this spread and how wide it is. a two-year chart so let's look at a little bit longer duration. this is a five year and the same circumstance and everyone is thinking the dollar cannot do anything but go up and the dollar cannot do anything but go down. i think you would do just the

opposite, you take the road less traveled and the fact that we are going to get some conversion that the dollar will come down and fail and the euro will rally. another way to look at the circumstance, this is the actual u.s. dollar index. let's put some lines and drawings in. a well-defined channel and we blown out through the top and you can see clearly that we basically have tracked so well within the channel until we broke out so often you get check backs like this and that and you're due for the next one. a selloff in the dollar. the thinking is whatever atf you want to use but the u.p. is as good as any. >> i could match it up with why that might happen with the oil the where it is. at one point before that the big jobs report you saw that come down 75 basis points and

maybe they don't go as far as they need to. that would not be good for the dollar. >> that's right. oil has come off, nickel. >> we have to rush over there but we can go through heathrow. >> what's the trade, a trip to europe? >> you should probably quick if you're going to make the trip to europe and try to take advantage of what they are referring to. the dollar isn't really strong. you take a look at inflation data and the dollar is weak but just the prettiest old nag at the glue factory. what's going on is we have other central banks that also have to contend with inflation issues and potential recessionary issues and the bank of japan will not do anything that the ecb might. we see consumer inflation expectations declined somewhat and now looking at ecb rate hikes 25 basis points in the

short term but maybe in september as much as 100 and meanwhile the own expectations increase at the next meeting have come off somewhat and now people are forecasting 75 basis points increase. important thing to remember is we are still well below neutral so if we start to see bigger increases with smaller ones here on a relative basis, that is bearish for the dollar. looking at september specifically 29-27 spread and that would cost $.59 and buying those and selling them for 13. i will quickly point out that the 29 relative to the close about $0.14 in the many so the $0.13 and premium doesn't seem like much at right now with the volatility of 14% is probably

almost double. currencies don't typically move the whole lot. they are moving more so we see increase options premium and that's one of the reasons we want to look at a spread. the $0.13 is against under $0.60 an extra premium. you have to realize that they are somewhat in the many already. >> tony, your take? >> i completely agree with this tactical short about two weeks ago i took effect of this. and if you look at the u.s. dollar, it consists of the euro and japanese yen which makes 75% of the weight of the u.s. dollar index. what you have seen on the indexes higher high in price but the momentum did not confirm it and also implied volatilities and has not climbed that much and those are some of the signs i see of capitulation of europe and japanese yen to the downside and it could leave the pullback

in the dollar. if you look at the trade, i understand why mike is using the spread because the volatility of the september options but from my perspective i think of the tactical short and may not last long so i'm inclined to just buy the september $29 put may be slightly out of the put option and wait for quick pullback and long-term the dollar is heading higher >> we can go out to far, five years from now, is there such a thing as common currency. >> the origins of common currency was to prevent war. >> germany was who we were worried about. >> that's right but you get wars when you have fighting currency, so to speak. >> that's way to far out into

much fundamental stuff. i've got three hours usually. we have a big week of earnings on deck. we take a look at one healthcare name that could be regaining itself. >> i want to take a look at johnson & johnson, particularly in this type of market environment and i'm looking for stocks that show strength for opportunity and johnson & johnson meet the criteria. if we look at the chart, we recently had a breakout about $150 from the pandemic and ever since the stock has been in the slow trajectory up to the right in the uptrend. the more important chart to look at is the relative performance of johnson & johnson to the healthcare sector tour and this is not particularly good because since 2008, this is a stock that has consistently underperformed for the past 14 years but what we have seen over the past few weeks is the outperformance, a

breakout about the trendline and this is the first thing i like to look for going into an earnings announcement and next week the options market is implying slightly larger than normal move about 2.8% relative to the 2.2% we have seen. the trade structure takes into account this elevated volatility that we see in johnson and johnson and using a similar trade structure on you u.p. which is a slightly in the money debit and i'm going out to september and i'm buying the 175, 190 call spread pain about $5.88. this is only about 3.8% of the stock price and only requires the stock to rally 3% before the strategy is possible by the september expiration. >> we own johnson and johnson in the equity fund so i'm definitely on board and i also

like the structure using the implied volatility has been elevated. not as much but this is also a stock that moves a lot and it does make sense to sell it at a higher strike to offset some of the decay and you will see slightly above average premiums even that this one doesn't tend to move that sharply. >> i like the group and i think you get the offense and defense but what's remarkable is it does not have the growth rate and is not the exciting stock. >> still to come, has him stuck between supply shortages and rising rates. coco is going to show you a safer way to play dr horton headed into earnings next week and for everythingptns tis, check out the website and newsletter.

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welcome back. next week, a huge one for the housing trade as investors will be hoping for a turnaround went to your horton reports earnings. the homebuilder down more than 32% this year but the chart master, the beaten-down name is building a case. >> let's look at some charts. nothing is wrong and let's put some lines in. this is etf or homebuilders, itb. we've had very distinct drawdowns, down 39%.

covid, pledging pledging 55 in this one. drawdowns but at this point, we are already starting to bounce. peak to trough almost twice the s&p and we look at the here now. first, relative. put the lime in, what's been happening is the same thing as in so many other areas and it is going down but the relative performance is going straight up. that's what alpha is defined as and we look at one or two others , this is the etf. it is failed at trend, failed at trend and now ever so slightly moving above and has the elements of head and shoulders bottom. guess what looks identical creek a stock that will report earnings.

is that a minor head and shoulders bottom? it sure is. final chart, just to make a point, this is dhi compared to the etf and the correlation is 96%. one will do what the other will do and vice versa. >> what's the trade? >> one of the things we are seen is rates have stabilized a little bit and it's important to recognize the housing shortage has not gone away even that we have seen home prices rise sharply and we have seen rates rise sharply. in respect to dr horton, one of their strengths as they operate in affordable segment, lower priced homes compared to toll brothers and this is company that's been focusing on lowering the balance sheet. they have options on a lot of their potential land rather than going out and purchasing it. and they focus on roi that

normally stands for return investment but there referring to the return on inventory and they are managing that quite effectively. we often like to you use it going in earnings our calendar spreads and call spread risk reversals and we use a little bit of a spin on both of those. i was looking at a diagonal call spread, selling the august 65 and eddie strike calls, collecting three dollars for both of those together and using the proceeds to help with the purchase of slightly in the many september 72 and half call for just under six dollars. the idea is to capture the accelerated decay and the a.b. strike call that expired in august and willing to purchase the stock down at the 65 strike put. the idea is after earnings and after august, we will still

hold the september calls and could felt upside calls or adjust the trade further. >> you got to want it at 65 and if you don't, don't do it. >> that is correct. one of the things is you have to be comfortable purchasing the stock. even here you would effectively be buying it at a discount. >> what's your take? >> this is one of the industries that i find hard to justify taking long exposure with the macro headwinds. if you look at the chart, the fact that dhr has not gotten above 77 level which were close to is really the concern. the outperformance is there but i would like to see the stock get about the 77 level. i think if you look at the macro headwinds and the fact that we have four months of

rising housing inventory with rising costs and i think this is really where despite the fact that dh horton is the leader in terms of space in eps growth and margin, still trading at 4.3 times next year zero earning tells me their concern for most investors and the valuation, the trade structure that mike is using, i do like. he is taking advantage of the elevated volatility by selling the august string hold and you're able to offset the cost of buying a september call and you will be able to see a game going into the earnings announcement and potentially if we say that breakout above 77%. and it gives you the complexity. the trade structure i quite like even though i'm not keen on the industry at the moment. >> carter?

final thought? >> i think quite bearish on housing and the rates were pooling and i think you will be okay. >> i think housing is one of those things that i hate to say it's different, i don't know about an economy at 3.6% unemployment and two straight negative gdp. there's no supply housing and if you put up a house for sale, lowball it because people will come in and you track them and you will get the more for the house. >> it seems fairly secure and steady. we sold off if you look at the site industry group.

>> i'm trying to figure out if we start with the stronger-than- expected economy and the fed continues to raise rates, is a good or bad that it was strong that unemployment was so low? is a good or bad? do they have to do more work. >> you wanted to go off or don't you. >> if someone buys dr horton and you have the call. >> up next, we take a look back on what turned out to be a match made in heaven.

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acquisition. some people think he could go months or even longer. last month he laid out a way to play match group. >> we are in the clear trend and we have seen a bit of a rally even the upper bound of the channel on the timing perspective. going out to the july 2, 22nd weekly expiration and i'm selling 77 and collecting $3.84 and it will allow me to profit whether the directional view is lower or the stock simply stays where it is. >> with the match hitting an all-time low, today the trade is firmly in the green. what to do now? >> we sold it for $3.84 and is trading at one penny so if he

had already taken profits on it, great. but if you have not, i think you should let it expire. you might not even look be able to get builds and let it expire you can collect the full max profit. >> i'm not a smart man but is that like buying it for penny and selling it for 384? >> sort of. >> by low and sell high. >> up next, your tweets and the final call. i've got this covered.

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>> that was on my phone. >> the first one is for tony. how did you close the netflix trade? >> when we sold the put spread i set up the stock is trading below 190 which is a short strike, i'm okay with taking delivery and owning the stock. it looked just under 190 as of today which was the expiration date. this is one where i own the stock and am looking to build the position. if you don't already have a position you can sell another put spread going into earnings to try to acquire more stock. >> next week meta added to the value index is like the kind of thing that would happen near the bottom. do they like meta and do they like the call spread to express the view? >> this company is as cheap as

it has ever been relative to earnings. use in a call spread might be a good way to do it. the short premiums are particularly steep soap maybe even make it a diagonal. >> started looking at j.p. morgan on the earnings dip and it hit a fresh 52-week low at a pe of just under eight. what you think of an entry into j.p. morgan now, recession is a key factor but i think it has strength. >> leaps buy you time and the stock closed at 113 january 2024-105 leaps up five dollars. if you think j.p. morgan will be 18% higher in the next 18 months then the money is good. >> if you want to belong housing and fade the strength for the u.s. dollar. >> seeking strength in healthcare for the call vertical

for johnson & johnson. >> i think the dollars overdone. >> thanks, guys and happy friday. have a great weekend and that does it. i have been running in dieting. the camera adds 10 pounds a friday rally on wall street. i'm courtney reagan. the next 60 minutes will be filled with stock picks and investing insight. we begin with the big market rally. the dow, that was a big winner gaining 658 points, up more than 2%. the s&p 500 up.9