4 Trade Ideas for Discover Financial Services: Bonus Idea

• Posted by Greg Harmon
• on August 21st, 2023

Here is your Bonus Idea with links to the full Top Ten:

Discover Financial Services, $DFS, comes into the week starting higher after a gap down. It moved back into the Bollinger Bands® Friday as it got a lift. The RSI is moving back up out of oversold territory and the MACD is starting to level. The gap above leaves some room to run higher. There is resistance at 93.50 and 95 then 96.50 and 98.50 before 101 and 102.50. Support lower comes at 91.50 and 90. Short interest is low at 1.9%. The stock pays a dividend with an annual yield of 3.00% and starts trading ex-dividend on August 23rd.

The company is expected to report earnings next on October 23rd. The September options chain shows biggest open interest at the 90 put strike and then at the 95 and 100 call strikes. In the October chain open interest is biggest at the 95 put and spread from 90 to 125 on the call side. Finally, the January chain shows the biggest open interest at the 110 and then 87.50 put strikes. On the call side it is biggest at the 110 strike.

Discover Financial Services, Ticker: $DFS

Trade Idea 1: Buy the stock on a move over 93.50 with a stop at 90.

Trade Idea 2: Buy the stock on a move over 93.50 and add an October 90/85 Put Spread ($1.65) while selling the October 105 Calls (90 cents).

Trade Idea 3: Buy the September/October 100 Call Calendar ($1.50) while selling the October 80 Put (95 cents).

Trade Idea 4: Buy the January 85/95/110 Call Spread Risk Reversal ($1.55).

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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which with the August options expiration in the books, equity markets continue to be under pressure heading into the coming week’s FOMC Jackson Hole Meeting.

Elsewhere look for Gold to continue its pullback while Crude Oil pulls back in consolidation. The US Dollar Index continues to drift to the upside while US Treasuries trend lower. The Shanghai Composite and Emerging Markets look to continue to pullback in consolidation ranges.

The Volatility Index looks to remain low but with upside risk making the path harder for equity markets to the upside. The charts of the SPY and QQQ still look strong on the longer timeframe. On the shorter timeframe the QQQ has broken the June low and the SPY approaching it, turning both from short term down moves to trending lower. The IWM continues in a broad consolidation that started April 2022. Use this information as you prepare for the coming week and trad’em well.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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