It’s the Easter long weekend.
But before the egg hunting begins this Sunday, I’m hunting for setups.
The State Street SPDR S&P 500 ETF Trust (NYSEARCA: SPY) dropped 9% in one month. The VIX spiked above 30.
Market-wide selloffs like that are indiscriminate. When fear takes over, undeserving stocks go down with the rest.
That creates pockets of opportunity that don’t exist in normal markets. Quality names trading at irrational prices simply because the entire market tanked.
The Iran war volatility (combined with end-of-quarter rebalancing) knocked some profitable companies with strong earnings to the ground for reasons that have nothing to do with their actual business performance.
They got sold off alongside defense contractors and oil stocks directly affected by the conflict.
Now those quality names are sitting at prices that won’t last long in a true upside reversal (which seems to be in motion)…
But you don’t have to hunt for Easter eggs.
I already found three for you…
Easter Egg #1: MSFT: May 1 $405 Calls
Microsoft Corp. (NASDAQ: MSFT) is down 26% year-to-date, the hardest hit of all the Magnificent Seven, with its RSI now below 30. The sell narrative is AI disruption eating into Microsoft’s relevance. But Azure is still growing, Copilot is live across the entire product suite, and the dividend is intact. You’re getting one of the most profitable businesses ever built at a valuation it hasn’t seen in years. At some point, the market has to reconcile that gap.
Support is sitting at $356 … the exact same level MSFT bounced from last April. One year later, here it is bouncing at the same spot again. Set your stop below $356 and let the 36,000 contracts of open interest tell you where institutional money is positioned.
Easter Egg #2: ORCL: April 17 $150 Calls
Oracle Corp. (NYSE: ORCL) has been absolutely destroyed over the past few months on rising debt concerns ($162 billion and counting). But on the flip side: the company has a backlog of $553 billion and cloud infrastructure revenue up 84% year-over-year.
The $138 level has held as support for two months. That gives you a clear line in the sand, where you can set a tight stop right below $138. If it holds, the trade is pure upside.
Easter Egg #3: HOOD June 18 $90 Calls
Robinhood Markets Inc. (NASDAQ: HOOD) is down 34% year-to-date. But it’s got record full-year revenue of $4.5 billion, options revenue up 41%, and a $1.5 billion share buyback announced last week. The analyst consensus price target sits near $122, almost 100% above where it trades today. When a company buys back its own stock at a 50% discount to what analysts think it’s worth, that’s a very bullish sign.
This is further longer dated (and further out of the money) than I’d normally recommend. But with such strong support sitting at $66, you can set a super-tight stop loss there. That defined downside risk justifies the longer expiration. You can hold these contracts as long as the stock stays above $66. Just keep time decay in mind if this doesn’t move within, say, six weeks.
Could State Street SPDR S&P 500 ETF Trust (NYSEARCA: SPY) drag these lower before they bounce? Yes, and I won’t pretend otherwise.
But more likely: these stocks, down 26-34% on intact fundamentals, have already absorbed most of the selling. The people who wanted out are already out.
Be ready on Tuesday.
Happy Easter,
Ben Sturgill
*Past performance does not indicate future results
