3 Trades Built for an Unpredictable Market

The market is facing a tougher backdrop right now. The 10-year Treasury yield is near 5%, oil is above $100 a barrel, inflation remains a concern, and investors are weighing the possibility of another rate hike.

That doesn’t mean every stock is bearish, but it does mean traders may need to become more selective.

During my latest appearance on Schwab Network’s The Big 3, I broke down CF Industries (CF), Lululemon (LULU), and UPS. Each stock is telling a different story, which is why I’m approaching each potential trade differently.

CF Industries caught my attention because of the current fertilizer supply environment. A meaningful portion of globally traded ammonia and urea moves through the Strait of Hormuz, so disruptions in the region can impact supply and pricing.

CF’s recent numbers were also interesting. Q2 sales increased to approximately $2.2 billion, up about 17% year over year, even though sales volume declined around 15%. The company sold less product but generated more revenue because of stronger pricing.

Technically, I see potentially bullish patterns developing, including an inverse head and shoulders and something resembling a cup and handle. The major area to watch is resistance around $140.

For a bullish trade, I discussed a January 15, 2027 bull call spread:

My “I’m wrong” level would be a break below the 20-day moving average, which has been acting as support.

Lululemon presents a much different picture.

The company is operating in a premium consumer category while higher food, fuel, and other costs are putting pressure on discretionary spending. Competition in the athleisure market has also become stronger.

The recent numbers reflect some of those challenges. Q2 revenue declined approximately 4%, comparable sales fell 9%, Americas revenue declined 8%, and comparable sales in the Americas fell 12%.

The challenge from a trading perspective is that LULU has already fallen significantly. Rather than simply buying puts and requiring another major drop, I discussed using a bear call spread built around the idea that the stock may have difficulty making a large move higher.

The potential November 2026 setup was:

With LULU near $100 at the time, the short strike provided roughly $20 of upside room. A break above the 50-day moving average would cause me to reconsider the bearish thesis.

UPS may be the most interesting setup because management has sounded optimistic while the stock chart continues to raise questions.

Q2 revenue increased 7.6% year over year, the company raised forward guidance, and management indicated that restructuring was largely behind them. But UPS is also winding down its relationship with Amazon while Amazon continues expanding its own delivery capabilities.

That leaves an important question: Where does the next major source of package growth come from?

Higher diesel prices add another challenge for a company that relies heavily on trucks and airplanes.

Technically, UPS had broken below its 200-day moving average, while the RSI was approaching oversold territory. The volume profile also showed a potential support area near $96.45.

Rather than requiring UPS to make another major move lower, I discussed an October 16, 2026 bear call spread:

With UPS around $100, the $105 short strike provided roughly a $5 cushion. A move back above the 200-day moving average would challenge the trade thesis.

These three stocks are a good example of why I don’t believe traders should start with the options strategy.

Start with the stock.

What is happening with the business? What does the chart look like? Where are support and resistance? And what price action would tell you that your thesis is no longer working?

CF has a bullish setup but still needs to deal with resistance. LULU has weak fundamentals, but the stock has already experienced a major decline. UPS has improving company numbers but a chart that continues to show weakness.

Those differences matter.

Options give traders the flexibility to structure a position around the setup rather than relying on a simple prediction that a stock must go straight up or straight down.

The goal is to gather enough evidence to create a plan before putting money at risk.

Understand the company, study the chart, identify the important technical levels, choose a strategy that fits the setup, and know where you’ll admit that the original thesis is wrong.

That process won’t make every trade a winner.

But it can help you make more educated trading decisions and manage your risk with greater discipline.

Disclaimer: The information provided in this article is for educational and informational purposes only and should not be considered financial, investment, or trading advice. Investing and trading involve risk, including the possible loss of principal. Past performance does not guarantee future results. Always do your own research and consider your personal financial situation, risk tolerance, and investment objectives before making any financial decisions.