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Proactive Spreads, March 23rd 2017 – GOOGL, WYNN

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Well, we finally got it.

A little volatility coming back into the markets.

A few days ago, the S&P sold off over 1%, finally ending that streak. It was well over 100 days.

And from just one down day, it seems that everyone is getting too nervous, too quickly. The media is grasping at straws trying to find a “reason” for the selloff… other than it was more sellers than buyers, and pullbacks happen in the market. Yes, stop the presses… stocks can go up AND down.

This is not panic worthy. In fact, we can still drop even further and still be in a healthy bull market.

We’re just about 3% off the recent highs. A 5% pullback would have us retest about 2300, which is my guess as to where we land.

The ideal setup would be one where the early dip buyers are punished and forced to stop out of their trades… and into that stop run is where the best reward is relative to the risk you take. Look for the “obvious” support levels that traders are buying into and start buying the dip once those early support buyers get run over.

Trade #1: GOOGL

GOOGL has seen, so far, one ugly day. Of course this could just be a one off event and it skyrockets to 900, but just normal probabilities suggest otherwise.

Key initial support is right around 842. I don’t think this is the best support to buy into. Instead, you want to look for the stop run under that level and a push to the next support starting around 820. That is rising trendline support, pivot support, and statistical support.

A 1 standard deviation for 10 day returns is around -6%, and the most recent pivots are about 4-5%.

A 5% pullback off recent highs is about 830, so that’s where we want to start initiating a position.

Trade Setup

Expected Price: 830

Sell to Open GOOGL May 780/775 Put Spread @0.75

Tier 1: Enter at 0.75, Exit at 0.25

Tier 2: Enter at 1.05, Exit at 0.75

Tier 3: Enter at 1.35, Exit at 1.05

Trade #2: WYNN

Strongest stock in a weak market. I expect this to continue to rally.

Trade Setup

Expected Price: 113

Sell to Open WYNN May 100/95 Put Spread

Tier 1: Enter at 0.90, Close at 0.30

Tier 2: Enter at 1.20, Close at 0.90

Tier 3: Enter at 1.50, Close at 1.20

Disclaimer

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