After the exhaustion gap at the beginning of March, the markets have settled back into a well defined range. We have a failed breakdown at 2325 and clear resistance at 2400.
The main point of control I’m watching is the 2350 area– the longer the markets hold above this, the higher the odds we see continuation.
Remember, this is a market of stocks, and certain sectors are running a little better than others. The parabolic spike higher in AMZN has led the Nasdaq 100 to hit new highs. On the downside, retail stocks are still hot garbage, and that’s one trade setup we’ll look for today.
Trade #1: LULU
LULU had a bad earnings report.
Down 20% bad.
Now when we see moves like this, I’ll never fade the first move. Instead, I’ll be looking for early dip buyers to get punished and stopped out. We’ve got the $50 level as a psychological support, and just underneath that is a lot of stops.
Look for that stop run and more weakness to sell spreads into.
Expected Price: 49
Sell to Open LULU May 45/42.50 Put Spread
Tier 1: Open at 0.30, Close at 0.10
Tier 2: Open at 0.45, Close at 0.30
Tier 3: Open at 0.60, close at 0.45
Trade #2: V
Visa put in a significant reversal pattern on March 20th– probing to new all time highs but finishing on the lows.
Look for a second low to get put in (again, to punish the first dip buyers) and then sell put spreads.
Expected Price: 87
Sell To Open V May 82.50/80 Put Spread
Tier 1: Enter at 0.37, Exit at 0.10
Tier 2: Enter at 0.52, Exit at 0.37
Tier 3: Enter at 0.67, Exit at 0.52