One shakeout was all it took.
About a week ago, the market put in a 5 standard deviation move to the downside.
A volatility pivot.
Normally, when we see this, we tend to see a retest of the lows on less momentum and volume.
This time we didn’t. In fact, it was just a short time until we hit new highs… without any kind of pullback at all.
By all accounts, bullish action. So the gameplan is to look for rotation in relative strength stocks that have not yet moved.
Trade #1: BIDU
The longer term setup for this stock looks great. It has been consolidating for well over a year, and continues to show strength in the spite of some shakeouts. I’m looking for any kind of retracement for an entry point.
Trade Setup
Expected Price: 187.50
Sell to Open BIDU Jul 175/170 Put Spread
Tier 1: Enter at 0.90, Exit at 0.30
Tier 2: Enter at 1.20, Exit at 0.90
Tier 3: Enter at 1.50, Exit at 1.20
Trade #2: AAPL
AAPL hasn’t seen new highs over the past 2 weeks.
Why?
Because much of the “hot money” is chasing AMZN and GOOGL on their way to 1,000. It’s not a fundamentals issue, it’s a market structure problem. As AMZN and GOOGL run into 1,000, expect some of that money to rotate back into other large cap tech.
Now here’s the thing. At current prices, you’d probably be fine getting long the stock. But I’m sitting here and pricing out the spreads, and quite frankly the risk/reward isn’t there. We’re forced to wait for better prices… if they don’t come then we have to move on.
Trade Setup
Expected Price: 146
Sell to Open AAPL Jul 135/130 Put Spread
Tier 1: Enter at 0.60, Exit at 0.20
Tier 2: Enter at 0.90, Exit at 0.60
Tier 3: Enter at 1.20, Exit at 0.90
Trade #3: TSLA
This is a breakout setup, and there’s enough premium available to enter at current prices… we’ll simply run a stop and not add a third tier.
Trade Setup
Expected Price: 325
Sell to Open TSLA Jul 285/280 Put Spread
Tier 1: Enter at 0.90, Exit at 0.30
Tier 2: Enter at 1.40, Exit at 0.90
No Tier 3
Stop out on a close under 285