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Proactive Spreads, May 18th 2017 – AAPL, AMZN, HD

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FINALLY.

Vol is picking up.

The markets had what we call a “volatility pivot.”

See, when vol increases it’s rarely a gradual thing… it kinda comes at you all at once.

The second thing to know is that this is rarely a one-off event. We will probably see a lower low pattern get knocked out.

Now a lot of people are going to try to blame US politics on this selloff… but that’s rubbish. It was a combination of VIX expiration, historically low vol, too many people chasing the breakout above 2400, and the lack of good earnings reports. You can read fuller explanations here.

There’s also some premarket news of Brazilian election shenanigans, and $EWZ is down about 18%. When it rains, it pours.

The average pullback in this bull market is right around 5%. That’s 225 on the SPY and major support.

If we manage to hit those levels, investors will view it as end-of-world kind of trading, but understand that we haven’t had a proper pullback in quite a while so it’s possible.

Trade #1: AAPL

AAPL taking a hard round trip here… all the large cap tech stocks which held this market up are seeing similar price action. I’m looking for a test of that rising trendline, previous resistance, and the rising 50 day moving average.

Trade Setup

Target Price: 146

Sell To Open AAPL Jul 135/130 Put Spread

Tier 1: Open at 0.64, Close at 0.14

Tier 2: Open at 0.95, Close at 0.65

Tier 3: Open at 1.25, Close at 0.95

Trade #2: AMZN

Similar kind of setup here. Looking for a test of the trendline, rising 50 day moving average, and a pull into the previous range area. I will bias this one a little higher because AMZN will probably find buyers before that, given it’s the strongest stock in the market right now.

Trade Setup

Target Price: 910

Sell To Open AMZN Jul 830/825 Put Spread

Tier 1: Open at 0.70, Close at 0.20

Tier 2: Open at 1.00, Close at 0.70

Tier 3: Open at 1.30, Close at 1.00

Trade #3: HD

Same setup as the previous two. Test of 50 day moving average and previous range… and there’s probably a trendline there but not shown.

Trade Setup

Target Price 151

Sell to Open HD 140/135 Put Spread 

Tier 1: Open at 0.65, Close at 0.15

Tier 2: Open at 0.95, Close at 0.65

Tier 3: Open at 1.25, Close at 0.95

Disclaimer

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