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Proactive Spreads, July 10th 2017 – BABA, COST

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While there has been weakness in the market, there is a distinct lack of downside followthrough. This has happened plenty of times this year, so I’m not surprised.

Volatility has opened up a bit and I expect that to continue, but keep this in mind. All corrections this year have been sideways and rotational in nature. If we make it through to mid-August without any kind of selling, the “FOMO” crowd will come back in the fall and jam this market even higher.

Trade #1: BABA

This is a trendfollowing and relative strength setup. While the rest of tech has been hit, the stock remains incredibly strong and I expect this to continue its trend.

Trade Setup

Expected Price: 142.43

Sell to Open BABA 130/125 Put Spread

Tier 1: Enter at 0.80, Close at 0.30

Tier 2: Enter at 1.10, Close at 0.80

Tier 3: Enter at 1.40, Close at 1.10

 Trade #2: COST

This is a vol pivot lower low pattern. The stock got hit hard on news that Amazon is acquiring Whole Foods. After a brief consolidation, the stock saw continued selling and hit a new lower low. Odds favor momentum and selling to slow in the near term.

We’re widening our tier structure to 0.40 instead of 0.30 to account for increased volatility.

Trade Setup

Expected Price: 154.11

Sell To Open COST Aug 145/140 Put Spread

Tier 1: Enter at 0.62, Exit at 0.12

Tier 2: Enter at 1.02, Exit at 0.62

Tier 3: Enter at 1.42, Exit at 1.02

Disclaimer

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