Markets are still in rally mode, although with the most recent push it made sense for a correction.
And just like the rest of the year, the correction has come over time rather than price. Sideways action that’s rotational.
On top of that, we’ve got earnings season, so expect individual stocks to continue to diverge.
Here’s the thing… and let’s be straight up here.
The lack of volatility in the broad indexes doesn’t feel natural. We’re seeing all time lows on the VIX, and the tightest trading ranges of all time. I’ve got some theories as to why this is happening, but just because we’ve seen tight ranges doesn’t mean we must expect a market crash next week.
We’ll continue to look for good risk/reward in individual stocks, pick our spots, and place the trades.
Trade #1: SHOP
SHOP got hit hard… not on earnings, but on a report from Citron, a noted short seller.
This feels like more of a technical breakdown and stop run… any bad news into earnings will most likely get priced in.
Trade Setup
Expected Price: 93
Sell to Open SHOP Nov 80/75 Put Spread
Tier 1: Enter at 0.90, Close at 0.20
Tier 2: Enter at 1.10, Close at 0.40
NO TIER 3 – Will wait post earnings if we need to roll anything.
Trade #2: C
Citigroup is fading hard after earnings. Look for the second extension to the downside to sell spreads into it. I’m watching previous resistance and a rising 50 day moving average at 70/share.
Trade Setup
Expected Price: 70
Sell to Open C Dec 65/62.50 Put Spread
Tier 1: Enter at 0.34, Exit at 0.10
Tier 2: Enter at 0.50, Exit at 0.34
Tier 3: Enter at 0.65, Exit at 0.50