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Proactive Spreads, October 26th, 2017 – IBB, GS

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We’re finally starting to see some two-side action in this market. After a month-long seller’s strike, markets are catching a little heat to the downside.

I’ve still got 2540 as my “failed breakout” indicator that would tell us short term weakness is setting up. And the recent highs, well, odds are we’ll just grind higher into that anyways.

Sector rotation is definitely coming into play. Biotech is getting walloped from some bad earnings events, drugstores getting hit from AMZN coming into their space, and a handful of large-cap stock earnings are keeping the whole ship afloat.

Trade #1: IBB

IBB is the biotech sector ETF. It’s seeing a pretty healthy gap down… CELG had a nasty earnings event, AMGN also gapped down into earnings, and a handful of other names are starting to see weakness.

So we’re oversold. Imagine that… a market that actually got oversold!

We’re going to avoid the single-stock risk and just play the sector ETF.

Trade Setup

Expected Price: 313

Sell to Open IBB Dec 285/280 Put Spread

Tier 1: Enter at 0.60, Exit at 0.10

Tier 2: Enter at 0.90, Exit at 0.30

Tier 3: Enter at 1.20, Exit at 0.60

Trade #2: GS

Simple setup– we’re looking for a pb2bo (pullback to breakout) at the previous range high.

Trade Setup

Expected Price: 233

Sell to Open GS Dec 220/215 Put Spread

Tier 1: Enter at 0.70, Exit at 0.20

Tier 2: Enter at 1.00, Exit at 0.40

Tier 3: Enter at 1.30, Exit at 0.70

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