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Proactive Spreads, January 11th, 2018 - BA, COST

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The meltup continues. After a very, very strong open to the year and a small pullback the markets are hitting new all time highs.

We're running hot into earnings season. There are a handful of stocks that are having perfection priced in, and I think those are reasonable fades at this point. Watch the price action in JPM after earnings to give us a clue as to how "sticky" this price action will be.

Again, I'm expecting a near term correction via sideways, rotational price action.

Trade #1: BA

Boeing is up 10% over a 5 day period. This is the largest move we've seen since the middle of last year... and before that we really haven't seen this kind of move without an earnings catalyst.

My bet here is that the runup is statistically overdone and the stock momentum will slow as we head into earnings.

Trade Setup

Expected Price: 326

Sell to Open BA Mar 360/370 Bear Call Spread

Tier 1: Enter at 1.05, Exit at 0.10

Tier 2: Enter at 2.00, Exit at 1.00

No Tier 3 Until after earnings

Trade #2: COST

The stock is topping out here after a failed move higher on earnings. So far, 185 held but if it is lost again, we're headed towards the gap fill area at 180. I want to scale into put spreads if we run lower.

Trade Setup

Expected Price: 183

Sell to Open COST Mar 170/165 Put Spread

Tier 1: Enter at 0.70, Exit at 0.20

Tier 2: Enter at 1.00, Exit at 0.50

Tier 3: Enter at 1.30, Exit at 0.80

 

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