Stocks have gone parabolic. The rate of change has increased three times in the past 6 months.
A combination of a news vacuum, predictable central banks, tax reform, and sentiment have all helped to keep the trend higher.
Yet this recent move for the start of the year... it's something else. We're seeing an absolute meltup in industrial stocks. Names like BA, CAT, and UTX are going bananas on the "inflation" narrative.
And many other stocks are getting jammed higher into their earnings events.
What I am expecting here is a rotational, time-based correction where the inflation narrative gets a little overdone... investors start focusing on the company earnings instead of the macro big picture.
A sideways correction, coupled with rotation out of some of the "hot" areas into the sectors that haven't moved much... like Semiconductors,
Trade #1: NVDA
Looking for a pull into the rising 20 day moving average.
Trade Setup
Expected Price: 210
Sell to Open NVDA Mar 175/170 Put Spread
Tier 1: Enter 0.65, Exit at 0.15
Tier 2: Enter at 0.95, Exit at 0.45
Tier 3: Enter at 1.25, Exit at 0.75
Trade #2: FB
Facebook got hit on them changing their newsfeed algorithm. I'm not sure why that matters because advertisers are still going to line up and pay a good premium here...
The stock broke down hard on volume. It's a rule of mine to never fade the first move. Instead I want to look for that second push lower for the best risk/reward opportunity.
Trade Setup
Target Price: 173
Sell to Open FB Mar 155/150 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