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Proactive Spreads, March 19th, 2018 - CRM, FB, NFLX

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We're starting today off with a look at the Nasdaq 100 index, which was hardest hit today on the back of bad Facebook news.

There has been technical deterioration in the market, but from my view it's not that we've gone from an uptrend to a downtrend-- we've moved from an uptrend to a distribution phase of the market.

Distribution is marked by larger selloff days, more volume traded, and much more reversion to the mean.

In other words, rangebound priceaction.

Given the breadth thrust we saw two weeks ago, it does make sense for some reversion to come in... yet this is not the exact kind of price action you want to see if you expect the market to rip absolutely higher.

I'm still expecting higher market prices, or at least not a retest of the low. My strategy for spread sales here is to enter into put spread sales onto pullbacks of stocks that haven't seen much technical deterioration... and if I do want to "buy the blood" I have to make sure that the stocks I play are very liquid, name-brand stocks.

Trade #1: CRM

Looking for a pullback to its 20 day moving average.

Trade Setup

Expected Price: 121

Sell to Open CRM Apr 114/111 Put Spread

Tier 1: Enter at 0.39, Exit at 0.09

Tier 2: Enter at 0.59, Exit at 0.29

Tier 3: Enter at 0.79, Exit at 0.49

Trade #2: FB

News catalyst play... I never fade the first day. Instead I'm looking for a break underneath the lows and a fast move to 165. Odds are selling will slow as we head into earnings.

Trade Setup

Expected Price: 165

Sell to Open FB Apr 150/145 Put Spread

Tier 1: Enter at 0.60, Exit at 0.10

Tier 2: Enter at 0.90, Exit at 0.40

Tier 3: Enter at 1.20, Exit at 0.70

Trade #3: NFLX

 

You'd probably be OK selling some spreads here, but I want to look for a pull into 290, given how fast the stock has risen over the past few months. 290 is the previous pivot level from late January.

Trade Setup

Expected Price: 290

Sell to Open NFLX Apr 250/245 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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