Proactive Spreads, May 17th, 2018

Markets have consolidated their gains. The Russell 2000 is breaking to new all time highs, and it appears as though everything is running on all cylinders. Unless there’s an introduction of a new narrative in the market, we should expect a run to the other end of the trading range for the S&P 500. That’s about 2800.

If the market becomes a runaway train with no pullbacks, then very few of our trade setups are going to trigger. That’s because selling spreads works best with pullbacks, so no pullbacks… no trades. I’d prefer a pull in some of the relative strength stocks to get involved in new trades.

Trade #1: NKE

Great breakout. Retail stocks have been hot over the past few months while the overall market traded like garbage. I want to see a test of the middle of yesterday’s breakout bar for a fresh entry.

Trade Setup

Expected Price: 70.53

Sell to Open NKE Jul 65/62.50 Put Spread

Tier 1: Enter at 0.35, Exit at 0.10

Tier 2: Enter at 0.50, Exit at 0.25

Tier 3: Enter at 0.65, Exit at 0.40

Trade #2: MA

Same kind of idea. Look for a 50% retrace of the most recent rally to get involved. There are several key moving averages catching up to that price level as well.

Trade Setup

Expected Price: 189

Sell to Open MA Jul 180/175 Put Spread

Tier 1: Enter at 0.90, Exit at 0.40

Tier 2: Enter at 1.20, Exit at 0.70

Tier 3: Enter at 1.50, Exit at 1.00

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Proactive Spreads, May 17th, 2018 – NKE, MA

Trade #2: MA

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