The S&P is headed to the 2800 magnet level. And quickly. We're not seeing the volatility like we have over the past few months, and it's much more "trendy" action since the failed breakdown under 2700.
I do expect the market to have a pause at 2800. Traders will start to look for a deeper pullback, but it won't come and we'll trade sideways. Once 2800 breaks, then the January breakdown highs are the next target.
The bullish thesis is invalidated if the market loses 2744 (May highs) and actually holds under it. Until that happens, expect stock pullbacks to be shallow and sideways.
Trade #1: HD
After the clearance of the may highs, the stock has been off like a rocket. I think it will pull in here... if it doesn't and starts a hard run to 205 without a pullback, we'd look at bear call spreads, yet right now just expecting a retest of some of the short term levels will be a good place to start getting long.
Trade Setup
Expected Price: 195.47
Sell to Open HD Jul 190/185 Put Spread
Tier 1: Enter at 1.03, Exit at 0.33
Tier 2: Enter at 1.33, Exit at 0.83
No Tier 3, May Need to Roll
Trade #2: GOOGL
GOOGL is putting in the kind of price action we're expecting in HD... strong move, hard pullback, but the recent highs will probably act as a magnet. An entry here gives us decent risk/reward.
Trade Setup
Expected Price: 1132
Sell to Open GOOGL Jul 1060/1055 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: COST
The stock is hitting new highs after earnings, so expect Post Earnings Announcement Drift. We're using Aug options because no earnings are in that cycle.
Trade Setup
Expected Price: 202.69
Sell to Open COST Aug 190/185 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