Today’s price action is confirming that, so far, the most recent move lower was simply a shakeout.
Think about the original trade thesis we’ve been working with for months– the market is working through a large, multi-month range.
As it stands, the upper end of the range is 2800, and the lower is around 2600.
If the S&P 500 can confirm a move above 2800, then we should expect new highs. This is already being confirmed in smallcaps, while the Dow is a serious laggard due to trade war risk.
(Speaking of the Dow, the level I’m watching for upside confirmation is around 25,400.)
My bias still remains higher, but I don’t think it will be the same kind of price action we saw in 2017. More volatility, more back and forth.
Trade #1: NKE
Great move on earnings, the stock has faded to nearly half of the gap higher. I’m expecting these levels to hold and the stock to make a rn back to 80.
Expected Price: 77.11
Sell to Open NKE Aug 72.50/70 Put Spread
Tier 1: Enter at 0.24, Exit at 0.04
Tier 2: Enter at 0.40, Exit at 0.10
No Tier 3, May Need To Roll to Sep.
Trade #2: COP
Conoco is the strongest large cap oil name. I’m expecting continuation higher into its earnings event.
Expected Price: 70.77
Sell to Open COP Aug 65/62.50 Put Spread
Tier 1: Enter at 0.31, Exit at 0.06
Tier 2: Enter at 0.50, Exit at 0.25
No Tier 3 – Earnings
Trade #3: RUT
The Russell 2000 Index is up 3.5% over the past 5 days. Starting to get a little overbought here.
I think trying to short into obvious resistance is too obvious and too crowded. Instead, I want to see an extension above the most recent levels as the early shorts get smoked.
Expected Price: 1730
Sell to Open RUT Aug 1790/1795 Call Spread
Tier 1: Enter at 0.75, Exit at 0.25
Tier 2: Enter at 1.05, Exit at 0.55
Tier 3: Enter at 1.35, Exit at 0.85