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Proactive Spreads, September 21st, 2018 – JWN, CAT

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The month-long correction has clearly resolved higher. The correction was incredibly benign, there was no follow-through, and it was very rotational.

We’re probably due for a pull in here. The market is above its upper bollinger band for two days in a row. AGAIN – that’s not calling for the end of western capitalism… just that with our trade setups being primarily pullback setups, we will most likely need the market to “exhale” to get into new positions.

Trade #1: JWN

After a GREAT earnings report and reaction, the stock is getting hit hard. I like a test of the recent range support as an entry.

Trade Setup

Expected Price: 60.58

Sell to Open JWN Oct 57.50/55 Put Spread

Tier 1: Enter at 0.40, Exit at 0.15

Tier 2: Enter at 0.65, Exit at 0.30

Tier 3: Enter at 0.80, Exit at 0.55

Trade #2: CAT

CAT bottomed on that test sub 130, and has since seen an easy 25 point move higher. It’s overbought, and honestly if it jams into 160 you can probably get a good short play there.

The easier play is to look for the gap fill to act as support.

Trade Setup

Expected Price: 152.77

Sell to Open CAT Nov 140/135 Put Spread

Tier 1: Enter at 0.79, Exit at 0.29

Tier 2: Enter at 1.09, Exit at 0.59

Tier 3: Enter at 1.39, Exit at 0.89

 

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