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Proactive Spreads, October 8th, 2018 – LULU, UAL, MA

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We are finally seeing a good sized pullback. The S&P is holding up strong, all things considered.

There has been a steady bid in large cap tech and other “liquidity” stocks, where it’s just easy to park money in these names because they’re still going up. That’s a very basic and incomplete idea, but essentially we’re finally seeing a hard drop in FANG stocks.

That’s led to a swift correction in the Nasdaq.

Fine. Market’s have needed it.

Now, it seems, it’s the end of Western capitalism. From my view, investors are getting panicky over normal fall volatility.

We’ve already got a handful of positions working, let’s see if we can pick up a few more. I’m focused on relative strength, because I don’t feel like being a hero trying to knifecatch WYNN.

Trade #1: LULU

Held up well all month after earnings, now it has cleared under its range lows… but it’s reversing here. I expect a failed breakdown pattern to setup here.

Trade Setup

Expected Price: 150.19

Sell to Open LULU Nov 135/130 Put Spread

Tier 1: Enter at 0.57, Exit at 0.07

Tier 2: Enter at 0.87, Exit at 0.37

Tier 3: Enter at 1.17, Exit at 0.67

Trade #2: UAL

The stock is pulling in to test the previous range from July. It’s a pullback to breakout pattern. Earnings are up so we will only do two tiers.

Trade Setup

Expected Price: 83.50

Sell to Open UAL Nov 75/70 Put Spread

Tier 1: Enter at 0.51, Exit at 0.01

Tier 2: Enter at 0.81, Exit at 0.31

Tier 3: Enter at 1.11, Exit at 0.61

Trade #3: MA

Statistically oversold, I’m expecting lows to get put in here soon and a new range to get established.

Trade Setup

Expected Price: 206.20

Sell to Open MA Nov 190/185 Put Spread

Tier 1: Enter at 0.66, Exit at 0.16

Tier 2: Enter at 0.96, Exit at 0.46

Tier 3: Enter at 1.26, Exit at 0.76

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