Markets continue to chop right around highs. Several very large companies report earnings, and if they move the market will respond in kind.
(Looking at you, Apple.)
The all time highs are being closely followed by all market participants. I’m in the camp that for the market to be constructive, you need a pullback from highs before a breakout. If the market jams to 3000 without any kind of selling pressure, then I’ll start looking at aggressive short trades.
Trade #1: DIS
DIS had a massive gap higher on news that they are rolling out their streaming service. This is on the back of a massive, multi-year range that the stock has been trading in.
When a stock gaps to new all time highs with a fundamental catalyst behind it, the odds of trend continuation are very high and that’s what I want to play.
Expected Price: 131.50
Sell to Open DIS 21Jun19 125/120 Put Spread
Tier 1: Enter at 0.82, Exit at 0.12
Tier 2: Enter at 1.12, Exit at 0.42
No Tier 3 (Earnings)
Trade #2: UNP
Very similar theme here– the stock is gapping higher to new highs on the back of fundamental news (earnings). This has high odds of trend continuation.
Expected Price: 177.72
Sell to Open UNP 21Jun19 165/160 Put Spread
Tier 1: Enter at 0.54, Exit at 0.04
Tier 2: Enter at 0.84, Exit at 0.14
Tier 3: Enter at 1.14, Exit at 0.44
Trade #3: IBM
Looking for a test of the gap from last quarter.
Expected Price: 132
Sell to Open IBM 21Jun19 125/120 Put Spread
Tier 1: Enter at 0.77, Exit at 0.07
Tier 2: Enter at 1.07, Exit at 0.37
Tier 3: Enter at 1.37, Exit at 0.67