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Proactive Spreads, September 30th, 2019 – MU, NKE, DIS

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One of the best skills I’ve developed as a trader over the past decade is the ability to hold opposing viewpoints in my head at the same time… without going insane.

(At least not yet.)

It’s necessary to use this skill in this market. Many times the markets are aligned and we know what narrative is being reflected in price action… other times it’s as clear as mud.

First point– the S&P 500 is within 2% of all time highs. Full stop. I don’t care what fancy indicator or economic data you use… attempting to bet on a drop when we’re 2% from ATH is not a good bet to me.

Ok we’ve got that out of the way, right?

Underneath the first point is a laundry list of weakness. With Proactive Spreads, we are focused on setups in individual stocks… and boy is it a trainwreck right now.

If you have ownership in about 80% of the market, it doesn’t feel like we’re near all time highs.

On top of that you’ve got political risks (we’ve had that for years now), macro risks, and a new earnings season that may not have completely baked in what the actual earnings of the market will be.

Just another day in stock trading.

So what can we do here? Stick to the process. Find quality setups in liquid stocks and be patient enough to let them come into good price levels.

Trade #1: MU

Micron earnings came out on Friday and it wasn’t a good reaction. I want to see a second push into key support and the rising 200 day moving average.

Trade Setup

Expected Price: 41.23

Sell to Open MU Nov 37/35 Put Spread

Tier 1: Enter at 0.39, Exit at 0.09

Tier 2: Enter at 0.59, Exit at 0.19

Tier 3: Enter at 0.79, Exit at 0.29

Trade #2: NKE

On the other side of the earnings coin, you’ve got NKE… which gapped higher into new all time highs on good earnings. It looks like they have direct to consumer figured out. I expect the stock to continue to grind higher from these levels.

Trade Setup

Expected Price: 92.30

Sell to Open NKE Nov 87.50/85 Put Spread

Tier 1: Enter at 0.45, Exit at 0.05

Tier 2: Enter at 0.60, Exit at 0.15

Tier 3: Enter at 0.75, Exit at 0.25

Stop out on Close under 86.40

Trade #3: DIS

The stock is coming back into the “Disney+” gap. It feels like a stop run on all the traders who bought thinking the stock would jam to 150 as Disney+ came out.

I want to see a pull into the event open and the rising 200 day moving average.

Trade Setup

Expected Price: 127

Sell to Open DIS Nov 120/115 Put Spread

Tier 1: Enter at 0.90, Exit at 0.20

Tier 2: Enter at 1.20, Exit at 0.30

Tier 3: Enter at 1.50, Exit at 0.40

 

Disclaimer

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