Market is taking a little downside heat on “trade war” headlines. Whatever that means.
We needed a pullback. From the Oct lows the S&P rallied 300 points without any kind of selling. Which is fine. My bet here is that there are a lot of dip buyers waiting on the sidelines… waiting for the SPX to retest the previous support level at 3030.
I think they’ll be disappointed. I know this because I want a retest of 3030 which means we won’t get it. Odds are the pullback will be shallow, rotational, and brief as buyers need to force their way in before the end of the year.
Trade #1: LRCX
The stock has tested its rising 50 day moving average, and the earnings open support is just underneath that. I like playing it long here.
Expected Price: 257.5
Sell to Open LRCX Jan 225/220 Put Spread
Tier 1: Enter at 0.6, Exit at 0.07
Tier 2: Enter at 0.84, Exit at 0.13
Tier 3: Enter at 1.08, Exit at 0.1
Stop Out If Close Under 225
Trade #2: INTC
Looking for a similar structure as LRCX– pullback into major moving average support and the earnings reaction open.
Expected Price: 54.68
Sell to Open INTC Jan 52.5/50 Put Spread
Tier 1: Enter at 0.51, Exit at 0.27
Tier 2: Enter at 0.714, Exit at 0.404
Tier 3: Enter at 0.918, Exit at 0.518
Stop Out If Close Under 50
Trade #3: CAT
I want to see a retest of the previous resistance, which should hold as potential support.
Expected Price: 135
Sell to Open CAT Jan 125/120 Put Spread
Tier 1: Enter at 0.74, Exit at 0.22
Tier 2: Enter at 1.036, Exit at 0.356
Tier 3: Enter at 1.332, Exit at 0.412
Stop Out If Close Under 125