And just like that, it’s gone. The market has fully retraced all the losses from February. Granted, most of the gains are from just a handful of stocks, but there’s nothing like price moving higher to change the narrative about stocks.
The market is still overhedged. Right now, the market has a realized volatility of 11%. The VIX Sep futures are currently in the 20s.
It’s stinkin’ hard to sell the market off when hedges are that rich. Any pullback and those hedges will peel off quickly, causing a floor to setup in the markets.
Trend is up, and until the market shows a shift in character we need to assume the trend will continue.
Trade #1: CMI
CMI has had a nice run, and is creating a consolidation pattern near its highs. I’d like to see just a bit more of a pullback for an entry point. This is our second attempt trying to play this long.
Expected Price: 208.16
Sell to Open CMI 18Sep20 185/180 Put Spread
Tier 1: Enter at 0.7, Exit at 0.04
Tier 2: Enter at 0.98, Exit at 0.17
Tier 3: Enter at 1.26, Exit at 0.21
Stop Out If Close Under 184.89
Trade #2: AMZN
AMZN had a monster breakout and looks ready for continued upside. It could gap up and run without us, but odds are a day of rest or a small pullback will get us involved.
Expected Price: 3312.49
Sell to Open AMZN 18Sep20 3085/3080 Put Spread
Tier 1: Enter at 1.3, Exit at 0.67
Tier 2: Enter at 1.82, Exit at 1.18
Tier 3: Enter at 2.34, Exit at 1.59
Stop Out If Close Under 3084.89
Trade #3: BRK/B
Looking for a retest of the previous resistance to act as potential support. We’ll start scaling in just above that.
Expected Price: 205.25
Sell to Open BRK/B 18Sep20 200/195 Put Spread
Tier 1: Enter at 0.98, Exit at 0.29
Tier 2: Enter at 1.372, Exit at 0.642
Tier 3: Enter at 1.764, Exit at 0.854
Stop Out If Close Under 199.89