Markets are running to new highs. Again. The “reason” we’re told is a new treatment for Cov-19, but the reality remains that we are in a “big water, small hose” environment.
The response to the crisis in March has left financial markets awash in liquidity… and the number of investable assets really hasn’t changed. Whether this is right or wrong is not up to us as speculators, we just need to focus on the trend to pull profits out.
I think the market is due for some rotation– tech is way ahead of itself so we’ll look at a short setup today. Our other focus will be on some large cap stocks that should have a tendency to grind higher.
Trade #1: TGT
TGT had a monster move on earnings. We’re going to play the “Post Earnings Announcement Drift” and I expect the stock to move higher, or at least create a new base at these higher prices.
Trade Setup
Expected Price: 153.22
Sell to Open TGT 18Sep20 145/140 Put Spread
Tier 1: Enter at 0.65, Exit at 0.09
Tier 2: Enter at 0.91, Exit at 0.09
Tier 3: Enter at 1.17, Exit at 0.09
Stop Out If Close Under 144.89
Trade #2: AAPL
We’re going to give this a shot. AAPL is overbought via several metrics — distance from 50 day moving average, RSI, and a few others. It’s jamming hard into its split event, and I’m looking for the market to “sell the news” before the split.
Trade Setup
Expected Price: 509.38
Sell to Open AAPL 18Sep20 570/575 Call 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 Over 571.11
Trade #3: BABA
Clear breakout out of a multi-month consolidation pattern. I checked the options and the premium is still very attractive. Similar to TGT, I’m looking for it to “drift” higher over the next few weeks.
Trade Setup
Expected Price: 275
Sell to Open BABA 18Sep20 255/252.5 Put Spread
Tier 1: Enter at 0.5, Exit at 0.16
Tier 2: Enter at 0.7, Exit at 0.34
Tier 3: Enter at 0.9, Exit at 0.45
Stop Out If Close Under 254.89