Markets accelerated higher today as there were more buyers than sellers.
Let's not overthink it here! We've got the election and fiscal deal narrative, but take a step back and think about the structure of the market for a minute...
After going parabolic at the end of summer, large cap stocks got smashed as everyone was leaning the wrong way. We then had a few months of chop-- if you tried to nail a big move in FANG stocks you got chopped up to death.
And here we are, rallying with as few people on board as possible-- traders got chopped up to death in the fall, and investors are still overhedged into the election.
Is it any surprise that we saw a move?
Stocks are a big overbought. The S&P 500 rallied over 5% in a 4 day window, and that doesn't happen often when we are near all time highs. And we've got headline risk, where one tweet can send this market down 1% in an hour.
Yet as it stands, this is not bearish tape. Unless the major markets take out Friday's lows, we need to assume trend continuation.
Trade #1: DKNG
After a parabolic push into the 60s, the stock has round-tripped the move. Support levels are coming up quick-- the rising 50 day moving average, prior price support, and previous resistance. I like scaling in here to align with the longer term trend.
Expected Price: 50.75
Sell to Open DKNG 30Oct20 43/40 Put Spread
Tier 1: Enter at 0.45, Exit at 0.01
Tier 2: Enter at 0.63, Exit at 0.15
Tier 3: Enter at 0.81, Exit at 0.19
Stop Out If Close Under 42.89
Trade #2: COST
Very nice move-- we are going to start looking for the first pullback to enter long.
Expected Price: 367.94
Sell to Open COST 20Nov20 345/340 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 344.89
Trade #3: ADBE
This stock just started its move and isn't overextended-- even if it finds resistance it will base out under 530 and we can look to the long side.
Expected Price: 510.84
Sell to Open ADBE 20Nov20 465/460 Put Spread
Tier 1: Enter at 0.9, Exit at 0.2
Tier 2: Enter at 1.26, Exit at 0.51
Tier 3: Enter at 1.62, Exit at 0.67
Stop Out If Close Under 464.89