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Proactive Spreads, December 7th, 2020 – TGT, FB, SMH

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The march higher into the end of the year continues. We’ve been bullish on the overall market here, and price action continues to reward that thesis.

It’s still too early to call a top in the broad markets– large cap tech really hasn’t moved, and the S&P 500 is on day 5 of a breakout from a one month range. The “macro” planets are aligning as well– easy monetary policy, good fiscal backing (probably), and vacc*ne news. Combine that with the fact that the VIX IS STILL ABOVE 20 INTO HOLIDAY TRADING!

It’s reasonable to expect trend continuation.

That doesn’t mean there won’t be corrections, but odds are they will be rotational in nature. Money will flow out of some hot sectors and go into others. We’ll build on that theme with today’s setups.

Trade #1: TGT

One of my favorite traders in the retail space, TGT is having a normal pullback after a strong move. I like scaling in as it approaches the 50-day and the previous breakout level.

Trade Setup

Expected Price: 172.29

Sell to Open TGT 18Dec20 167.5/165 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 167.39

Trade #2: FB

FB is one of the mega-cap tech names that hasn’t gone anywhere since the blowoff top in the fall. This continues to have a bullish structure, as buyers continue to pick up shares at higher and higher prices. The stock is above all it’s major moving averages and anticipating the breakout here makes plenty of sense.

Trade Setup

Expected Price: 285.38

Sell to Open FB 18Dec20 270/267.5 Put Spread

Tier 1: Enter at 0.38, Exit at 0.01

Tier 2: Enter at 0.532, Exit at 0.13

Tier 3: Enter at 0.684, Exit at 0.17

Stop Out If Close Under 269.89

Trade #3: SMH

I have been stalking this for a few weeks, and it finally saw a proper blowoff move. It’s taking out a rising channel that’s been in place since March, and is coming into very significant levels at 225. It’s massively stretched 40% above the 200 day moving average– the largest we have seen in modern markets.

I’m still bullish on semis long term, but we are now in OTIS (oh, this is stupid) territory.

Note the expiration date is January, not December.

Trade Setup

Expected Price: 220.43

Sell to Open SMH 15Jan21 235/240 Call Spread

Tier 1: Enter at 0.75, Exit at 0.02

Tier 2: Enter at 1.05, Exit at 0.26

Tier 3: Enter at 1.35, Exit at 0.32

Stop Out If Close Over 235.11

Disclaimer

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