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Proactive Spreads, Jan 15th, 2021 – TGT, JPM, MRVL

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I’m writing this on Friday afternoon, after the market close. My eyes are crossing from this week’s action and January options expiration is finally out of the way. We’re coming into a 3-day weekend, so I don’t think we’ll be getting filled on any trades this Monday!

I think we can see some downside here. I’m not looking for a crash, just a rotational correction. Bonds overshot to the downside, and if we see reversion there and a dollar push higher, then you can easily see some areas come in– financials and materials come to mind.

We’ve also got the Russell 2000 which is hilariously extended and is due for a rug pull. Of course, I’ve said that for about a month now and it hasn’t really worked (although selling call spreads into rips has done pretty well).

The entire premise of Proactive trading is that we can anticipate where the market is going to go and be prepared for when that happens. As it stands, there’s not many setups I would sell credit spreads in right now. Too many things are extended, and the possible setups in many stocks are eliminated due to earnings season coming.

We’ll focus on “first pull” names on stocks that report earnings after Feb opex, and go from there.

Enjoy your weekend!

Trade #1: TGT

TGT has had a great run, and is due for yet another shakeout. I think the most recent pullback was a bit of a grinder, and this one could happen faster. I’m looking for a similar selloff in magnitude as the stock comes into the rising 20 day moving average.

Trade Setup

Expected Price: 188.32

Sell to Open TGT 19Feb21 180/175 Put Spread

Tier 1: Enter at 1.03, Exit at 0.35

Tier 2: Enter at 1.442, Exit at 0.72

Tier 3: Enter at 1.854, Exit at 0.96

Stop Out If Close Under 179.89

Trade #2: JPM

JPM will most likely pull back if the yield curve reverts, and the stock is still structurally healthy. Earnings happened this week so we don’t need to worry about that. I’m looking for a gap fill of the most recent breakout bar.

Trade Setup

Expected Price: 133.46

Sell to Open JPM 19Feb21 125/120 Put Spread

Tier 1: Enter at 0.73, Exit at 0.05

Tier 2: Enter at 1.022, Exit at 0.22

Tier 3: Enter at 1.314, Exit at 0.27

Stop Out If Close Under 124.89

Trade #3: MRVL

Eyeing a pullback to breakout setup in MRVL here.

Trade Setup

Expected Price: 48.37

Sell to Open MRVL 19Feb21 44/41 Put Spread

Tier 1: Enter at 0.49, Exit at 0.06

Tier 2: Enter at 0.686, Exit at 0.21

Tier 3: Enter at 0.882, Exit at 0.28

Stop Out If Close Under 43.89

 

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