Archives for March 2021
Two TLT Fade Setups
Update: June 10th, 2021
Closing the trades.
Full Time Profits, March 15th, 2021 – FB, JPM, BA
Led by financials and industrials, the S&P jammed to new all time highs, just when it looked like the wheels were going to fall off.
“New all time highs” is never a bearish reading for me, but we can consider how a rotational correction can get started.
If you look at XLI (industrials), XLE (energy), and XLF (financials), they were largely spared from the carnage. I am looking for rotation out of those names, and into those “first pullbacks” I want to get involved.
Trade #1: FB
FB is a good play here due to the relative strength against the other mega-cap Nasdaq stocks. While AAPL and MSFT were getting hit 2 weeks ago and making new swing lows, FB made a higher low against the January lows. I think the stock is setup for a breakout here soon, and we can absolutely anticipate breakouts using our system.
Trade Setup
Expected Price: 273.29
Sell to Open FB 16Apr21 255/250 Put Spread
Tier 1: Enter at 1, Exit at 0.32
Tier 2: Enter at 1.4, Exit at 0.68
Tier 3: Enter at 1.8, Exit at 0.9
Stop Out If Close Under 254.89
Trade #2: JPM
JPM has seen a nice run, but it’s extended in the near term. Look for this breakout to fail and for the stock to run towards the other end of the range, that will give us the best risk/reward to take.
Trade Setup
Expected Price: 147.16
Sell to Open JPM 16Apr21 140/135 Put Spread
Tier 1: Enter at 0.67, Exit at 0.07
Tier 2: Enter at 0.938, Exit at 0.11
Tier 3: Enter at 1.206, Exit at 0.13
Stop Out If Close Under 139.89
Trade #3: BA
I think we can call this a breakout.
Boeing is running hot right now, and due for a pull, but I don’t think we will see a full test of the previous support level as institutional interest will be too strong. Instead I’m keying off the price action from Friday, any pull should give us good risk/reward.
Trade Setup
Expected Price: 258
Sell to Open BA 16Apr21 230/225 Put Spread
Tier 1: Enter at 0.86, Exit at 0.15
Tier 2: Enter at 1.204, Exit at 0.44
Tier 3: Enter at 1.548, Exit at 0.57
Stop Out If Close Under 229.89
Primer, March 15th, 2021
IWM Bear Call Spreads
Full Time Profits, March 8th, 2021 – NVDA, ZM, CHWY
If you’re wondering how the market is doing, you first have to ask… “which market?”
Energy and financial stocks are on an absolute tear, and tech names have are bruised and broken. It’s a rotational correction.
It all ties back into the recent move in rates and the expectations of reflation across the board. When rates are up, it helps banks. When commodities run, it helps energy and materials names.
This all feels a little “late stage” in terms of the business cycle, but it could just be some more reversion from 2020.
The next question you’re wondering if this pullback is “it” for tech stocks. There’s no clear answer, and for us it doesn’t matter too much as we can embrace the volatility with the Proactive method. Scale in and scale out!
Due to the volatility, there are times where you can enter a trade, exit for a profit, and have the ability to reenter for a similar price. That’s what I will be doing– trading a little more aggressively to take advantage of the elevated vol (both actual and implied) for some nice profits.
The theme today is “heartbreak.” We want to look at some high beta stocks that appeared as though they bottomed on Friday, but may see one more stop run into levels.
If the market is still feeling too risky for you, then you can just take the approach we use and transfer it into sector bets– QQQ, TAN, ARKK, and XBI are good traders for this.
Trade #1: NVDA
There were a ton of chasers into the breakout above 600, and they’re all underwater and in the process of getting stopped out. Semiconductors as a whole haven’t traded very well, eyt this is within the context of the sector running 150% off the lows from March.
There’s a gap fill just above 460 that I want to play. It will look like an “obvious” breakdown, but that’s what the move from 520->470 was, and we’re close to a strong bounce in the stock.
Trade Setup
Expected Price: 462.61
Sell to Open NVDA 16Apr21 410/405 Put Spread
Tier 1: Enter at 0.98, Exit at 0.29
Tier 2: Enter at 1.372, Exit at 0.64
Tier 3: Enter at 1.764, Exit at 0.85
Stop Out If Close Under 409.89
Trade #2: CHWY
One of my favorite traders– the stock had a solid breakout from 70 and ran to 110, only to round trip it. We’re now coming back to the lower end of the trading range, and I think this is a good place to start putting on some risk.
Trade Setup
Expected Price: 77.36
Sell to Open CHWY 16Apr21 65/60 Put Spread
Tier 1: Enter at 1.05, Exit at 0.37
Tier 2: Enter at 1.47, Exit at 0.76
Tier 3: Enter at 1.89, Exit at 1.01
Stop Out If Close Under 64.89
Trade #3: ZM
Another momentum darling that has been taken out. It’s attempting to fill the earnings gap from last quarter, and I think there’s one more push into 300 that should crack as whole number stops are taken out. Into that, I want to fade it.
Trade Setup
Expected Price: 295.06
Sell to Open ZM 16Apr21 270/260 Put Spread
Tier 1: Enter at 2.95, Exit at 1.75
Tier 2: Enter at 4.13, Exit at 2.95
Tier 3: Enter at 5.31, Exit at 3.99
Stop Out If Close Under 269.89