After a shallow reset, markets are near their highs. Again. I’m in the camp that the most recent pullback wasn’t enough in terms of magnitude or volatility, but we’ve seen plenty of times where we can grind further and longer than I think!
There is a very real chance for a failed breakout. This is where the S&P clears 4200 but can’t find buyers to hold above that level, which then leads to another push to the lower end of the range. If we see 4200 hold, then we can quickly see a push higher and the next pivot low will be higher than the last.
As one of my friends likes to say… “It’s a bull market, you know!”
Earnings are finally getting out of the way. MSFT was a negative reaction, GOOGL a positive one. AAPL reports tomorrow with a few other tech stocks that could move the market a bit, and we’ve got the Fed meeting this week.
Quick sidebar: the Fed could end up stuck between a rock and a hard place. I think we’re a few months off from that, but if commodity prices continue to rise along with other input costs, then they may be forced to hike sooner than expected. If the market gets the slightest whiff of that happening, there will be a tantrum in equities… we’re just not there yet.
Today we’re focusing on two post-earnings plays and a pullback on a stock I’ve been stalking for a while.
Trade #1: CROX
They knocked it out of the park, again. They upped guidance and the stock saw a post-earnings move into the 100s. When you have a big gap on good earnings, there is a tendency for the stock to drift higher, so we want to take advantage of that.
Trade Setup
Expected Price: 97.79
Sell to Open CROX 18Jun21 85/80 Put Spread
Tier 1: Enter at 0.60, Exit at 0.10
Tier 2: Enter at 0.84, Exit at 0.10
Tier 3: Enter at 1.08, Exit at 0.10
Stop Out If Close Under 84.89
Trade #2: IBM
After a LONG time of underperformance, IBM is making a move on the back of its earnings numbers. I’m not expecting crazy upside momentum, but the current levels above 140 are holding up well over the past few days an we could see a continuation here soon.
Trade Setup
Expected Price: 142.01
Sell to Open IBM 18Jun21 135/130 Put Spread
Tier 1: Enter at 0.89, Exit at 0.19
Tier 2: Enter at 1.246, Exit at 0.48
Tier 3: Enter at 1.602, Exit at 0.64
Stop Out If Close Under 134.89
Trade #3: LOW
LOW caught a monster run on the “home improvement” theme. Lumber futures have tripled as well– remember those commodity inputs I mentioned earlier?
This is the first decent pullback in the stock since the rally off the lows began, and I’d like to be involved.
Trade Setup
Expected Price: 199.05
Sell to Open LOW 18Jun21 185/180 Put Spread
Tier 1: Enter at 0.99, Exit at 0.3
Tier 2: Enter at 1.386, Exit at 0.65
Tier 3: Enter at 1.782, Exit at 0.87
Stop Out If Close Under 184.89