Not much has changed since our last newsletter. The S&P is continuing to grind higher, this time led by a good rally in tech (see XLK) while money flows out of some previously hot sectors.
At some point we will see a rotation down, and given where we have come from, the pullback will (most likely) be constructive.
Our focus today will be to dial in on some of the leaders that have seen some good rotation out, as they head into key support.
Trade #1: CAT
I think we are “close enough” for a starter on CAT, but I would not be surprised if we saw some kind of a “heartbreak” lower low to stop out of the first round of dip buyers. That’s why we will be going with a longer duration option so we have more wiggle room and won’t be stopped out if the stock sees a jam down to 210.
Expected Price: 219
Sell to Open CAT 20Aug21 195/190 Put 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
Trade #2: LOW
LOW has traded weak after its parabolic run to 210. It continues to stay heavy as all pops are sold into. Look for one good flush down to test some monster levels in the low 180s.
Expected Price: 183.09
Sell to Open LOW 16Jul21 175/170 Put Spread
Tier 1: Enter at 0.72, Exit at 0.01
Tier 2: Enter at 1, Exit at 0.2
Tier 3: Enter at 1.29, Exit at 0.25
Trade #3: NEM
Solid pullback in Newmont as gold works off some of the short term excesses.
(Our GLD short call spread is going great, too…)
I’m looking for a pull to the 50 day moving average.
Expected Price: 68
Sell to Open NEM 16Jul21 65/62.5 Put Spread
Tier 1: Enter at 0.45, Exit at 0.1
Tier 2: Enter at 0.63, Exit at 0.25
Tier 3: Enter at 0.81, Exit at 0.33