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Proactive Spreads, September 2nd, 2021 – NFLX, QQQ, XBI

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Markets hit a new all time high today, which is what tends to happen in a bull market.

(I keep needing to remind myself of this…)

Overall, things look fine. There’s the potential of a failed breakout from this candle, yet that is a little suspect.

The blue lines show the magnitude of the first rally in June, and then the same magnitude was overlaid on both the recent rallies. If we were to have the same energy pushed into stocks, that woudl take us to around 4600. That may seem unheard of, yet it’s only about 1.5% higher from here (I hope I did that math right…).

Our best bet is to focus on rotational bets, either planning pullbacks in leaders, looking for an index short into further upside as a hedge, and betting on an emerging sector into the end of the year.

That’s our theme today.

Trade #1: NFLX

Currently the strongest tech stock on my list. I’m looking for a shallow pullback to play, as we haven’t seen the full narrative flesh out behind this move, and we have institutions who will be looking for any dip to buy.

Trade Setup

Expected Price: 574.25

Sell to Open NFLX 15Oct21 540/535 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 539.89

Trade #2: QQQ

 

Large cap tech has seen a nice extension away from the Jul-Aug correction, yet I think it’s starting to overheat just a bit. If we get one more push higher, I’ll be looking to start a fade.

Trade Setup

Expected Price: 386.01

Sell to Open QQQ 30Sep21 395/398 Call Spread

Tier 1: Enter at 0.64, Exit at 0.23

Tier 2: Enter at 0.896, Exit at 0.46

Tier 3: Enter at 1.152, Exit at 0.63

Stop Out If Close Over 395.11

Trade #3: XBI

This is the strongest momentum small cap biotech has had in a very long time. Look for one last retest of the previous range as a low-risk entry.

Trade Setup

Expected Price: 130.25

Sell to Open XBI 15Oct21 119/116 Put Spread

Tier 1: Enter at 0.47, Exit at 0.03

Tier 2: Enter at 0.658, Exit at 0.18

Tier 3: Enter at 0.846, Exit at 0.23

Stop Out If Close Under 118.89

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