Very whippy day in the markets!
If you traded in the 2010s, you remember how every unemployment number would be a big deal for the markets. And it was a little goofy– investors were rooting for bad jobs numbers because it meant the Federal Reserve would keep monetary policy very loose.
Now it’s a little different. Instead of focusing on jobs, we’re watching the CPI– Consumer Price Index. Much of the narrative surrounding the selloff last month had to do with the fact that inflation was running hot and the Fed would have to hike rates.
Premarket was another CPI number and it came in much higher than the market expected. That led to a gap down, with a very aggressive bid on the markets when it opened, followed by a hard reversal and a close under the range the market was knocking out.
For now, this just feels like an aftershock from the selloff in January. Market participants are still sitting overhedged and deleveraged, which makes it difficult to see the same kind of cascade effects like you would in a very ugly bear market.
Our setups today will be focusing on some of the stronger stocks in the market. We don’t have to try and pick the bottoms when we get better quality setups with a lot less stress.
Trade #1: COST
Costco had a nice reset in January, coming back down into 480 before finding buyers. I want to play the higher low here, if it coems back into the internal pivot level in the high 400s.
This trade does carry earnings risk, so if you aren’t comfortable holding through, then consider passing on this or going with smaller sizing.
Trade Setup
Expected Price: 497.14
Sell to Open COST 18Mar22 455/450 Put Spread
Tier 1: Enter at 0.76, Exit at 0.03
Tier 2: Enter at 1.064, Exit at 0.27
Tier 3: Enter at 1.368, Exit at 0.34
Stop Out If Close Under 454.89
Trade #2: WFC
One of the strongest stocks in the market right now, and I’m looking for a pullback into the swing AVWAP from the December lows, and the initial congestion level in the 55s.
Trade Setup
Expected Price: 54.78
Sell to Open WFC 18Mar22 52.5/50 Put Spread
Tier 1: Enter at 0.61, Exit at 0.28
Tier 2: Enter at 0.854, Exit at 0.52
Tier 3: Enter at 1.098, Exit at 0.69
Stop Out If Close Under 52.39
Trade #3: VLO
Oil markets are running hot so I’m not sure we will get this one. But if HAL pulls back to its prior breakout level, I want to be involved.
Trade Setup
Expected Price: 29.14
Sell to Open HAL 18Mar22 25/23 Put Spread
Tier 1: Enter at 0.3, Exit at 0.01
Tier 2: Enter at 0.42, Exit at 0.1
Tier 3: Enter at 0.54, Exit at 0.13
Stop Out If Close Under 24.89