Looks like they wanted back in!
The rotational correction in the S&P has completed with a strong move into a shortened week. Tech has found buyers again, and semiconductors just started a monster move today, with SMH finishing up over 3.8%.
Gap up, close at highs… that’s not bearish price action.
Into rallies like this, it will be tougher for us to get filled on trades. The Proactive method is about anticipating where price will turn, so many of our setups require sellers to show up first. Don’t be surprised if the market has a run and we aren’t seeing good entries… that’s OK, because once a correction does come, there will be many more setups.
On the short side… well we’re not there yet. Broad markets have a ways to go before we can consider them overextended, and I will be watching for good short entries– like HD from last week, which filled yesterday.
If you’re in some setups already, make sure you’ve got your exits planned out so you can automatically take profits into the move higher.
I’m finishing up this newsletter on Thursday after the close. There’s no trading on Friday, so these will be “fresh” setups on Monday, along with the Monday newsletter.
I am doing this on purpose. I don’t like chasing the market higher with short put spreads, and I don’t want you to do that, either.
For new setups, we’ll be taking a look at some trend continuation setups, and anticipate a long setup in HD if it does manage to pullback.
Trade #1: QRVO
The semiconductor space, as a whole, is looking to run higher and QRVO is involved. I was planning on selling spreads a little lower in strikes, but the breakout today gives us extra cushion and I’m willing to trade this into a small pull.
Trade Setup
Expected Price: 191.48
Sell to Open QRVO 21May21 170/165 Put Spread
Tier 1: Enter at 0.9, Exit at 0.2
Tier 2: Enter at 1.26, Exit at 0.51
Tier 3: Enter at 1.62, Exit at 0.67
Stop Out If Close Under 169.89
Trade #2: DKNG
Over the past few months, we’ve seen all these momentum darlings taken out behind the woodshed and shot. DKNG did not do that, and managed to break to new highs. That’s good relative strength, and the narrative is still solid behind the name as more sporting events open back up.
I like entering as it carves out a near term bottom.
Trade Setup
Expected Price: 61.33
Sell to Open DKNG 21May21 50/45 Put Spread
Tier 1: Enter at 0.91, Exit at 0.21
Tier 2: Enter at 1.274, Exit at 0.52
Tier 3: Enter at 1.638, Exit at 0.68
Stop Out If Close Under 49.89
Trade #3: HD
The stock is overbought as funds pile into the “home improvement with stimmy checks.” We’ve already got a short setup lined up here, and now I want to play for if a pullback happens.
Trade Setup
Expected Price: 294
Sell to Open HD 21May21 275/270 Put Spread
Tier 1: Enter at 0.9, Exit at 0.2
Tier 2: Enter at 1.26, Exit at 0.51
Tier 3: Enter at 1.62, Exit at 0.67
Stop Out If Close Under 274.89