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Full Time Profits, January 24th, 2019 – LULU, PYPL, GLD

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In December, the market continued to sell off further and faster than what the majority thought.

Why, then, does it come as a shock to so many market participants that the rally has also squeezed, further and faster, than what the majority thought?

The S&P retook 2600 — key support from Fall 2018 — with no hesitation whatsoever. Until that character changes, it will be very difficult for the market to rollover

An attempt at a retest isn’t a terrible idea, and generally that’s what happens.

It just tends to take longer than what most people thing. You need a full options expiration cycle to burn off all that premium that hedgers bought in anticipation of the rollover.

The gameplan here is to start following relative strength.

We just spent a few months of a macro-dominated market where all stocks moved on the same conveyor belt with no reversion whatsoever. I’m calling a top on that theme. Expect more reversion, and expect more rotation in this market.

Trade #1: LULU

This stock has been on a tear since the sales numbers came out earlier this month. The 150’s *should* bring in some sellers as the previous support from September comes into play. I’d like to see a gap fill and a little push lower to get involved.

Trade Setup

Expected Price: 142.30

Sell to Open LULU Mar 125/120 Put Spread

Tier 1: Enter at 0.60, Exit at 0.10

Tier 2: Enter at 0.90, Exit at 0.40

Tier 3: Enter at 1.20, Exit at 0.70

Trade #2: PYPL

 

One of the strongest stocks in the market. It has earnings coming up, so I’ll play it if it tests the previoius resistance levels from Oct-Dec.

Trade Setup

Expected Price: 87.34

Sell to Open PYPL Mar 77.5/75 Put Spread

Tier 1: Enter at 0.35, Exit at 0.05

Tier 2: Enter at 0.50, Exit at 0.25

Tier 3: Enter at 0.65, Exit at 0.40

Trade #3: GLD

Gold is still incredibly strong given how hard everything else has reverted. There is some confluence at 120 that I want to be involved with.

Trade Setup

Expected Price: 120

Sell to Open GLD Mar 117/114 Put Spread

Tier 1: Enter at 0.32, Exit at 0.05

Tier 2: Enter at 0.47, Exit at 0.22

Tier 3: Enter at 0.62, Exit at 0.37

Disclaimer

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