After coming up to test the 2800 resistance, the market has been pulling back over the past few days.
“The market” here being the S&P. That’s a touch misleading.
See, market correlations have again gone to the floor. Some areas are seeing continued weakness… think industrials due to the “trade war” and large-cap financials.
Yet if you look at large cap tech… monster moves. NFLX up 30% over the past month. FB and GOOGL finally breaking out. Very little downside volatility there.
And smallcaps have been on a tear. The Russell 2000 index has seen its best rally this year and doesn’t show signs of slowing.
So when we look at the market pulling back… it’s really been a sideways, rotational correction. Like we expected.
Right now the pick-money-off-the-ground setups seem to be tech stock pullbacks. From there, I’ll look to play potential capitulation in BA and Gold.
Trade #1: CRM
The stock probed at higher prices and finished the day at the lows. This is a bearish reversal candle. Look for an extension lower to tag a gap fill, trendline support, and moving average support.
Trade Setup
Expected Price: 134.24
Sell to Open CRM Aug 125/120 Put Spread
Tier 1: Enter at 0.65, Exit at 0.15
Tier 2: Enter at 0.95, Exit at 0.45
Tier 3: Enter at 1.25, Exit at 0.75
Trade #2: EA
I’m expecting just a small pullback from this name. Unlike CRM there wasn’t a hard reversal during the day’s auction and will most likely hold its bid longer.
Trade Setup
Expected Price: 141.50
Sell to Open EA Aug 125/120 Put Spread
Tier 1: Enter at 0.65, Exit at 0.15
Tier 2: Enter at 0.95, Exit at 0.45
Tier 3: Enter at 1.25, Exit at 0.75
Trade #3: ADBE
The 248 price level has been tested twice, if it is tested again, look for a move to the next pivot levels. At that level is a good place to start scaling in.
Trade Setup
Expected Price: 244
Sell to Open ADBE Aug 220/215 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 #4: BA
Now I don’t want this trade to trigger, because I’ve already got exposure in this narrative.
BA gapped down hard on trade war voodoo. Very technical term, I know.
What’s more important here is that the stock experienced a failed breakout pattern. Many times when a stock fails to break out, it will retest the lower end of the range. That’s what we’re looking for here… a swift capitulation towards the lower end of the trading range.
Trade Setup
Expected Price: 330
Sell to Open BA Aug 290/285 Put Spread
Tier 1: Enter at 0.65, Exit at 0.15
Tier 2: Enter at 0.95, Exit at 0.45
Tier 3: Enter at 1.25, Exit at 0.75
Trade #5: GLD
GLD is selling off hard, and is breaking 120 in the premarket. This is a good place to start scaling in. 5 day selloff currently at -2.37% which is statistically oversold. And the 10 day reading is heading towards -3%, also a key oversold level.
Gold has been trading in a very volatile trading range and we’re starting to head towards the first support test of the Dec 17 pivot. Odds are that will hold.
Trade Setup
Expected Price: 120
Sell to Open GLD Aug 118/115 Put Spread
IMPORTANT! I’m using theoretical pricing which may be very different on the open due to the gap down, changes in pricing and implied volatility. The opening prices may be a little higher or lower depending on how we move. Sell the first spread for as low as 0.50 and watch the open to see if we can get a higher price.
Tier 1: Enter at 0.65, Exit at 0.25
Tier 2: Enter at 0.85, Exit at 0.45
Tier 3: Enter at 1.05, Exit at 0.65