Failed breakdowns lead to fast moves.
After a tiny scare out of Italy, the S&P regained 2700 and is on a fast track to 2800, the next pivot level.
And this index doesn’t show the broad strength in the overall market. The Russell 2000 index is hitting all time highs nearly every day now, and large cap tech stocks have been on an absolute tear.
There are not many “easy” credit spreads here. It’s a tricky spot. Markets are extended, but overbought can become even more overbought so shorting is NOT easy here. And most of the put credit spreads to put on will require a pullback for the best risk/reward, and we aren’t entitled to one if the market doesn’t want to give it to us.
Right now, it’s best to be Proactive about it. Don’t force your way into shorts, let them come to you. And we’ll look at some stocks undergoing deeper pullbacks for low risk put credit spread entries.
Trade #1: TXN
The earnings gap from 2 quarters ago is acting as a magnet, and a lot of energy has been expended getting here. Since the stock is ripping higher into resistance with no pullback, this offers good risk/reward for a short opportunity, with no need to chase.
Trade Setup
Expected Price: 118.11
Sell to Open TXN Jul 125/130 Call 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: MSFT
All I want here is a small pullback to retest the 100 breakout level.
Trade Setup
Expected Price: 101.21
Sell to Open MSFT Jul 95/92.50 Put Spread
Tier 1: Enter at 0.35, Exit at 0.10
Tier 2: Enter at 0.50, Exit at 0.25
Tier 3: Enter at 0.65, Exit at 0.40
Trade #3: RUT
Smallcap stocks have started to get overbough and go parabolic, and I think you can short here if you scale your way in. I don’t think this price is the best price, but we’re close.
Trade Setup
Expected Price 1685
Sell to Open RUT Jul 1755/1760 Call 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: FSLR
FSLR is significantly oversold here. The collapse “catalyst” was due to China pulling back on their solar policies. This stock really has been feast or famine for the past few years. It used to be a momentum darling, but can’t seem to maintain any kind of bullish momentum without falling into some kind of a range, or getting a bad news day that causes a move like this.
I like scaling in here as we head into the earnings gap from 2 quarters ago.
Trade Setup
Expected Price: 54
Sell to Open FSLR Jul 47.50/45 Put Spread
Tier 1: Enter at 0.35, Exit at 0.10
Tier 2: Enter at 0.50, Exit at 0.25
Tier 3: Enter at 0.65, Exit at 0.40
Trade #5: WYNN
Another pretty oversold stock, yet I want to trade this a little differently. Anecdotally, I’ve seen too many rookie traders broadcast how they’re loading up into bull put spreads. They’re probably early. On top of that, the stock sold off hard on bad Macau numbers, yet if you look at LVS (another casino company with Macau exposure) the stock wasn’t hit nearly as hard.
WYNN has been on shaky ground every since their CEO got kicked out, so I’m looking for a lower low to cause pain to early dip buyers before I get involved.
Trade Setup
Expected Price: 172
Sell to Open WYNN Jul 155/150 Put Spread
Tier 1: Enter at 0.70, Exit at 0.20
Tier 2: Enter at 1.00, Exit at 0.50
Tier 3: Enter at 1.30, Exit at 0.80