Markets are still a choppy mess right now. We’ve got potential changes in Fed policy due to “transitory” economic data, a ramp up in crude and natural gas, the debt ceiling/infrastructure, and the Chinese Evergrande situation that everyone thinks is contained. Oh, and earnings.
In other words, just another week in the markets.
We will most likely stay choppy for a while as we continue to shake out the weak hands. It’s very possible that this is a longer term topping pattern, yet we won’t know how strong the odds are on that until we get more data and price action. I currently view the S&P as roughly a coin flip here, with not much of an edge on a daily chart. So right now we will focus on playing pullbacks in two strong stocks, and picking a fade level in the Semiconductor sector.
Trade #1: ICE
Clean multi-week breakout for ICE. This is probably related to the uptick in trade activity in commodities. This setup will have earnings risk, yet this stock doesn’t have a tendency for massive moves. That said, we’ll focus on December options for this one to give more wiggle room through earnings.
Trade Setup
Expected Price: 123.3
Sell to Open ICE 17Dec21 115/110 Put Spread
Tier 1: Enter at 0.75, Exit at 0.02
Tier 2: Enter at 1.05, Exit at 0.26
Tier 3: Enter at 1.35, Exit at 0.32
Stop Out If Close Under 114.89
Trade #2: COP
Conoco is running hot on the back of solid moves in oil and gas. I’m looking for the first pullback from this breakout for a fresh entry.
Earnings is in this cycle, so again we will focus on Dec options.
Trade Setup
Expected Price: 67.33
Sell to Open COP 17Dec21 62.5/60 Put Spread
Tier 1: Enter at 0.65, Exit at 0.33
Tier 2: Enter at 0.91, Exit at 0.59
Tier 3: Enter at 1.17, Exit at 0.79
Stop Out If Close Under 62.39
Trade #3: SMH
This is a “wishful thinking” trade where if we get a break under the 200 day moving average, we can see a swift move to the middle of the trading range.
Trade Setup
Expected Price: 240
Sell to Open SMH 19Nov21 220/215 Put Spread
Tier 1: Enter at 0.75, Exit at 0.02
Tier 2: Enter at 1.05, Exit at 0.26
Tier 3: Enter at 1.35, Exit at 0.32
Stop Out If Close Under 219.89