QQQ Bearish Opening Trade Signal

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Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 7 Contracts April 6th Put Vertical Spreads @ $2.86 Debit per contract.

Total Risk: This trade has a max risk of $2.002 (7 Contracts x $286) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $286 to select the # contracts for your portfolio.

Counter Trend Signal: This ETF has reached a resistance level and is expected to pull back from recent gains.

1M/6M Trends:Bullish/Bullish

Technical Score: 9/10

OptionsPlay Score: 142

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Wednesday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

An eerily quiet immediate reaction to the Fed rate hike and early Powell press conference turned into an ugly close to the day, as the final hour saw a constant stream of selling that took the SPX down 66 pts. (1.65%) to 3937. No one said trading was an easy game, and after a good bounce from 3864 just two weeks ago it’s actually no surprise that we saw a pullback to make buyers from this week second guess themselves. A close, interestingly, right on the flat 200-DMA.

SPX – Daily

Was there anything good about yesterday’s SPX price action? Well, the down close means that if we see a close today above 3985 (the daily Propulsion Momentum level) it would be qualified, meaning that a higher open/higher high/higher close on Friday would get a fresh buy signal – targeting near the early Feb. highs and a move back to the high end of the trading range.   

Yesterday, as instructed in the Daily Play, we were able to get out of the long TLT call spread at the same price we put it on at (i.e., $2.20). This was not because I don’t think interest rates are headed lower (i.e., I think they will), but because I make it a blanket rule for myself that when trading options – if I have a 50% profit on a position – I stop myself out at breakeven.

With our LYFT short $9 put, we are up about 60%. If tomorrow the put is trading beneath a 50% profit going into the closing bell, buy back one of two puts.

A new idea: Yesterday’s rally and lousy close gives us a defined risk level for a bearish QQQ trade, as Wednesday’s high was right at its Propulsion Exhaustion level, and the +13 signal from a week ago Wednesday is still in effect. As such, let’s look to buy an April 6th $305/$295 put spread for what was marked yesterday at $2.855 mid, or about 29% of the spread differential. I am purposely choosing a short-dated option to play for some attempt towards the blue rectangle support zone, which includes the bearish Propulsion Momentum level; unfilled close to low gap; and the uptrend line from the January low to occur shortly after the double-top just made against the Feb. high. Stop yourself out on any daily close above yesterday’s high (i.e., don’t wait for me to tell you to get out the next day).

QQQ – Daily

Investors poured back into financials – especially regional banks – as fears have quickly dissipated over the banking crisis. Can it actually be that there were but 3 “cockroaches” in the cabinet? I’m not convinced that more won’t come scampering out, but I am open and happy to being wrong, if that’s the way this all ultimately plays out. Meanwhile, the overall market moves higher on the bounce from the non-breakdown at 3864.

SPX – Daily

Today is the culmination of two weeks’ worth of important economic data that have led up to today’s FOMC announcement. The collective market is betting on a 25 bps. rate increase today, but we’ll see if that occurs, and just as – if not more importantly – what Chair Powell says in his 2:30pm ET press conference. Every word out of his mouth is scrutinized, so always be at the ready on a Fed day for lots of potential fireworks.

Given the potential volatility and meaning behind today’s Fed statement, I am not putting on a new position today. As per our open positions, the only one that I don’t like is that we saw something like a 50% gain in our TLT trade slide yesterday into a small loss. My bad for not alerting to the following beforehand, but as a blanket rule, if we are ever up 50% or more on a trade, make sure you have a stop in at no worse than what was your entry price on the position.

TLT – Daily

There are now two gaps near current levels: one above and one below. Both could be filled by the end of the week, but let’s look to close out the TLT spread trade at breakeven entry price of or near $2.20 any day this week.

Partial Closing Trade

• USO – 8.92% Gain: Sell to Close 2 Contracts (or 40% of your Contracts) Jul 21st $71/$77 $63/$57 Iron Condors @ $4.15 Credit. DailyPlay Portfolio: By Closing 2 of the 5 Contracts, we will receive $830. 

Investment rationale

As you heard me say in last Friday’s webinar, unless we saw the SPX close beneath 3862 to close out last week, I remain in the belief that for right now, the market stays in a trading range of 3864 to 4148. Now, I do think that when and if we hear about more regional banks having issues like SVB or Signature Bank had, we will see the 3864 give way and then the door gets opened for a further 350-point decline. But until and if that happens, for right now, we’ll trade the range.

I do want to address the falling crude oil price, and that seeing it make the lowest low last week since late-2021 should help kick off a further decline, especially given all that new open interest that came in since the beginning of this year. (Those new oil commitments account for ~22% of all open interest.)

But – and in this case it’s a big but – the $66 level in oil has also been a major downside target since May ‘22; it’s also where the US govt. is replenishing the Strategic Oil Reserve; and last week also happened to mark an Aggressive Combo -13 signal (and the daily posted an Aggressive Sequential signal one day last week, too) along with only 12% of those polled being bullish oil right now. Despite that we have until July on our long USO iron condor, there are just too many reasons to leave the full position on. Thus, today we will exit 2 of 5 long iron condor spreads we hold, locking in but a small profit of 9% since we put this trade on, but acting upon this slew of signals we see that could give oil traders reason to hold support down in here. (And certainly, we hope they don’t, but as you know, “hope” is not a strategy.)

WTI Oil – Weekly

Investment Rationale

With First Republic Bank and Credit Suisse getting backstopped by cash injections from other banks, investors were quick to bid stocks back up, and yesterday saw the SPX close almost 70 pts. higher and safely above the key 3864 weekly bearish Propulsion Momentum level. Barring a close beneath there today, the SPX remains in a trading range bounded by that level and 4148 on top. Traders continue to have the edge over more confirmed bulls and bears, who this year have been beaten up badly by having stubborn opinions.

Propulsion levels have been golden since last summer. See the 4 highlighted rectangles below:

SPX – Weekly

Today is a major option expiration. Open interest in strikes even remotely near yesterday’s close is massive, but the single largest are in the SPY $390 puts (107K) and the $400 calls (103K). Many hundreds of thousands of options will go off the board today worthless – another reason why selling options is the preferred way to play by most smart money in the business.

We have on three option spread positions that expire today (i.e., SPOT, GLD, and ABBV). Yesterday I wrote to you to make sure that you are out of them by this morning.

LTFT Bullish Opening Trade Signal

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Strategy Details

Strategy: Short Put

Direction: Bullish

Details: Sell to Open 2 Contracts April 14th $9 Put @ $0.67 Credit per contract.

Total Risk: This trade has a max risk of $1,666 (2 Contracts x $833) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $833 to select the # contracts for your portfolio.

Counter Trend Signal: This stock has been trading lower and has reached an over-sold condition, from where a bounce higher is expected.

1M/6M Trends: Bearish/Bearish

Technical Score: 1/10

OptionsPlay Score: 100

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Wednesday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

Stocks closed lower yesterday, with the SPX down 27 pts. to 3891.  But they only lost 1/3 of how low they went at yesterday’s midday bottom. That suggests there’s some buying coming in to offset the selling, and of most interest to me, is that after three sessions this week, we’ve only seen last Friday’s close exceeded by six points on just one of those closes. I continue to respect the 3864 weekly bearish Propulsion Momentum level, and if we don’t see a down close on this Friday relative to last Friday’s of 3864, then the odds get better that we could see a bounce from this area – one that could take the SPX back up to test the lower of two trendlines drawn from the Feb. high (about 100 points above current price).

As any of you know who are trading daily, market volatility has dramatically increased in the past several sessions, and trying to get a handle on its bigger move is no piece of cake. I still think that it will ultimately be downward earnings revisions that helps take the market lower from this range, but the day-to-day see-saw movement is going to truly test your skills.

We’ve got three spread positions on that expire Friday, so I suggest you get out of them today or tomorrow morning unless you plan on dealing with being exercised.  These include:

1. Short 2 SPOT $125/$130 call spreads. The stock closed at $125.65 on Wednesday, and we’re down 4.7% on these final two.
2. Long 2 GLD $168.5/$176.5 call spreads. The stock closes at $178.21 on Wednesday, and we’re up 205% on these final two.
3. Short 5 ABBV $145/$150$160/$165 iron condors. The stock closed at $154.06 on Wednesday, and we’re up 79% on these final 5.

Here’s an idea to consider for those willing to potentially get long a name if exercised in 30 days, and if not, collecting the premium. Let’s look at both the daily and monthly charts of LYFT. I see a potential bounce coming from the bottom of a well-established channel. Secondly, the monthly chart shows its first-ever -13 signal (this is an Aggressive Combo one). Combined, it gives me a sense that this is not a bad place to put on a bullish strategy, especially for the longer term if need be and if willing to buy the stock. Using the April 14th $9 strike, you can collect $67 per option sold, effectively making your purchase price $8.33 if exercised.

LYFT – Daily

LYFT – Monthly

BSX Bullish Opening Trade Signal

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Strategy Details

Strategy: Long Call

Direction: Bullish

Details: Buy to Open 12 Contracts April 21st $48 Call @ $1.70 Debit per contract.

Total Risk: This trade has a max risk of $2,040 (12 Contracts x $170) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $170 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish stock that is expected to continue its uptrend.

1M/6M Trends: Bullish/Bullish

Technical Score: 9/10

OptionsPlay Score: 82

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Tuesday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

The SPX rose 1.7% on Tuesday as investors got an inline CPI number that created more comfort that the Fed may actually pause their rate hikes next week, while also getting a sense that the banking issue that hit the markets last week is subsiding. Badly beaten-down regional banks made substantial gains yesterday, recouping significant losses seen over the past few days. Using the weekly SPX chart, the trading range from the bullish and bearish Propulsion Momentum levels continue to be evident, and remains so barring a Friday close this week beneath last week’s close of 3862.

Yesterday we added to our morning Daily Play when I put out a midday update to exit a trim/exit a few more ideas we had on that moved enough to act on, given their proximity to expiration. We were also able to buy the TLT recommendation I put out yesterday morning, as it pulled back into the $104.50/$104 zone I was willing to get long a $104.5/$114 April 6th call spread. We got filled near $2.20.

For today, I see an idea to enter in a long call spread on a S&P 500 stock that is a hair shy from its all-time high. (Obviously, we don’t come across too many SPX names making that statement.) The name is Boston Scientific (BSX), and its chart suggests that a surge higher is likely coming, as price has repeatedly bottom over the past 4-6 weeks on the same level that stood as an almost 20-year resistance level, and more recently as a 3-year resistance level.

BSX – Weekly

The next major catalyst is its earnings report in late-April, but given no seller has ever made money being a seller (as compared to a long-term holder), I’d look to buy a bullish call spread. The best way to play this, in my view, is to simply buy the April 21st $48 call for what yesterday closed at $1.70 mid (Selling the $55 call against it only yields a nickel, and there’s no strikes in between the $150 and $155.) So, this is basically a bet that the stock will close above $49.70 by then, and that’s only $1.40 (or 2.8%) above yesterday’s close. I think that’s reasonable.

Closing Trade

• SLV – 49.09% Gain: Buy to Close 1 Contract (or 100% of your Contracts) Mar 17th $20 Cash Secured Put @ $0.28 Debit. DailyPlay Portfolio: By Closing this Contract, we will be paying $28 Debit. 

Partial Closing Trades

• GLD – 187.24% Gain: Sell to Close 2 Contracts (or 50% of your remaining Contracts) Mar 17th $168.50/$176.50 Call Vertical Spreads @ $6.98 Credit. DailyPlay Portfolio: By Closing 2 of the remaining 4 Contracts, we will receive $1,396 Credit. 
• SPOT – 10.53% Loss: Buy to Close 2 Contracts (or 50% of your remaining Contracts) Mar 17th $125/$130 Call Vertical Spreads @ $2.10 Debit. DailyPlay Portfolio: By Closing 2 of the remaining 4 Contracts, we will be paying $420 Debit. 

TLT Bullish Opening Trade Signal

View TLT Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 6 Contracts April 6th $104.50/$114 Call Vertical Spreads @ $3.05 Debit per contract.

Total Risk: This trade has a max risk of $1,836 (6 Contracts x $306) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $306 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish stock that is expected to continue its uptrend.

1M/6M Trends: Bullish/Bullish

Technical Score: 8/10

OptionsPlay Score: 109

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Monday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

Here’s the good and the bad from yesterday’s price action: Despite the market closing lower on the day, buyers were actually evident with the day posting an “open” candle, meaning that the close was above the open. That suggests institutional buying was seen into the weakness. The “bad” (in the case of overall market direction), is that the lower open relative to last Friday’s close and the lower weekly low gives us two of three steps needed to confirm the last Friday’s qualified weekly close beneath the bearish Propulsion level of 3864. Though this actually helps better define the likely next bigger move, should this Friday close beneath last Friday’s close, we’d see a new bearish qualified and confirmed bearish Propulsion Momentum level triggered, suggesting there’s enough new downside momentum at hand to set up a further decline to 3532, the bearish Propulsion Exhaustion target price. And from my perspective, the more significantly the 3864 level would be breached this Friday, the more likely that 3532 target is a good one.

SPX – Weekly

I write this now – only Tuesday of this week – to help give you my overall thinking of where odds change from what could still be a trading range market. If we see the SPX close above 3864 on Friday, then the signal is not officially triggered, and we may still be in the trading range bounded by that level and 4148 on top.

For now, we still have to deal with the inflation numbers coming out today and tomorrow, and of course, that means we can see the market move sharply depending upon how they come in versus expectations. Certainly, volatility has picked up with the VIX in the mid-20s from what was recently under 20.

For a new Daily Play idea, I do think bond yields will not get back over 3.80% on this current move, and as such, I want to buy a minor pullback in the TLT. Looking at the daily chart, I would aim to get long into the highlighted yellow box, which is $104.50 to $104. This level could be seen today or tomorrow, so that if that occurs, we’ll want to buy the April 6th $104.5/$114 call spread for what is the then current bid/offer mid-price. (Yesterday, this closed at $3.06, or 32% of the strike differential).

TLT – Daily

Partial Closing Trades

• SPOT – 31.58% Gain: Buy to Close 3 Contracts (or 40% of your Contracts)  Mar 17th $125/$130 Call Vertical Spreads @ $1.30 Debit. DailyPlay Portfolio: By Closing 3 of the 7 Contracts, we will be paying $390. 
• GLD – 98.77% Gain: Sell to Close 2 Contracts (or 1/3 of your remaining Contracts)  Mar 17th $168.50/$176.50 Call Vertical Spreads @ $4.83 Credit. DailyPlay Portfolio: By Closing 2 of the remaining 6 Contracts, we will receive $966.
• CLX – 48.97% Gain: Sell to Close 2 Contracts (or 25% of your Contracts)  Apr 21st $155/$145 Put Vertical Spreads @ $4.32 Credit. DailyPlay Portfolio: By Closing 2 of the 8 Contracts, we will receive $864. 

ADM Bullish Opening Trade Signal

View ADM Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 14 Contracts April 21st $77.50/$75 Put Vertical Spreads @ $1.03 Credit per contract.

Total Risk: This trade has a max risk of $2,058 (14 Contracts x $147)  based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $147 to select the # contracts for your portfolio.

Counter Trend Signal: This stock is currently trading lower but is expected to bounce higher from support. 

1M/6M Trends: Bearish/Bearish

Technical Score: 3/10

OptionsPlay Score: 85

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Friday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

Stocks got rocked on Friday as the SVB story got worse, and California shut the bank. Regional bank stocks were walloped for significant losses, and all the mess dragged ths SPX down to 3862 – two points beneath the key support level I’ve targeted for a few weeks already as what needs to hold up to reduce the odds increasing of a test of the 2022 lows. Two points is just two close to make the call, but with last week’s downmove already qualified (by a lower Friday close two weeks ago relative to three Fridays ago), if this week sees a lower open on Monday morning; a lower low this week beneath last week’s low; and a lower Friday close relative to last Friday – we’d get a qualified and confirmed breakdown of that weekly bearish Propulsion Momentum level of 3864, with a Prop. Exhaustion level measured to 3532 (essentially, by chance, last year’s low area).

As I write this Sunday night, I see S&P futures up 50 points from their 4:15 settlement on Friday. This is no surprise, given just how close the SPX hugged that very important support level on Friday’s close. (If today doesn’t open lower at 9:30am, then the bearish Prop. Momentum signal cannot be made this Friday, regardless of how the market trades this week.) So, those who are in the bull camp got their ideal entry point right on the close Friday.

I’ve declared that we are likely in a trading range, bounded by approx. 4148 on the top and 3864 on the bottom. We’ve now seen both those levels trade in the past six weeks, so right now, we’ve got the main resistance and support levels pegged correctly.

I’m still in the camp that the market will likely ultimately head lower to test those 2022 lows – mostly from my belief that earnings revisions will fall sharply before all is said and done. And that will not come while seeing stocks hang out near being unchanged on the year; they will fall on those earnings estimates downward revisions when analysts realize that “The king has no clothes”.

We are up 32% on our short SPOT call spreads. They expire on Friday this week. Let’s take off 3 of 7 today.

We are up 99% on our long GLD trade. Let’s exit 2 of 6 of the long call spreads today.

We are up 49% on our long CLX put spreads. Let’s exit 2 of 8 of them today.

For a new trade idea, let’s play for a quick trading bounce in beaten down Archer Daniels Midland (ADM) as it had an active daily Sequential -13 signal from early March that has slid to its Risk level while also marking a new Combo -13 signal on Friday. Calls are too pricey, so let’s look to sell the April 21 $77.5/$75 put spread for what was priced on Friday’s close at $1.03 mid. It collects 41%.

ADM– Daily

Investment Rationale

Investors faced new bearish news on Thursday, with Silicon Valley Bank (SIVB) coming under selling pressure that you rarely see from a S&P 500 name. It dragged other financial stocks lower on concerns of spillage to other banks, and the SPX closed down 74 points in what proved to be a very ugly session.

SPX – Daily

This picture is a worsening one, now trading lower than the early March low, and potentially heading next to test the December lows and the Propulsion Exhaustion target at 3779. Obviously, today’s unemployment report and next week’s inflation numbers will materially affect the Fed’s rate change on Wednesday March 21. The one thing I can tell you is that I will continuously look to fade market rallies so long as the SPX remains beneath 4148. In SPY terms, that resistance is likely now in the 401 to 404.50 zone. Should we get up there today or any day next week, I’d be leaning into that rally to stay with the idea of reducing overall long-term exposure to the market – something I’ve personally been continuously doing for the past 12 months.

Investment Rationale

Stocks see-sawed most of yesterday’s session, but in the end, the SPX closed up 6 points. Fed Chair Powell is done with his testimony, and today may be a quiet one as most investors will wait for tomorrow’s unemployment report before potentially making new commitments to the market. Powell made it clear that the jobs report and next week’s CPI figure will influence their rate decision next Wednesday.

I have now just spent over 45 minutes looking for a new DP for today, and almost every name I looked at is above near-term support and beneath near-term resistance, just as the SPX is. With a big number coming out tomorrow, I will reiterate what I said in Monday’s webinar: Don’t push to trade this week. (In fact, I did a video on the subject “Sometimes the Best Trade is Not to Trade” for my InTheKnowTrader.com site on Tuesday. It’s available for anyone to watch for free on YouTube.  Here’s the link: https://youtu.be/F4tcBUzFX_Y.)

If you’ve been watching the market movement this week, other than the decline after Powell’s comments on Tuesday, it’s been very choppy and directionless. Tomorrow will be the next catalyst for a potential decent directional move, and much of it will likely be done before the NYSE even opens. Again, unless you think that you personally have a major edge over some of the smartest people and computers on the Street, trying to guess which way the market will move tomorrow, today, is not a game I want to play while we’re in between important support and resistance levels.  I hope you’re not disappointed that I’m not putting out a new idea today, but I can tell you that I have absolutely no plans to trade today knowing how important tomorrow’s number will be. I look at it as preservation of my capital, but I’m also waiting for the market to get out of its trading range and make a more definitive directional move that we then have a greater chance of further exploiting.

Any market pundit who tells you with high confidence which way the market is going is simply hoping they are correct (and is silently very much worrying that they are not). But the reality is that right now, no one can really know if the strength of the economy will be offset by the bond market’s indication of a recession. So, take the bullish bias of the Tom Lee’s of the world and the bearish stance of the Mike Wilson’s of the world, and put them on the backseat. Neither has been right at all this year, nor even been willing to adapt to what the market is actually saying.  Right now, I’m neutral the market, and staying with that call until I have evidence that the next real move is at hand.