The market is looking a bit toppy to me, it could use a bit of a breather.
I guess you can say I am piling on our bond guru Bill Griffo …
And I like a spread very similar to what he recommended.
AND I have the Japanese candlesticks to back it up!
Check out these two charts of the SPY and the SPX, which are basically the same product.
The two green candles that the arrows are pointing to are called the Hanging Man candle formation.
This candle is formed at the top of an uptrend and happens when the stock has traded lower, signaling sellers have come in, but closes at or near the opening price.
The Hanging Man candle has a longer lower shadow and a very small body.
Generally you want to get a confirmation that the trend is going to change.
The fact that yesterday’s candle shows a lower close is my confirmation.
I like buying the SPY Feb5 381/371 put spread paying $1.65.
I am buying the 381 puts with an implied volatility of 15.93 and selling the 371 puts with an implied vol of 21.22 = buying low and selling high.
It’s a nice, low price entry price to take advantage of that down swing.
I will stop my loss on this spread if it trades below $.95.
My TWTR put spread I sold at $2.36 is still looking good trading $1.40. Don’t forget we need to buy it back before earnings on Feb 9.
Also, my SLV trade is up slightly but we have 53 days left and we only spent $.50, I am sticking with it.
Keep your eye on that GME, it will be interesting.
Thanks for reading … See You Next Tuesday!
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