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We Like Down Opens
www.oneoption.com
Our best day trading set up is to wait for support when the market gaps down and to buy.
PRE-OPEN MARKET COMMENTS MONDAY – The market continues to float higher and the 25 basis point rate cut did not produce a move last week. A more dovish tone and the possibility of two more rate cuts this year should keep buyers engaged. The volume was heavier than normal, but much of that was related to triple witching.
The news is light this week. This will be our final look at Q2 GDP and that release won’t have much of an impact. Is the government going to shut down? That’s doubtful and even if it does, it won’t be for long. The market is not worried about that outcome because politicians always reach an agreement at the last second.
Global markets were mixed with marginal moves higher and lower.
When we don’t get a nice pullback in August/September, we don’t get a nice snap back rally into year end. Seasonal weakness ends in a month and then the seasonal strength begins. I don’t see any speedbumps ahead and a gradual grind higher into the end of the year is very likely.
Overnight gaps down provide us with good entry points for longs and while the market probes for support we can identify stocks with relative strength. This is our best trading set up. Wait for market support and buy the strongest stocks when we have it. This is the tactic we’ve been using for the last few months.
There are opportunities to sell out of the money puts on some of the high fliers that have extreme IVs. As long as you hold half of the strike price in reserve you can buy the stock at a good price. If you don’t get assigned, you’ll generate a nice income of 5-10% in a month. Make sure you sell the puts below technical support so that your odds are higher. If you do get assigned, you will buy a hot stock that has shown great strength at a good price.
Support is at $654.30 and resistance is at $665. That is last week’s range.
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