Apple and FOMC Likely To Spook the Market – Buy A Few Puts This Week

April 26, 2016
Author: Peter Stolcers, Founder of OneOption

Posted 9:30 AM ET - Yesterday the market drifted lower early in the day. Buyers surfaced in the afternoon and the damage was minimal. The bid seems light and Apple could disappoint after the close. Global credit concerns have eased slightly and the FOMC statement should be a little more hawkish Wednesday. Whatever gas is left in the tank will be used this week. Facebook and Amazon report Wednesday and Thursday respectively. Once these mega cap tech stocks are out-of-the-way, bearish speculators will get a little more aggressive. I also expect to see profit-taking now that the upward momentum has stalled. My comments yesterday were a bit more bearish and I am seeing signs of exhaustion. The market lacks a catalyst and we will be lucky to challenge the all-time high. I will buy a few puts for overnight positions this week, but I'm not going overboard. This topping process will take time and I need to see technical confirmation before I aggressively short the market. There are excellent day trading opportunities on both sides of the market. I am using the first hour range as my guide. I prefer buying laggards that are at the low-end of the range. The downside is limited and breakouts through horizontal resistance have room to run. The opposite is true for shorts. I like stocks that have rolled over at the top of their range and that are breaking below horizontal support. During the next couple of weeks I will search for bearish call spreading opportunities. I will be looking for stocks that are weak relative to the market and that have a defined resistance level. I will sell calls above technical resistance and I will use that as my stop. Day traders, look for opportunities on both sides of the market. There will be some excellent shorting opportunities in the next few days. Start lining up some bearish candidates. Swing traders, start looking for stocks that have announced earnings and that are forming a top. Technical support is at SPY $208.30 (minor), $207 and $204. I believe we could test $204 during this wave of selling. That is not a big drop, but it's enough to shake bullish speculators out. I believe Apple will disappoint and the market will be down a little overnight. FOMC meetings have been bullish and buyers will support the market until the statement. Once that news is released, the second shoe will drop and the market will decline. If this scenario plays out, I will have the information I need to get short with confidence. Again, my put positions will be relatively small and I'm not looking for a huge move. If the market rallies after both events, I will keep my powder dry and wait for signs of weakness. The next move is down; I just have to be patient with my swing trades. Until then, I will day trade. We have been making great money day trading in the chat room and we are going to stick with this strategy. . . image

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