Day Traders – Wait For Support and Buy This Dip – Sell Bullish Put Spreads

March 24, 2016
Author: Peter Stolcers, Founder of OneOption

AVOID THIS DEATH TRAP - COMMON TRADING MISTAKE - PURE EDUCATION Posted 9:30 AM ET - Yesterday the market pulled back and we are seeing follow-through selling this morning. The last leg of this rally was fueled by quadruple witching and I expected weakness this week. The market will open at the 200-day moving average this morning. That level will attract buyers and I believe the damage will be contained. I've mentioned throughout the week that I want to fade early gaps. I will be day trading from the long side early this morning. This might be the only good move we get today. After that, I will use the first hour range as my guide. In all likelihood, I will NOT trade the second half of the day. I have not been able to find decent bullish put spreads because the market has been able to tread water. This dip might present some opportunities and I will spend most of the day looking for attractive candidates. Cyclical stocks have run up on short covering and they are ripe for shorting. I believe we will see rotation out of cyclicals and into tech. Consequently, I know where to look for shorts and longs. The news will pick up next week. Official PMI's, ISM manufacturing, ADP and the Unemployment Report will be posted. The magnitude of this rally suggests that this topping process will take time. I will not buy puts at this stage. The 100-day moving average is a major support level and buyers will scoop stocks ahead of earnings season if we get that low. Any sustained decline is not likely for another month. Look for strong stocks and try to sell out of the money bullish put spreads. This option trading strategy will allow you to distance yourself from the action and you can take advantage of time decay. I am expecting the 200-Day MA to hold through April options expiration. From a day trading standpoint, wait for support and buy strong stocks when the market bounces. Keep your trade count down and reduce your size. Happy Easter . . image

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