FOMC and Facebook Will Attract Buyers – Sell Bullish Put Spreads If You See This Pattern

January 27, 2016
Author: Peter Stolcers, Founder of OneOption

WATCH US SELL BULLISH PUT SPREADS TODAY - FREE TRIAL Posted 9:45 AM ET - Yesterday the market rallied early in the day and it was able to hold the gains. This is a good sign. With each passing day, the bid should strengthen. Apple posted a decent number, but the macro picture is deteriorating. They are reliant on cell phone sales and growth is slowing. Apple continues its search for the next big product and the stock is weighing on the market. The FOMC will release its statement this afternoon and their rhetoric will be dovish. They want to calm nerves after a global market meltdown. This should be a bullish event. Facebook will post results after the close and they should be excellent. Microsoft and Amazon will post after the close tomorrow and the results should be good. In general, earnings will attract buyers. Bad news is priced in and the strongest companies post early in the cycle. I believe the SPY will rally in the next two weeks. I'm not looking for a big move, but we could reach SPY $200. The closer we get to that level, the more bearish I get. On a temporary basis the market has a few things working in its favor. Oil is establishing support, China's economic numbers are okay, we have not heard of any shadow banking defaults in China, the Fed will post dovish comments and stock valuations are fairly attractive at this level. Even if the market simply treads water, this options trading strategy will make money. I am selling out the money bullish put spreads on stocks that post strong earnings. Yesterday I sold puts on SWFT and I will be looking for new candidates today. I trade a specific pattern. First I want to see a strong base that formed when the market was still going down. Ideally the stock has compressed. I must see a breakout through horizontal resistance. I need to see a buy signal from my system and strong volume. If I have all of these elements I can either sell puts below the breakout or if the compression is extremely tight I can sell puts below the base. Regardless, I buy the puts back if the breakout/base is breached. I will also be day trading from the long side today. Look for a bullish day and watch the bid grow stronger each day. I'm not overly concerned with a nice rally, but I do want to see SPY $187.50 hold for the next few weeks. . . image

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