| GUY COHEN
A Lion Picks His Spots
Last weekend I noted the S&P was likely to drift lower toward and below its 50-dma and 200-dma Key Levels, and there was likely to be some friction around them.
It did precisely that before bouncing sharply off the 200-dma on Thursday and following through on Friday.
That’s good, and potentially a reason for optimism. But right now I don’t see high-quality setups forming, so I would counsel a bit more patience.
This is where being a lion – not a headless chicken – really pays dividends. Right now is prime lion time, which means observe.
The market can reveal its hand very quickly – literally in just a couple of days – yielding high quality setups for stocks and options.
So, practice observing. The setups we can profit from include probable moves and probable “not moves.”
By “not moves” I mean stocks that might be overstretched or where significant support/resistance as well as other factors preclude a breach of certain levels.
In these select circumstances, an options credit spread can deliver high probability income trades. But as ever, quality always trumps quantity.
Guy | | | | |
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