Stocks have been hammered this and are close to breaching the “Death Line.”
If stocks fall below this level again, I (Jeff Bishop) think the market will be in big trouble. I hope you’ve taken my advice to hedge your positions, reduce your positions sizes and if you’re a newer trader, sit this one out. If so, you’re probably feeling pretty good right now.
Since the markets are in the Danger Zone, I’ve asked Davis Martin to give me his take on what’s going on in the market right now. As you know, Davis trades SPY — an ETF that tracks the S&P 500 — every morning through his Trade of the Day alerts.
After that, I’ll tell you about a stock I actually like to the long side. It’s one of only two or three stocks I’d touch right now… It’s got a great chart setup, and I’ll show you exactly how I’m playing it.
But before that, I want to remind you that you can now watch Jason Bond’s FREEDOM TRADER replay for a limited time. Jump to 1:00:14 to see exactly how “THE HORIZON” works — the one line that generates easy profits. Jason guarantees it works.
Davis Martin Interview: How To Make 200%-Plus In This Market
Jeff Bishop: Davis, I’m telling my members that the market is in a precarious position right now. We’re getting close to SPY $280, which was a major low recently. I’m calling that the “Death Line” — a break below that and I think we could see a quick 5%-plus drop.
What are your thoughts?
Davis Martin: Hey Jeff! Yes, I completely agree. Right now $280 is the critical level SPY must hold.
I told my members before the market opened today that if $283 support failed, to look for a move to $280. We’re starting to get very close to that level as I type this.
Jeff Bishop: What was your Trade of the Day today? And what did you see pre-market that led you to it?
Davis Marin: My trade this morning was SPY May 29 283 Puts.
Markets were red premarket this morning, but that’s not why I went with puts. In fact, I often play red to green moves and vice versa.
But today European markets were all down 1% or more. Over the years, I’ve noticed that red to green moves are extremely rare when European markets are also down.
On top of that, I generally wait for a trigger to enter my trade. It can be as simple as a moving average crossover or using head and shoulder patterns. In today’s case, a clear trigger would have been breaking below $283 support.
Jeff Bishop: Nice one! Were members able to cash in?
Davis Martin: Heck yea! Those options are up over 200% right now.
Obviously, not everyone made that much. A lot of them took profit at 30%-80% in first couple of minutes after the market opened, but others… well, let me show you:
dan mil: +170% on SPY puts BOOM!
michelle all: sold 285.5 puts 4.03 from 1.94 +207%
peyton jon: Davis – TY for your interpretative sessions in the morning. They really assist with my trading sessions. Up 122% done for day
jason bat: Dang 125% win
benjamin joh: Davis, that’s 10 of 11 green trades since coming back in this room beginning of May. Love that I can get back to work now, only 9:35
Jeff Bishop: That’s fantastic… can you give us your Trade of the Day for tomorrow?
Davis Marin: Unfortunately, no. My Trade of the Day is largely based on US. premarket action and how international markets trade are performing (many of which have not even opened yet). It’s why I wake up at 3 a.m. ET, so I can get ahead analyzing foreign exchanges before moving onto U.S. futures.
But I will say this, I only plan to trade in the morning tomorrow. Volume tends to dry up in the afternoon before long weekends (the market is closed May 27 in observance of Memorial Day).
I also tend to close most of my options positions before a long weekend due to the extra time decay. There’s also more days for a presidential tweet or other news to spook the market. So I’m playing it safe right now.
Jeff Bishop: Thanks for the tips today!
If you want to receive Davis’ Trade of the Day tomorrow morning, you can sign up here. It’s the perfect way to start your day and the first thing I read each morning.
Today’s Trade: Strength During Weakness
When markets are in a precarious place like they are today, you need to be extremely selective with your trades. That’s especially true if you’re taking a long position when markets have been weak.
One way to weed out most stocks is to look for companies showing strength when the rest of the market is weak. That’s what put Constellation Brands (STZ) on my radar this week. Check out how well it’s holding up:
The company is well-managed and in a very defensive space (it’s a $39 billion company that produces and markets booze — it’s not going anywhere).
So I bought STZ JUN 21 2019 210 Calls today. I’m up about 7% on the trade right now, but would be willing to add to my position if it falls lower.
To get my Weekly Money Multiplier alerts and access my live portfolio, join me here.
Jeff Bishop & Jason Bond