Back story: At the end of June, I noted that every time the IWM — the iShares Russell 2000 ETF — tried to push through $142, it couldn’t get there. That said, recognizing a pattern is different from seeing it happen again.

On Monday July 3, I was waiting for a $142.50 test to buy to open 8/18 at the money put options on it for a swing trade. It didn’t get to my price target to start building a position, so I was patient with it.

See why Jason Bond is already in IWM puts

What I am looking for:  Before the holiday weekend, the IWM, time and again, has had troubles making new highs. Instead it keeps bouncing off new highs and presents good short opportunities via buying to open put options.

Pre-market today, it has been trading at $141.32, and I’m expecting the problem to continue.

When I will act/what I will do: I’ve lowered my price target to the IWM at $142 to buy to open put options for a swing trade as price action over the July 4th stock market holiday is indicating a red open and I won’t be the least bit surprised to see some profit taking, as it is long overdue.

Here is a one-month daily chart which illustrates the IWM’s troubles making new highs anywhere above the $142’s for any substantial amount of time:

I’m waiting for an IWM $142 test to come to me to begin building a short position via buying to open put options for a swing trade which might take a little while to succeed. If IWM were to trade above $143 for two hours or more I would stop of out this position.

#-#-#

    Davis Martin is the lead publisher at DailyProfitMachine.com. He trades SPY calls and puts and swing trades mid-large cap stocks and stock options. He has no open positions in the IWM, but is looking to build one as described in this article; he last traded IWM on July 21 $140 puts on June 13 for a profitable day trade.  

 

Be a Better Stock Trader, Starting Today

Get the expert insights, tips and strategies you need to optimize your trading skills and profiles
START NOW