The set-up: Almost every sector is overextended right now, especially big technology where I am hoping for some big earnings misses to set up potential buy-the-dip opportunities.

Retail normally is too boring for me to trade, but it’s is the one sector that isn’t looking extended right now, so that’s the pond you have to look at fishing in right now.

What I’m watching: I’ve actually never traded the SPDR S&P Retail ETF (XRT) or the two stocks I like the most in the retail sector, but the chart on Macy’s (M) looks like a double-bottom bullish setup, while the Gap Inc. (GPS) chart is showing signs of green here in the pre-market.

If I decide to trade call options on these today, I’ll use a hit-and-run strategy, in and out as fast as possible with a modest 10 percent profit target, but also tight stops.

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Davis Martin is the head trader at DailyProfitMachine.com. He trades SPY Calls and Puts and swing trades mid-large cap stocks and stock options. At the time this commentary was published on RagingBull.com, he had no shares, options or open orders on M, GPS or XRT, having never traded any of them before, but he was planning to watch their charts Tuesday looking for an options play as described in this commentary. RagingBull.com editor Chuck Jaffe – who worked on this story – has shares of GPS in his portfolio; he is a long-term investor in the stock.

Author: Ben Sturgill

Ben leads two services at RagingBull. IPO Payday can help you pinpoint, position, and profit from IPOs. In Daily Profit Machine Ben guides day and swing traders to profit by trading the SPY Index. Ben hosts the RagingBull.com weekly podcast WealthWise where he shares thoughts on wealth and success with traders, businesspeople, entrepreneurs, and experts to uncover and share the wisdom needed to live a wealthy life.

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