Davis Martin purchased options on the iShares MSCI Brazil Capped ETF, straight off of the 100-day moving average on Monday, calling the chart a gap-down reversal pattern that he thinks could net him big profits in the next few days or weeks. Martin purchased six January 19 $40 call options while EWZ shares were trading at roughly $39.50 and thinks the ETF could hit roughly $43. His Raging Bull colleague, Petra Hess of PetraPicks.com, made EWZ one of three single-country ETFs she was looking at for possible trades earlier this week, based on a “rounded-bottom pattern,” which Martin said is effectively a “gap-down reversal” by a different name.
Martin said that he is not buying more contracts on a move lower and that he’d stop out of the trade if EWZ were to fall back to the 100-day moving average line; he said that a good entry point on the EWZ options would be in the range of $1.57 and $1.70, which equates to the mid-$39 range on EWZ shares.
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 interview was recorded on Nov. 8, he held six Jan. 19 $40 options contracts on the EWZ and was planning to trade them in accordance with this discussion. he Raging Bull podcast features experts from the site talking with Raging Bull editor Chuck Jaffe on his show, “Money Life with Chuck Jaffe.” You can learn more about Chuck’s daily hour of market and personal-finance chat at MoneyLifeShow.com; you can subscribe to the Raging Bull podcast via iTunes and other podcast providers.