The market is in a tug of war right now. I wrote about this a few weeks ago and traded the idea using an Iron Condor strategy which you can read more about HERE.
It’s playing out just as expected so far. What this increased range bound volatility means is that there are great trading opportunities on both the long and the short side right now.
The Professor gave out 3 bear trade ideas on Tuesday, and after yesterday’s selloff, they are all trading lower.
The ideas were as follows:
- XBI: Bear flag signaling lower prices are coming up next
- XRT: Break of support signals bulls are not able to hold their levels
- DXCM: Bear flag could show lower prices but buying puts won’t work for this trade
Here’s how DXCM is playing out:
The Professor, Mike Parks, is Raging Bull’s Senior Training Specialist.
Mike is a veteran trader and educator and is adding a level of insight to Total Alpha that can only come from decades of experience in trading and market education.
Mike has incredibly knowledgeable on all things markets and his talent for teaching new traders how to use market signals to choose the right options strategies is unmatched.
XBI
XBI is The SPDR S&P Biotech ETF, it consists of holdings such as Intellia Therapeutics Inc NTLA, Editas Medicine Inc EDIT, Anavex Life Sciences Corp AVXL, Ocugen Inc OCG, and many others.
Here is the Professor’s Note from Tuesday:
XBI is starting to look like it is trading lower from a break of the lower support in a bear flag pattern.
Right now there is still some buying pressure so I want to wait to see what happens and plan to enter this trade a little lower than usual.
My Trade: Buy Mar18 $87 puts once my buy level at $87.82 is reached. Target one at $79.40 with Target two at $73.96.
Here is where the stock is trading as of yesterday’s close:
XRT
XRT is the SPDR S&P Retail ETF, it consists of holdings such as Etsy Inc ETSY, Buckle Inc BKE, Revolve Group RVLV, DoorDash Inc DASH.
Here is the Professor’s Note from Tuesday:
I’m thinking that the market is coming close to a bounce at these levels and I don’t want to preemptively enter a break of a bear flag in case it becomes a bear trap.
Once the price hits and breaks lower from my entry-level of $76.38 I will look to get short at that time.
My Trade: A drop below $76.38 for entry on this trade. Looking to buy Mar 18 $75 puts. Target one is $73.71 with target two $71.21
Here is where the stock is trading as of yesterday’s close:
DXCM
DexCom, Inc., a medical device company, focuses on the design, development, and commercialization of continuous glucose monitoring (CGM) systems in the United States and internationally.
Here is the Professor’s Note from Tuesday:
Another Bear Flag but this time it comes with much higher implied volatility.
Because of this, I can’t simply just buy the puts since I’ll be entering at higher implied volatility levels than I would like on this trade.
By avoiding buying the puts and selling a credit call spread, a trader can avoid potentially getting hurt from both a rise in stock price along with a decrease in implied volatility.
My trade: Sell the 440/450 Mar 18 bear vertical call spread. to collect all profits the price needs to remain below $440 Strike Price. I am looking to collect $2.50 or more credit.
Here is where it’s trading as of yesterday’s close:
All 3 stocks traded lower on Thursday, with DXCM having an extended move to the downside. The Professor does it again!
