Below is a monthly chart of SPDRÂ S&P Biotech ETF (XBI).
Trade: Over $99.08, consider buying the ETF.
Technical Setup: Breakout to all-time highs from bullish consolidation, great relative strength to market.
Stop Loss: $94.88.
OPEN ETF POSITIONS WITH TRADE UPDATES
6/11: IYT – Trade: Bought IYT and sold Jul (7/20) $200 call options for a debit of $195.85/share.
Original Technical Setup: Breakout daily and weekly with price void above, with multiple bullish Bottoming Tails (BT) on the weekly chart.
Option Strategy: Covered Call (CC). Used to reduce cost basis on IYT. For further discussion on the strategy, please see our video at https://mastertrader.com/option-strategies-series-definitions/
Trade Update: After breaking out and consolidating, last week IYT closed with a Bullish Engulfing Bar, possibly setting up a higher low above the r20-MA. Looks great on all time frames.
Adjusted Stop Loss: $192.97 (which is under weekly BT bar).
6/4: SPY – Trade: Bought SPY at $275.01.
Original Technical Setup: Bullish consolidation at the high end of a Bullish Wide Range Bar (+WRB), followed by a Bullish Breakdown Failure (+BDF) reversal.
Trade Update: Because the broader markets got overbought and some of our market internals (i.e., sentiment indicators) suggested a short-term top, we sold Jul (7/20 expiration) $282 call options for $1.10/share, reducing cost basis to $273.91.
This is what we refer to as “legging into a covered call.” We do this after momentum slows to increase our total returns and lower our cost basis by the premium received. For further discussion on the strategy, please see our video at https://mastertrader.com/option-strategies-series-definitions/
Last Friday, SPY gapped down under the stalled consolidation but closed with a Bottoming Tail above the r20-MA. Weekly and monthly charts are still in bullish uptrends so looks fine.
Adjusted Stop Loss: Maintain $274.17.
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Greg Capra
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Trading the Pristine Method — Origin and End
Dan Gibby
Chief Options Strategist
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