The broader markets moved up last week as they historically do into the Thanksgiving Holiday. We hope that everyone had a wonderful Thanksgiving!
What has been strong — technology and Internet — continue to be. Sectors that have been beaten down, like Telecom and Retail, came off of their lows strongly. These two sectors — and some others — have moved up into areas of price resistance, and it will be telling when we see what reaction they have this week.
The Financial Sector eked out a small gain, but it showed relative weakness compared to the broader markets and other sectors. The renewed strength in the bond market has created a headwind in this sector, which had been strong. If bonds continue to move higher, the financial stocks should move lower.
The Russell 2000 Index came roaring back to make a new all-time high, which keeps that part of the bullish underpinnings of this market intact. However, the Transportation Index continued to show relative weakness but did have a marginal gain for the week. The continued strength in Crude Oil is having a negative effect on the transportation stocks, which is no surprise.
There is nothing meaningful to suggest that there will be a meaningful change in the direction of the markets at this time. The market internals that we follow have not reached a bearish extreme yet, but are getting close. It is interesting that the Volatility Index formed a large Bottoming Tail (BT) bar on Friday and we will be watching to see if there’s any follow through to that.
A BT, especially a large one, suggests a move to the upside. A BT as it relates to the Volatility index, historically, when the Volatility index rises the broader markets move lower. At this time, this is only an observation to take note of because it does have a short-term negative implication for the breaker markets. It does not suggest the end of the current uptrend in the markets, however.
DOW JONES INDUSTRIAL AVG.
Above is the chart of the Dow Jones Industrial Average that we review each week. The majority of last week’s gain came on Wednesday with a gap higher and pushed to another new all-time high. That gap was left unfilled and, from a bullish point of view, it should stay that way for now.
Marked on the chart above is a new higher reference point of Major Support (MS) that formed last week. A move below that area in the near term would be bearish since it would violate the uptrend — especially after a new all-time high.
As mentioned, there is nothing of significance to suggest a bearish bias, but we always have our “lines in the sand” as a reference. The ideal bullish scenario is for prices to move above last week’s high and continue to move higher.
BROADER MARKETS
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TREND MATRIX AND INTERNALS
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New Trade Ideas
Below is a daily chart of The Boeing Company (BA).
Trade: Over $267.48, consider (a) shorting Dec (12/15) $260/250 bull put spread (18 DTE) for current mid-point but a minimum of $.65/share (closed at $.83/share), or (b) consider buying Dec (12/15) $255/272.5 bull call spread for a limit of $12.18/share (which has $.30/share positive time decay. Note: Trade (b) is higher reward-risk since more directional.
Technical Setup: Breakout on daily and weekly after bullish multi-week consolidation, strong uptrend all time frames.
Option Strategy: Bull Put Credit Spread (BPS), Bull Call Debit Spread (BCS).
Stop Loss: $264.29 on BPS, $259.98 on BCS.
Below is a daily chart of Target Corporation (TGT).
Trade: Provided it does not open over $56.50, consider shorting Dec (12/15) $58/60 bear call spread (18 DTE) for a limit of $.46/share.
Technical Setup: Bearish Wide Range Bar (-WRB) at d20-MA after Pro Gap down and retracement.
Option Strategy: Bear Call Credit Spread (BCS).
Stop Loss: $58.14.
Below is a daily chart of Best Buy Co., Inc. (BBY).
Trade: Over $57.43, consider shorting Dec (12/15) $55/52 bull put spread (18 DTE) for current mid-point but a minimum of $.43/share (closed at $.50/share).
Technical Setup: Breakout on daily and weekly after bullish multi-week consolidation above r200-MA daily.
Option Strategy: Bull Put Credit Spread (BPS).
Stop Loss: $54.88.
Below is a weekly chart of Sealed Air Corporation (SEE).
Trade: Over $45.83, consider buying stock and shorting Dec (12/15) $46 calls (18 DTE) for a limit of $45.14/share (which is selling the call for at least $.70/share).
Technical Setup: Breakout on daily and weekly after bullish multi-month consolidation above r200-MA weekly.
Option Strategy: Covered Call (CC).
Stop Loss: $44.90.
Below is a daily chart of Intercontinental Exchange, Inc. (ICE).
Trade: Over $68.60, consider shorting Dec (12/15) $67.5/65 Bull Put Credit Spread (18 DTE) for mid-point but limit of $.50/share (closed at $.70/share).
Technical Setup: Retracement after Bullish Wide Range (+WRB) from Triple Bottom daily.
Option Strategy: Bull Put Credit Spread (BPS).
Stop Loss: $67.38.
Below is a daily chart of Lam Research Corporation (LRCX).
Trade: Over $219.50, consider (a) shorting Dec (12/15) $207.5/195 bull put spread (18 DTE) for current mid-point but a minimum of $1.65/share (closed at $1.87/share), or (b) consider buying Dec (12/15) $200/230 bull call spread for a limit of $12.18/share (which has at least $.85/share positive time decay). Note: Trade (b) is higher reward-risk since more directional.
Technical Setup: Continuation Breakout on daily and weekly.
Option Strategy: Bull Put Credit Spread (BPS), Bull Call Debit Spread (BCS).
Stop Loss: $209.98 on BPS, $214.23 on BCS.
Below is a daily chart of General Electric Company (GE).
Trade: Over $18.38, consider buying stock.
Technical Setup: Double Bottom daily and very oversold daily, monthly Climactic Buy Setup.
Stop Loss: $17.69.
Below is a daily chart of Diamond Offshore Drilling, Inc. (DO).
Trade: Under $15.88, consider shorting Dec (12/15) $17.5/20 bear call spread (18 DTE) for mid-point but limit of $.19/share (closed at $.21/share). Note that these strikes are based on an indicated pre-market gap to $49.50 area.
Technical Setup: Bearish consolidation and Topping Tails at 40-MA daily.
Option Strategy: Bear Call Credit Spread (BCS).
Stop Loss: $17.32. Note: If trades over $16.56, we will consider selling a BPS to convert to an Iron Condor.
Below is a daily chart of Deltic Timber Corporation (DEL).
NOTE: We will trade any compelling pattern on any liquid instrument. This is an awesome pattern to sell OTM $95 Strike Calls/Spreads on (bearish daily and weekly); however, look at the spreads on these Dec Calls. They are preposterous and untradable – I wish the SEC would not allow that since any fills are sure to only disadvantage the traders and give a gift to the market makers. We will monitor to see if they tighten and/or watch for a short equity trade.
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All the best,
Greg Capra
Managing Director of Master Trader
Pristine’s Founder and Creator of the Pristine Method
Dan Gibby
Chief Options Strategist
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NOTE: Master Trader will show opening and closing prices of all stock and option trades. We do not recommend proper share size for your particular trading style, risk tolerance, or account balance. We urge you to calculate your own share size based on your individualized risk parameters, Trading Plan, and familiarity with the proposed trade strategy and risk.
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