Broadening

Well, I have definitely been slacking on my posting duties out here in Chicago. But my wife was in town this week, can you blame me?

Before I continue, let me say that if you are ever in Chicago and want to visit the CBOE, don't just show up and expect a tour. They don't do that.

Now to the markets. How schizophrenic can they be?!?! I don't have many positions on. I keep getting in and then kicked right back out. The volatility is crazy, makes me want to day trade. The volatility in the market is making option premiums high creating some good spread opportunities even with expiration coming up in 4 days. But be warned, implied volatility is always high for a reason so monitor any short positions closely and hold on tight.

Last week I got into a credit spread on PCU. I picked up a $1.50 for 10 days w/ a 60% of expiring worthless. Pretty good in my book. It's hanging out right by the short strike but with the overall market at a potential support level I'm expecting it to expire worthless.


I've also got a trend trade going on GNK. It's doing ok, hasn't hit my initial stop yet but I haven't been able to move the stop up yet.


Now for a broad market analysis. I mentioned a couple weeks ago that I was thinking this recent correction could be a significant one. Well, looking at the Dow right now, which has held up a little stronger than the S&P 500 up to this point. However, recently it appears to be forming a somewhat rare pattern called a broadening formation. These can be strong indication of a top if completed. This is how I have it drawn in.


So while the market appears to be at support, and prices may rally from this point, I think it's an excellent time to sell, rather than enter lots of long positions. This pattern will complete with a break of the support line, so be looking out for that.

As far as potential trades, ILMN is looking good for the upside and AZO is still looking good for a bearish trade. Timing an entry w/ AZO has been difficult but I'd like to see it test 122 or so for resistance. My target w/ it is still 100.