July 21, 2017

Still Range-Bound Near the Top

Keeping it short tonight.

After the worst day since November, the market was able to get back on its feet and rally back near the highs set a few days ago. I am still comfortable selling bear call spreads above the recent highs and the chart below from my esteemed colleague and friend Tim Knight shows why.

 

As you can see we are touching a long-term trend line and given the recent price action around this level I expect to see a short to intermediate-term pullback. But the most important aspect of this long-term trend line is the fact that I am able to sell options well above this level to give the margin of error that creates a high-probability trade. Yes, it’s that simple.

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