The broad indices (S&P 500, Dow Jones Industrial Average, and the Nasdaq) sold off today led be profit taking in the tech sector... at least that's the story. However, regardless of the reason, the facts remain that prices are considerably lower than where they were yesterday! You can take a look at the individual stocks that comprise any one of these indices and find that the majority of them are down. The only question that remains is will there be a continued selloff carrying into tomorrow? or is this our long awaited correction? If this is our correction, do we buy the dip?
If anyone attempts to answer this question telling you that they know what will happen tomorrow, they're lying. All of my indicators could by flashing BUY BUY BUY and tomorrow could still up being another down day. That said, take a look at the chart of SPY above. It has been a while since we have neared the 21 day EMA. It has yet to reach it but it came very close today. These EMAs are not self fulfilling by themselves... only if enough people take action on them. So more than likely we could see a continued sell off to the 21 EMA tomorrow. I think the 21 EMA is where the SPY is heading. We have had 5 months straight months of gains...
Options at this point are overpriced since the VIX is spiking as a result of the selloff. So bulls should think about selling put credit spreads rather than buying calls out right. If we pull back to the 21 day EMA... I think the markets will take their sweet time moving back up. Common option strategies for sideways moving markets include selling iron condors, iron butterflies, and straddles... These strategies might not be a bad idea since Theta decay is on your side. If volatility is more your thing, then consider buying straddles, strangles, or long iron condors... but be prepared to pay a hefty price!
Rather than trading options, I think buying the dip could be considered for long term stock trading plans...mainly because stocks don't have an expiration date like options do. Take advantage of this temporary dip and take a look at your favorite stocks. Ask yourself if you are happy with the current prices. Imagine you buy the stock today and then tomorrow or even in the next few weeks, the stock drops more. Can you handle seeing that? If you are not sure what you should do, try reaching out to a trade coach for some assistance. Trading involves risks... so should you buy the dip? Only you can answer that question.
If anyone attempts to answer this question telling you that they know what will happen tomorrow, they're lying. All of my indicators could by flashing BUY BUY BUY and tomorrow could still up being another down day. That said, take a look at the chart of SPY above. It has been a while since we have neared the 21 day EMA. It has yet to reach it but it came very close today. These EMAs are not self fulfilling by themselves... only if enough people take action on them. So more than likely we could see a continued sell off to the 21 EMA tomorrow. I think the 21 EMA is where the SPY is heading. We have had 5 months straight months of gains...
Options at this point are overpriced since the VIX is spiking as a result of the selloff. So bulls should think about selling put credit spreads rather than buying calls out right. If we pull back to the 21 day EMA... I think the markets will take their sweet time moving back up. Common option strategies for sideways moving markets include selling iron condors, iron butterflies, and straddles... These strategies might not be a bad idea since Theta decay is on your side. If volatility is more your thing, then consider buying straddles, strangles, or long iron condors... but be prepared to pay a hefty price!
Rather than trading options, I think buying the dip could be considered for long term stock trading plans...mainly because stocks don't have an expiration date like options do. Take advantage of this temporary dip and take a look at your favorite stocks. Ask yourself if you are happy with the current prices. Imagine you buy the stock today and then tomorrow or even in the next few weeks, the stock drops more. Can you handle seeing that? If you are not sure what you should do, try reaching out to a trade coach for some assistance. Trading involves risks... so should you buy the dip? Only you can answer that question.
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.