NEW DIRECTIONAL PUT PLAYS
iShares Russell 2000 ETF - IWM - close: 77.85 change: -1.05
Stop Loss: 80.05
Target(s): 72.00-70.00 zone
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see below
Why We Like It:
The market appears to be breaking down as investors find little reason to buy stocks given so many concerns over slowing growth and issues in Europe. The small cap IWM ETF has created what is arguably a bearish head-and-shoulders pattern. A breakdown under $78.00 should signal a drop toward the $72.00. Unfortunately there are several moving averages in the $77-78 area that clouds where potential support could be (200-Ema, 300-dma, 150-dma).
Therefore, I am suggesting a trigger to buy puts on the IWM but only if the IWM closes under $77.00. We'll buy puts the next day with a stop loss at $80.05. Our multi-week target is the $72-70 zone.
FYI: The Point & Figure chart for IWM is bearish with a $73 target.
Trigger: a close under $77.00, buy puts the next morning.
- Suggested Positions -
buy the Jul $74 PUT (IWM1221S74) current ask $2.42
Entry on May xx at $ xx.xx
Earnings Date --/--/--
Average Daily Volume = 53 million
Listed on May 12, 2012