My Trade Plan Details:

• IWM Feb 2, $188 puts near $2.00
• Stop: Close IWM above $196
• Target 1: $186
• Target 2: $182

My Reasoning:

A “tired” market doesn’t necessarily mean things are headed lower.  I often see a market like this trade sideways for a while and digest the recent gains.  That can result in a lot of back-and-forth trading action, and it can be very frustrating for traders as they wait for a clear direction.  

When I look at the bigger indexes like QQQ and SPY headed into this week, I still think things are undecided on the direction.  Things are clearly leaning towards the bears right now, but when you look under the hood at market leaders, they still are looking strong.

Now, when you look at interest rates and bonds, you see a different picture.  The Fed’s stance of “higher for longer” when it comes to rates is clearly having an impact on interest rates right now.

That is causing traders to reverse bets on interest-rate-sensitive stocks as they wait for the Fed to make the next move.

One of the most sensitive stocks to rates right now is IWM, which is and ETF that is loaded with regional banks and small-cap stocks.

Those money-losing companies react very poorly to higher rates, and you will see that when you look at the IWM chart over the last few weeks.

I hate to say it, but I see all the signs that IWM is going to continue to head lower.  

So this week, my top idea is…

My Bullseye pick this week is to buy (IWM) puts.

My plan for the week is to get started with a half-sized position on the IWM puts I am targeting (listed below), somewhere near the market open.

Then, I want to add to this trade if IWM trades up near $193-194.

My Trade Plan Details:

• AMD Jan 19, 2024 $145 calls near $1.65
• Stop: Close under $136
• Target 1: $144
• Target 2: $146

AMD options up over 1350% in just 9 days!

My Reasoning:

One of the strongest sectors that looks like it will lead the market higher is semiconductors.

It is tempting to go with NVDA when you want to trade semis, but I think that stock has already made a significant move from the lows.  It will probably still go higher, but I think there are other strong stocks that can make a bigger percentage move this week.

It’s a big list, but based on implied volatility and option liquidity, I am going to go with…

My Bullseye pick this week is to buy (AMD) calls.

I am generally bullish this week. I don’t think this market is going to suffer another loss like last week.  Buyers seem to be returning, and I think it will carry us higher for a while.

My Trade Plan Details:

• NFLX Jan 19, 2024 $470 puts near $5
• Stop: Close over $495
• Target 1: $465
• Target 2: $450

My Reasoning:

The QQQ is now trading under the 20-hour moving average for the second day now.  That is a bearish signal, and you need to pay attention to that.

Because things are slipping, I want to get on the short side of things this week. Of all the large tech stocks, I think NFLX has the most downside potential right now.

They had bad news come out today about subscriber growth, and I don’t think that is fully baked into the price of the stock yet.  That is the main reason that…

My Bullseye pick this week is to buy Netflix (NFLX) puts.

Today, my plan is to get started with a position on NFLX near the open.  I would like to save some room to add more contracts if NFLX bounces to the $485 area.

Remember, this is a week I am betting against NFLX, so I am buying puts and hoping it continues to go lower.

If I am wrong, NFLX will shake off the news today and resume its uptrend. For me, that would mean a close above $495 for the stop loss on this trade.