For Thursday: Equities ripped higher on Wednesday on news that the most hawkish Fed doesn’t come till sometime in March. Without more put buyers, dealers were forced to buy back futures for a reflexive rip back toward ATHs in $SPX and $NDX. If not for an important OPEX on Friday, those new highs are all but assured.
In the meantime, we see some stocks ripe to run out of steam soon. One of those is $JNJ. She’s run 10% in a little more than a week and the near-term profile is thin. If the stock is unable to find more buyers to get ATHs, then we see a path back to 165, the yearly VWAP. Since $JNJ has a low IV, we can construct a low-risk idea around a move back to 165.
|OPPORTUNITY?||Put Debit Spread buy 165/ sell 160 for $.72 debit|
|IDEA?||JNJ has exceeded their monthly expected high and the profile is thin. If sellers come in, good chance for return to 165 price|
|RISK?||Max Loss is $72 per spread – Max Gain $480|
|HOW WILL I KNOW THAT I’M RIGHT?||JNJ accepts back below 169.40|
|HOW WILL I KNOW THAT I’M WRONG?||JNJ unable to accept back below 169.40|
TO FIND OTHER IDEAS LIKE THIS: