After trading the home builders and the DIA for quick 15-day gains, we now have an opportunity to trade the downsides.
Toll Brothers (TOL) – for example – just gave us returns of 44% and 65% gains on the long side. But the stock is now over-extended to the upside, having refilled the bearish gap. MACD and RSI have also become over-extended.
Because of that, we expect to see near-term reversal down. To profit, we’re recommending that you buy to open a small position in the TOL December 2014 36 put up to $3. Do not risk the house. The market is a bit wild again.
We’re also recommending that you buy to open a small position in the DIA November 2014 169 put up to $4, as the Dow becomes technically over-extended. Whenever RSI gets this toppy, we see temporary reversal down. When we traded the DIA calls last week, we took gains of about 62% and 27%.