As expected, the market is continuing to break down to that 200-day moving average on economic realities. We hold all open positions, despite this move. Going forward, until the market finds and holds that 200-day, we have to be incredibly cautious.
As promised, though, we also want to get you into the Alibaba trade we’ve been talking about.
After breaking a prior support level, BABA is showing signs of further, near-term decay to the downside. At the same time, we need to hedge for protection should the trend change. After watching this price action, here’s what we recommend doing.
Consider buying to open the BABA January 2015 82.50 put up to $5.50
Consider buying to open the BABA January 2015 90 call up to $6.30.
Only open small positions in these right now. The market is far too volatile and out of balance with these economic realities and issues.
Also note that once the Dow hits that 200-day, we may look to close out an existing position in the DIA November 169 put and open a long-dated call. What we typically see at 200-day is a significant bounce. We’re hoping to see the same.
But at this stage of the game, it’s all a wait and see.
We’ll speak again soon. Thanks again for all the support in this mess we call a market.