Make This Play on the S&P 500 for a Quick Profit Pop

Shah Gilani|February 27, 2023

It’s the start of a new trading week, and that means it’s time to look for a new opportunity to Flip the Chart.

Instead of targeting an individual stock, we’re going to target the entire stock market, in response to some trends I see developing.

When I look at the S&P 500 based on last week’s trading, which was the worst week since December, and I see stocks closing the week up off Friday’s early session lows, I think we were seeing traders simply “monetizing the puts” that they had purchased earlier in the week.

Fast forward to today’s session, stocks opened the new week higher, and the S&P 500 is heading back toward 4,000. If we can hold above 4,000, we could see more money flow back into the market.

But that’s a big “if” – and it’s not the way I see things playing out. Given the widespread narrative of the Fed raising rates higher and holding them there for longer, I just don’t see stocks breaking out to new highs, at least not in the near-term.

The rally off of the October 2022 lows created a nice uptrending channel. Had we stayed in that channel, technically, I think we could see stocks pushing higher – but that’s not what happened.

Instead, stocks broke through that channel last week. Now, it’s going to take a lot of buying pressure to keep stocks above 4,000.

Even though we’re up in Monday’s session as I write this, I still think the bias is for stocks to trade lower.

With that said, I like buying the SPX March 29, 2023 4000/3990 Put Spread for $4.50 or less. Capture profits at 50% and exit the trade if the spread is down 50%.

That’s it – nice and simple. Keep an eye on your inbox every Monday for another trade!