The market seems fairly convinced that either the conflict with Iran will end or it simply won’t matter for corporate earnings growth.  When interest rates were rising, I was certainly a bit more skeptical, but now that interest rates are falling again, I’m more likely to believe.

But there’s a real problem here.  When I see moves like what happened yesterday in Micron (MU), and what we’ve seen in many other semi-conductors recently, it’s clear that the market has a favorite sector and is willing to buy at virtually any price.  The bears keep losing and now appear content to stop losing and let the bulls run wild.  But IF something starts a sell-off, the most loved sector can quickly become the fastest falling sector.

As a result, I’m still looking over the Stock Forecast Toolbox ideas and evaluating ways to insulate myself from the risk of liquidation.  Trading semi-conductors feels like gambling, and I’m focusing on a professional trading strategy.  Professional trading strategies aren’t focused on gambling, they are focused on finding predictable and reliable income.  And one way to achieve that right now appears to be in Expedia (EXPE):

EXPE is boring.  And boring is good when the right options strategy is utilized.  From a technical perspective, EXPE has found firm support at $210, and while there may (or may not) be further upside from here, the reliable and boring trade is to focus on where EXPE is struggling to go – down.  It may go down a little, but $210 seems like a big hurdle for the bear.  And the Forecast Toolbox agrees:

I didn’t stumble upon EXPE by accident.  I looked through the Forecast Toolbox for ideas that weren’t in semiconductors, weren’t in oil, and weren’t all that exciting.  There’s plenty of ideas in the more “exciting” sectors, because the patent-pending AI model is certainly aware of the massive money-flow that’s running into semi-conductors and other tech names.  But it’s also able to identify setups like EXPE that suit a completely different trading strategy: the put credit spread.  For EXPE, I can do a bit further evaluation in the morning, but right now, I’m looking at an opportunity to generate some income by selling a June 5th $210/$207.50 put credit spread, currently priced at $0.54.  For every put credit spread I sell, my maximum profit is $54, and my maximum risk is $196.  While that may not seem exciting, what is exciting is the probability that it pays off.  And the return on risk of 27.5% for a week and a half is a lot more exciting than the stock chart itself.  That’s a recipe for success, as long as I use the right options strategy for the setup!

As the market continues to show sector and stock strength as well as opportunities in seemingly boring, but highly predictable stock patterns, be sure to take advantage of the free 7-Day Trial of the Stock Forecast Toolbox!

If you have any questions, never hesitate to reach out.

Keith Harwood

Keith@OptionHotline.com