Tech continues to lead a market that doesn’t seem to want to rally without tech.  But now we are getting into earnings, so we could be getting set for sector rotation as the individual company and sector fundamental inputs get updated to the market.

Before I jump into an individual company, I want to review a couple of major trends going on.  First, let’s address the tech move:

QQQ continues to rocket higher and follow a bullish trend.  But it’s a very overbought condition with the RSI over 70, which makes it particularly difficult to chase that move.

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So, rather than spending a lot of time on wondering what could drive QQQ higher, let’s check out the financials as we see many Fed speakers this week and earnings starting up this week, as well:

Financials look ready to break out of a consolidation period, but it will really depend on how the core economic data and earnings start up, it seems.  So, with earnings looming, I tend to prefer looking at an entry once a few of the big earnings have come out AND the breakout has occurred.  If the earnings disappoint, then financials are more likely to stay range-bound and of limited interest.

So, is there a trade I can leverage?  I absolutely believe so, and it’s in a sector that hasn’t been getting much interest recently: retail.  While the sector on the whole has been disregarded, the anniversary sale is starting for Nordstrom’s, and with knowledge of how the sales start to look for the fundamental investors, it could cause an interesting breakout from a very rangebound trade:

On top of this limited range and a new fundamental event going on, the implied volatility in JWN stock is at 6-month lows:

Given this, I can really leverage a move by betting that the anniversary sale expectations can be priced in before earnings in 1.5 months.  If that happens and we do get a stock breakout before earnings are released, I can get leverage in the options market by trading options that expire before the market is pricing in the move occurring.  In other words, if I can have a simple technical move, with the possibility that speculation on the anniversary sale triggers that technical move, I have a potential for a big winner!

There are many other financials and other sector names in my Outlier Watch List, so if you’re looking for more names like this, make sure you check it out!  With the list, I show how these technical signals can be leveraged in various underlying stocks.  So, make sure you check out my Outlier Watch List, where I give a long list of stocks I’m considering for bullish and bearish entries via options.

And as always, please go to to review how I traditionally apply technical signals, volatility analysis, and probability analysis to my options trades.  And if you have any questions, never hesitate to reach out.

Keith Harwood

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