Looking back at the last week, the market has done some big work to help keep the bulls in control.  As long as the bulls maintain this control, it is very difficult to bet on and hold on to bearish positions.  Given this, what’s the next play in this market?

As I reflect back on the past few weeks and recent bullish price action, I first want to see how my conviction stands in XBI, which appeared to have strong upside at this time last week:

With the price stalling at the 50-Day Moving Average after a $5+ rally, I am now a bit concerned that there is limited upside in the short-term.  Once XBI can break through the 50-Day Moving Average, the upside seems to be a strong probability play, but until then, I’d rather look for an alternative trade.

When you know these key setups, spotting the lucrative Outlier trades gets crazy easy. Click here for your Outlier Roadmap.

So, with that in mind, I’ll start looking at other sectors, with one idea being to look at financials with the ETF XLF:

XLF is an interesting idea given that it has been bullish for months and stalled ahead of earnings.  But, with most financial institutions having released earnings, the next run can be based upon technicals once again.  And now, XLF is back above all my key moving averages and testing recent highs.  A move above the March high would be even more bullish.

Perhaps a more leveraged way to play this, especially given a general delay in the move, is via the regional banks, and for that I’ll look at the ETF KRE:

The trend isn’t nearly as clear here, but the leverage is certainly there.  With a move above the March highs yesterday (albeit only by a few cents), there’s a clear entry point.  For me, I’d be looking to exit if the ETF fails to hold above the 100-Day Moving Average, with potential short-term upside of about 6% before hitting the highs of December.

If this all plays out, though, I like looking at something that’s even more leveraged since I can leverage the trade with options and define my risk in case of an ultimate failure of the company and stock.  So, I’m looking at a higher risk play that could just be getting started, NYCB:

This stock has been on my Outlier Watch List for 2 straight weeks now with different entry points as the potential for a rally increases.  It might be on it for a third given how this move is getting started.  With potential upside to the earnings gap from January putting the stock nearly 100% higher than current prices, I see a lot of interesting potential for leverage in this stock if the regional banks provide a bullish backdrop.  So, with that in mind, take a look at the Outlier Watch List and you can see how I apply options analysis to leveraged and trending stock moves.

As always, please go to http://optionhotline.com 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