We  wrote about Amazon (AMZN) during “20 on 20” a week ago, and recommended a 255/260 bear call spread. Looks like we nailed it, and anybody who took that advice should be very happy right now. AMZN continues to be a range-bound security, and we like range-bound securities. Now we’re going to wait and see if the lower level in this channel is touched… something around $215. 

There’s definitely no trade here, at least not yet, but we think there will be soon. There may be some small support at $240 (the 50-day simple moving average) and if it gets that far, there may also be support at $230, from the 200-day simple moving average. 

If AMZN gets to $230 you can bet we’ll post a bullish note here, as that’s close to the bottom of this slowly descending channel, and we’ll be happy to take another position in what has been a pretty reliable security for the past six months at least.

We’re really, really close to tossing a bearish trade out to our members in MCD. We’ve been watching this bullish run carefully, waiting for a good time to jump in and bet against the bulls, and the time may come tomorrow morning. 

We’ve got all the set-up we need… resistance from the moving average and regression channel. There’s an argument to be made for a small range between the 200-day SMA and the 50-day SMA, and it may be that there’s a short drop followed by sideways movement. We’re going to do our best to put together a trade that could benefit from a short-term drop, which will probably be a credit spread. 

Take a look at this chart and feel free to comment if you’ve got an idea… we’ve got our own brewing and our members may see it tomorrow. If you’re not already a member, sign up here and don’t miss the Options Strategy Alerts!

We’ve got another chart hot and ready for you, and if you’re a bull, it’s not such a… happy… meal… ouch. Puns aside, McDonald’s (MCD) doesn’t look great right now. We’ve had a nice rally over the past month, but we’re getting very near the 200-day simple moving average, which has acted as significant resistance in both previous instances it’s been tested. 

On top of that (or below it, if you’re looking at the chart) we’ve got a year-to-date regression channel that’s been extremely apt at describing MCD’s range. Those two things lead us to believe a bearish trade may be best right now, and we’ll certainly be looking to put one on for our Options Strategy Alert members this week. If you’re not already signed up, you can order here! 

We took a shot at an SLV Calendar Spread Wednesday for our premier members, and although we’re not going to share all the details now, we wanted to give a quick demonstration as to how being wrong isn’t always a bad thing. 

Take a look at this SLV chart - we see “bearish” written all over it. We sold an October (weekly) contract and bought a November contract, and banked on silver going a little lower heading into expiration. We were wrong yesterday, but that’s ok - the discount we got on the November put is still in place (the price of the October put) and we’re still bearish heading into November’s expiration. If we’re right, we’ll make a nice profit on a cheap trade, and if we’re wrong, our losses shouldn’t be harmful. If nothing else, we got a 15% discount on an already-inexpensive put. 

If you want to get these trade ideas hot and fresh, you’ve got to be a Tickertank.com Premier Member… sign up here! 

We just noted a bearish setup in DIA that has yet to be validated. Well here’s a bearish setup in another major indice, QQQ, that is valid and in play.

QQQ has formed a head & shoulders pattern (gray ovals) over the past two months. Yesterday is broke below neckline support (blue line), which validates this pattern. The measured move (pink rectangle) takes QQQ to 65.50, which puts it on on 1-year support (purple line).

We missed the initial break, but will be watching for a retracement to the 68.00 price area to short into.  An AAPL retracement to 660 as mentioned in this article would certainly help that cause.

All in all the indices are noting continued bearish price action, but we are expecting a few upside days which will present excellent bearish strategy entry opportunities.

Noteworthy action taking place on this DIA 1-year chart (click to enlarge). DIA is currently testing accelerated uptrend support coupled with double top support at 133.25.  The double top resides at 136, translating to a 2.75 pattern height (136-133.25). If DIA does in fact break 133.25 support, we expect continued downside to the 130-130.50 range.

It is important to note that DIA must break 133.25 support in the next few business days in order for this assumption to be at all valid.

We see three cases for AAPL based on the chart above (click to enlarge)…

Best Case: AAPL bottomed with today’s low of 623.55

Middle Case: AAPL will retrace to 650-660, then complete the head & shoulders (gray ovals) measured move which takes the stock to 600.

Worst Case: AAPL will complete the measured move pertaining to the 1-year uptrend. The pink rectangle represents the point at which AAPL was furthest away from the uptrend. The height at that point was 175 (640-465). A 175 point downside move from the 650 uptrend break price would take the stock down to approximately 475. 

We think the middle case scenario is most likely, but as you know anything can happen. We are looking for a retracement to 660 in AAPL, at which point we would certainly put on a bearish options strategy.

(click image to enlarge)

1-year uptrend support break + head & shoulders neckline support break could mean AAPL 600 very soon.

We posted a bear call spread on NFLX for our premier members a few days ago, and the last two days haven’t been kind to that trade. NFLX is up almost 10% over that time frame, and our trade has gone from out-of-the-money to in-the-money. We’re not daunted though, and we’re looking to the Netflix chart for a little relief. 

We’re pushing to the top of the post-earnings range from last quarter’s announcement, and nearing an earnings report later this month. 5 of the last 6 earnings responses in NFLX have been negative, including some enormous 20%+ drops. If that happens again our trade will be back on the good side. 

If you’re not already in a trade, this is a pretty good spot for selling NFLX, up against an important price level and with a history of failing to meet expectations. 

AAPL is an amazing company and an equally amazing stock.  Regardless, the current price level should be looked at as a profit taking opportunity in our opinion.  AAPL is a previous all time highs resistance, which could very well result in heavy profit taking and short side pressure.  At this level, we favor taking profits if your positioned bullish in the stock and positioning bearish if you have no position. 

To keep it simple, let’s say we are holding a position in the stock. We would take profits here.  If AAPL manages to break & hold above 640 all time high resistance, we would simply buy the stock again having missed out on a few points…no biggie. If AAPL dips, we would start buying again at 620 (not all in), and again if it pushed to 600.  In the event it went to 575, we would likely be all in again.  So in this example you risk missing out on say 10 points of upside to avoid partaking in 20 or more points of downside.  Makes sense to us.

AAPL created an initial uptrend around 7 months ago.  Two accelerated uptrends spawned from the initial uptrend, resulting in quite the bull run in AAPL.  As of today, both accelerated uptrend support lines have broke and AAPL is testing the initial uptrend support as we speak. If this breaks, we see AAPL testing 550 pretty quickly.  Therefore, a break of initial uptrend in likely to prompt us to place a short term bearish options strategy on the stock.  Until that trend clearly breaks, we have no interest in a bearish position.

It’s been a while since we’ve seen a Head & Shoulders formation as perfect as the one that’s currently on the BRCM 1-year chart.  The height of the pattern is approximately five points with a flat neckline at 34.00.  This translates to a measured move in the 29-30 range if this pattern comes to fruition.

BRCM will need two consecutive closes below neckline support at 34.00 before we get too excited, but it’s certainly shaping up nicely.  Today will make two consecutive closes below 200 day SMA, which may give it fuel to the downside.  Today’s break below 34.00 looked promising for bearish positioning, but it is rallying into the close which diminishes the validity of the neckline break. 

We’re keeping a close eye on BRCM and fully intend to send Premier Members a trade alert on the stock if we get the confirmation mentioned above. 

p.s. - link to this article on twitter to receive an entry credit for our Ultimate Trader’s iPad giveaway!

(click image to enlarge)

The other major indices we analyzed are certainly worth keeping tabs on, which was the point of this exercise.  That said, we saved the best scenario for last.

Nasdaq 100 Futures (/NQ) present a very attractive trade opportunity.  Strength across the board in tech stocks and a parabolic move in AAPL have taken /NQ back to a very defined level of resistance at 2400.  As highlighted by the gray ovals, this 2400 area has attracted sellers numberous times over the past year.  Since we’re so close to the level, a bearish position is worth risking some capital on in our opinion.

To break it down, on the short side there is 30 points in upside risk (2405 stop to give it a little breathing room above 2400) and at least 75 points in downside potential (2300)…probably more like 125 points (2250).  That makes for a worst case 2.5:1 reward to risk, and best case 4:1.

This scenario can be complimented with something like a QQQ Feb12 59/60 Bear Call Spread, which is currently selling for around 0.45 credit.  There are plenty of bearish Options strategies that would fit this scenario, just use your brain and analysis tool to get in the one that you’re most comfortable with if you like this setup.

Given the overall market strength and bullish looking setups in the S&P and Russell, it would not surprise us if they drag the Nasdaq higher through 2400 resistance.  Regardless, the Trader in us must play a set up like this and we intend to send a trade alert to TickerTank Members tomorrow!