Something a little different this weekend, focus on a new, solo high probability trade. It won't take much for the trade to unfold in the indicated direction, if not early this coming week, then certainly by the week after. Risk is the usual -50%, but the potential reward is in excess of 200%-300%. Trade of The Week As promised in yesterday's Into The Close, this is a highly leveraged bet on the inverse of SMH, the Semiconductor Index, i.e., SOXS, which is the 3X times Bearish Semiconductor ETF. Since the March 30th lows, SMH has risen 22.5% and for eight sessions in a row. As the SMH chart below indicates, price is now extremely extended above both its 200 Day EMA (@ 352) and 100 Day EMA (@383). Even if in a "new bull market," the index is due for a retrace to at least the 100 Day EMA and more likely to the 200 Day EMA, with the potential to drop even lower if something more bearish is afoot. The Charts SMH The thin blue line is the 100 Day EMA, while the thicker black line is the 200 Day EMA. Price is extremely extended and due for a regression to at least the 100 Day EMA, but more likely the 200 Day EMA. SMH 2-Day w/Parallel Trend Channel A decline to mid-channel would take the index down 15%, while a decline to the lower channel would be closer to a 30% decline. In terms of the inverse SOXS index, that would equate to a rise of between 45% and 90%. From SOX's current price of about $23, that suggests a run higher to between $33 and $45, with May out-of-the-money calls ripe for generous gains. BTC 2-Day Different asset class, same pattern, only in this case, the third down arrow resulted in a 50% crash...and counting. SOXS Daily Note how quickly SOX runs up on retracements, even while the main trend is down. Simple week-long rallies takes SOX up 33%-50%, easily. Minimum expectation for SOXS is a rise over the next few weeks into low $30's to mid $40s, with even higher potential if the general market cooperates. SOXS May 15th Best Bets: May 15th $30C - $35C Bottom Line: Risk -50% to make +200%, or better. SPX 2025 Analog - Update SPX 2-Day One more reason to take the SOXS trade: If S&P 500 breaks down next week below its 100 day EMA, the analog to 2025 suggests significant new lows on the horizon. If 100 EMA is breached next week, look for fresh SPY May put recommendations. SPY 2-Day Maybe the most important chart of the weekend: Minimum expectation = Decline to mid-channel after touching top channel, approximately 575-600, while bottom channel is at approximately 465-500. SPY Jun $600P Pointing out: 14K Jun $600P contracts traded Friday. What do they know? Quote of The Week Active Options "Active Options," are recommended trades that are unexpired and have not violated the -50% hard stops, without regard to profit taking via trailing stops. PRO Trading Service Premium Trading Service
