We are going to add some short exposure and have our eyes on small caps.
Rather than buy some Russell 2000 puts, we’re going to hit the two largest industry groups that comprise the index.
So we’re buying puts on biotechs and banks via XBI and KRE.
If these trades work, they should work quickly. If these are valid tops, then we will know soon. I think this is the perfect level to get short for both of them.
First up is KRE:
We’re looking at a tactical top and a series of lower highs and lower lows since last fall.
This is exactly where we want to fade the banks.
We're buying the $KRE 4/17 $56 puts for about $0.88 - $0.90 per contract.
Next is SPDR Biotech XBI:
This massive top has been forming since early last year.
Price is currently coiling in a bear flag right at the VWAP from the cycle lows. All the other key VWAP levels have already been taken out.
I think this one is next. And it’s such a big level, it could spark a big reaction leg.
We're buying the $XBI 4/17 $83 puts for about $1.20 - $1.40 per contract.
