Ep. 298 Come Prepared For Sector Rotations With Iron Condors, Call Walls And More
Investing With IBD
Deep Dive
Why is the NASDAQ Composite performing so strongly?
The NASDAQ Composite is being driven by the Magnificent 7 stocks, which are large trillion-dollar companies with significant weight in the index. These stocks are leading the market higher, creating a continuous 'buy the dip' environment.
What is Anne-Marie Baiynd's view on the Russell 2000 index?
Anne-Marie is biased against the Russell 2000 due to its composition, which includes smaller companies with weaker fundamentals. She sees it as a short opportunity, especially as it struggles to maintain breakout momentum and volume has diminished.
How does Anne-Marie Baiynd approach buying breakouts in the current market?
Anne-Marie advises against buying breakouts directly. Instead, she recommends waiting for pullbacks to key support levels, such as the 50% retracement of a range, to enter positions with lower risk.
What is an iron condor strategy, and why is Anne-Marie using it now?
An iron condor is a neutral options strategy that involves selling both a call spread and a put spread. Anne-Marie is using it because many charts are showing range-bound movement, making it a suitable strategy for capturing premium while the market consolidates.
What is a call wall, and how does it impact market behavior?
A call wall is a high concentration of call options at a specific strike price. When the market breaches a call wall, market makers are forced to buy the underlying asset to hedge their short call positions, which can drive the price higher.
How does Anne-Marie Baiynd use volume profiles in her trading?
Anne-Marie uses volume profiles to identify key support and resistance levels where the majority of trading activity occurs. She draws boxes around these areas to determine entry and exit points, focusing on areas where buyers and sellers have historically acted.
What is Anne-Marie's view on the energy sector, particularly solar stocks like First Solar?
Anne-Marie sees potential in the energy sector, particularly in solar stocks like First Solar, due to the U.S. focus on energy independence. She recommends selling put spreads as a conservative way to gain exposure to these stocks while managing risk.
How does Anne-Marie manage risk in her trades?
Anne-Marie manages risk by sizing her positions according to her ability to handle drawdowns. She sets tight stops and takes profits at key levels, such as the top of a range, to protect gains and minimize losses.
- Difficulty in shorting the NASDAQ due to its strength
- Challenges in finding value outside the MAGA-7 stocks
- Russell 2000 (IWM) shows breakout potential but struggles to sustain gains
- Recommendation to wait for pullbacks before considering long positions in IWM
Shownotes Transcript