I told traders to watch two tickers heading into the midterms:
- SPDR Dow Jones Industrial Average ETF Trust (NYSE: DIA)
- Health Care Select Sector SPDR Fund (NYSE: XLV)
Wednesday morning, we found out Democrats took the House and the Senate.
DIA ran. XLV ran.
Now, somebody tell me. Is that because I’m the smartest guy in the room?
No.
It’s just history.
History doesn’t repeat itself. But it often rhymes…
And if this market keeps rhyming, I’ve got two trades lined up into the end of the year.
The 2018 Rhyme
Let’s rewind to November 2018.
Trump was in his first term. Democrats won back the House, while Republicans held the Senate.
The next day, the Dow jumped 545 points. And healthcare stocks led the way, since a Democratic House ended any chance of repealing the Affordable Care Act.
Sound familiar?
Different details. Same setup: a Republican president losing ground in Congress, and a market relieved the uncertainty is over.
That’s why I called out DIA and XLV on Monday. It wasn’t some major calculation.
I just looked at what happened last time.
And the day-after pop was just the first leg… By the end of 2018, two other trends showed up:
- Bonds were one of the strongest trades.
- Tech was one of the weakest.
DIA and XLV already followed the same playbook.
Now I’m focused on the next two trades…
(Join me on Tuesdays for more of my expert analysis. Follow the link below.)
My Post-Midterm Playbook
Trade #1: Bonds
iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT) just made a nice turn, and it’s sitting near $81 per share.
The options market is pricing an expected move of about $3.16 through the December 18 “quad witching” expiration (one of the most heavily traded expirations of the year).
That would put the stock near $84 if it plays out.
And traders are already positioning. I’m seeing a bunch of volume on the December 18 $83 calls.
I’ve got three ways in:
- A pullback to $81, near the 13 EMA. That’s my preferred entry.
- A starter position above $81.90.
- A breakout over $82.90.
Trade #2: Tech
Now for the other side.
The Invesco QQQ Trust (NASDAQ: QQQ) didn’t join the bull party. It bounced back to the 8 EMA, rejected, and fell. That confirmed its weakness to the downside.
So I went through big tech one by one.
Amazon, Microsoft, and Apple all broke out. I don’t want to touch those. NVIDIA is in a downtrend, but it has earnings coming up.
Then I pulled up Netflix Inc. (NASDAQ: NFLX)…
The chart looks almost the same as the QQQ. It’s back at the 21 EMA on the daily chart, and it should reject.
I’m watching the November 20 $67.50 puts. They’re slightly in the money, with big open interest.
My first target is $64.50, then $63.
If NFLX gets back above $67, the setup is broken.
None of these is a trade until the chart confirms it. History doesn’t give us gains. It gives us a map.
Set your alerts and let the price come to you.
Be good (and be good to others),
Ben Sturgill
*Past performance does not indicate future results. Not typical.
