How To Play A Rebound In The Industrial ETF XLI | IBD

TL;DR

Senior product coach Harold Morris analyzes the chart of XLI, an industrial select ETF. He suggests a bull put spread strategy, waiting for a move to the upside before entering the trade.

Transcript

foreign I'm Chris gessel Chief content officer of Investors Business Daily and this is ibd's option of the day and with me is Harold Morris our senior product coach with uh leaderboard and swing Trader and Harold today you're looking at xli the industrial selects uh uh Spider uh what kind of uh play are you looking at and and what's setting up with... Read More

Key Insights

• 🎁 XLI presents a bullish opportunity after pulling back to the 50-day moving average.
• 🤑 Selling an at-the-money put and buying a put for protection is a popular strategy for bullish trades.
• ✋ Waiting for confirmation, such as a breakout above the recent high, is crucial before entering the trade.
• 🌸 Utilizing tools like risk graphs and price slices can help traders visualize potential profit and loss at different price levels.
• 🛟 Monitoring the stock's behavior relative to major moving averages can serve as a trigger for exiting the trade.
• 🏣 Patience and observation are necessary before entering the trade, as the stock's movement post-pullback needs to be assessed.
• 🥳 The XLI ETF's current position near the 50-day moving average may offer possibilities in the future.

Questions & Answers

Q: When is the ideal time to enter the bullish trade with XLI?

The ideal time to enter the trade is after XLI takes out today's high, indicating upward momentum. Waiting for confirmation is essential to avoid premature trades.

Q: Why is selling the 98 put and buying the 93 put considered a bullish strategy?

This strategy involves selling an at-the-money put and buying a put for protection. By selling the put, the trader receives a credit, indicating a bullish expectation for the stock to stay above the strike price.

Q: How can the risk graph and price slices help in analyzing the trade?

The risk graph and price slices provide visual representations of potential profit and loss at different price levels. Traders can use them to evaluate different scenarios and understand the trade's potential outcomes.

Q: What would prompt the trader to exit the trade?

If XLI trades below the 50-day moving average on high volume, it would be a trigger to exit the trade. This indicates a potential change in the stock's direction.

Summary & Key Takeaways

• XLI, the industrial select ETF, has pulled back to the 50-day moving average, presenting a potential buying opportunity.

• Stocks pulling back to major moving averages, like the 50-day or 21-day, have been successful in the current market.

• The bull put spread strategy involves selling the 98 put and buying the 93 put for protection, offering a credit of 1.53.