What if it's NOT a top?

JC Parets
March 26, 2024

One of my favorite setups is when you have a major "top" formation, that doesn't actually turn into a reversal pattern and top for the market.

A recent example was in shares of Disney.

If you guys recall, this one looked like a major top, sentiment was down in the dumps, and we were buyers at 80.

Here we are with Disney at 120 and hitting new 52-week highs.

I gotta tell you, this setup in Energy looks exactly like that.

Look at this chart below - it's got all the hallmarks of a top:

You can call this a "rounding top". You can also call this a "Head & Shoulders Top".

But for me, the biggest risk is this NOT being a top.

What if, like in Disney last year, prices are just at the lower end of this range.

This chart above represents Energy stocks relative to the S&P500. If this is a failed breakdown, and actually NOT a major top for the group, then look out for a ripper.

Here is Energy on an absolute basis. If prices break out from this base, then you're potentially looking at new all-time highs.

The S&P Energy Sector Index is still below its 2008 highs, believe it or not.

The Great Financial Crisis was over a decade and half ago.

And Energy is still stuck below those levels.

I think 2024 is the year that it finally happens and we get the historic breakout.

But don't take my word for it. We'll let price determine whether this is it or not. And we'll act accordingly.

There are many different ways to play the Energy market this year.

But as my pal Sean McLaughlin likes to say, "Options give us options".

In other words, there is no one way to do it.

There are different types of stocks and ETFs that can give us exposure to the space. Each of these brings a different level of volatility to the equation.

There are 4 possible scenarios that we could find ourselves in when making a directional bet on a given stock or ETF.

For each of these 4 scenarios there is the perfect options trade.

The way we like to think about it around here is that we want the perfect balance of just enough risk, that we can still sleep peacefully at night. But enough exposure and upside potential that we'll get paid very nicely when we're right.

This Thursday @ 4:30PM ET, Sean is going to walk us through exactly which trade we want to put on and how, depending on which scenario we're in:

Bullish with low volatility?

Bullish with high volatility?

Bearish with low volatility?

Bearish with high volatility?

These are the 4 scenarios.

Learn which trade to put on for each one of these FREE this Thursday March 28th @ 4:30PM ET.

Sign up here to add your name to the list.

If you can't make it live this Thursday, the video replay and slides will be sent to everyone who registered.

See you there!

 

 

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