by Tyler Craig | October 22, 2012 12:10 pm
Bearish onslaughts like the one we saw Friday can wreak havoc on price charts across the board. When numerous sectors breach pivotal support levels on elevated volume, it can inflict damage that takes weeks to recover from.
The likes of Google (NASDAQ:GOOG[1]), Apple (NASDAQ:AAPL[2]), Amazon (NASDAQ:AMZN[3]), Priceline (NASDAQ:PCLN[4]) and other such high-fliers of yore are on the list of casualties and will need some time to establish bases before new uptrends take root.
To increase your survival rate during a market correction, consider making a few of the following tactical adjustments to your trading:
So where do some of the best setups lie right now?
Although twin precious metals silver and gold fell victim to last week’s plunge, silver mining stocks — as measured by the Global X Silver Miners ETF (NYSE:SIL[5]) — escaped the selling frenzy virtually unscathed. Of the individual constituents comprising the SIL, Silver Wheaton (NYSE:SLW[6]) looks particularly appealing.
Click to Enlarge During the past month, SLW has formed a textbook symmetrical triangle with a couple of accumulation days thrown in for good measure. If it can break to the topside of the consolidation pattern, higher prices should be in the offing.
Traders looking for a high-probability play to exploit continued upside might consider selling the Nov 37 put for 66 cents. The reward is capped at the initial 66 cents received and will be captured as long as SLW remains above $37 by November expiration.
Because the risk of a short put is open-ended, traders should consider closing the position by buying back the put option if SLW falls below the expiration breakeven price of $36.34 ($37 – $0.66).
SLW is slated to report earnings on Nov. 5, so traders unwilling to hold through the event might consider exiting any positions beforehand.
As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.
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