Trade of the Day: World Wrestling Entertainment (WWE)

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The bulls showed why it has been hard to throw in the towel on a continued run to higher highs, as they recovered the first layers of resistance on Wednesday. More headlines out of Greece swayed the market, and the technical picture is still showing major volatility ahead.

The Dow held the 17,700-17,800 level, with the close nearly splitting the middle. Additional resistance is at 18,000-18,100 on a move above the latter. Near-term support remains at 17,600.

The S&P 500 tested a high of 2,082 shortly after the open to clear resistance at 2,070-2,075. These levels held into the close, with backup support moving up to 2,060-2,050. A move above 2,085-2,090 would clear the way for a run at 2,100 again.

The Nasdaq opened above 5,025 at 5,029 to reach a peak of 5,038 shortly after the open. The bears tried to keep the index below 5,000 with an intraday backtest to 4,994, but they failed at holding this level and the 100-day moving average. Additional hurdles remain at 5,050-5,075 before we can say that a run to 5,100 and fresh highs are coming.

The Russell 2000 small-caps made a strong run past short-term resistance at 1,260 after kissing 1,264 within the first 30 minutes of trading. The late-day fade to 1,250 with a positive close may have been a picture-perfect backtest. The bulls recovered the 50-day moving average, but we can’t get excited until 1,280 is cleared, as that would confirm that the selling pressure is over.

The S&P 500 Volatility Index (VIX) traded in negative territory and below the 17.50 level throughout the session. This was a very bullish signal. A move below 15 ahead of the three-day weekend would be confirmation that trading could be just as explosive to the upside next week as the action was to the downside this week.

With that view, I put on a new trade in World Wrestling Entertainment (WWE) to take advantage of bullish volatility. WWE is a name that I’ve traded many times in the past. WWE’s 50- and 100-day moving averages are curling higher, and continued closes above $17 would be bullish.

Buy to open the WWE August 17 calls (WWE150821C0001700) at current levels, around $1.10.

I like these calls to play a possible run to $18-$20 and fresh 52-week peaks. These are the regular monthly options that expire on Aug. 21.

My exit target for the WWE calls is $2.20. I don’t have a stop loss in place at this time.

A reminder that U.S. markets are closed Friday, July 3, to observed Independence Day, so we’ll be back with the next Trade of the Day on Monday, July 6.

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