The Big 3: XLV, ARM, NKE

**Marlee Caden** (0:03)
Back to Trading 360, I'm Marlee Caden. It's time for The Big Three. We've got three stocks, three charts, and three trades for you. Rick Ducat will take us through the charts. Here to take us through the trades today, Don Kaufman, the co-founder of Theo Trade. Don, great to have you on. You got a nice green day on the screen. We've got yields coming off here as we had the Treasury Department make its announcement of its buyback operation for long-term debt. How are you looking at the action we've seen so far this week?

**Don Kaufman** (0:28)
Yeah, everything right now happens to be, at least in my camp, it's about the bond market. Right now, what do we get involved in over here? It looks like, well, yield curve control by any other name is still yield curve control. On one side, we're going to have the Treasury, which is going to be easing off on rates, and the other side, we're actually going to have the Fed doing what? Possibly raising rates, contracting the balance sheet.
You have to love this. Look, I think that the days to come to see if the Treasury markets sell back off, that could be some pending doom for this marketplace. It's a lot of risk on the table.
Taking this in stride right now is the market. The S&Ps are up some 42 handles right now, predicated on what? I don't necessarily think it's a good thing right now that we are pushing, if you will, rates down on the long end of the curve.

**Marlee Caden** (1:19)
All right.
Let's take a look then at your big three here. We've got the XLV Health Care Sector ETF as your first pick today. I don't know if you had this as your first pick or not before we got these trial results from the Moderna-Merc partnership. But how are you looking at XLV right now?

**Don Kaufman** (1:37)
First of all, absolutely. I wanted to take advantage of this pop to the upside. So I was watching the Moderna-Merc kind of news over here and I was like, oh, that's the one. I was already eyeballing XLV. Listen, XLV has been the beneficiary, if you will, of a rotation and a heavy rotation out of SMH, out of some of the big tech and they're rotating into some of the health care over there. It's been kind of a protection trade. Nevertheless, I like this from the short stance. That is, I'm going to use this pop to the upside today.
Some of the pop is already faded. So it was up closer to 4 percent. It's actually pulled back in a little bit already. But I'm going to go after it. But I'm going to give myself all the way out to the December 18th expiration. So this is a December 18th. Why am I giving myself so much time? Because I'm looking for a dramatic pullback. And I'm being quite frank in saying, I can't necessarily time this dramatic pullback. So I'm giving myself months of time. I'm going to buy the 163 puts, again, buying the 163 puts, selling the 158 puts against it. This one's done for a dollar debit. But anytime you have a dollar at risk, a spread that could be worth five bucks, this trade's only got about a 20 percent probability inherently in the trade.
Nevertheless, though, kind of like my odds over here right now, with the capacity for this marketplace to pull back as rotations, I don't think they're going to continue like this. I mean, we just every day, we seem to find a way to rotate. But we're still smoking a lot of the tech stocks, specifically SMH and the semis.

**Marlee Caden** (3:14)
All right, and you are right. Every day in Market On Clothes, when I do the sector breakdown, it's just sort of a flip of the day before. I mean, I might as well not look one day and see what happens, if it's right or not. I'll do that and tell you what happens next time. But as we look at the technical setup here, we have obviously a significant pop today off of those trial results. Moderna doubled its value just overnight, although not one of the largest holdings in this group. What are you seeing in the technical setup here and the momentum that we've seen behind healthcare with this rotation setup?

**Rick Ducat** (3:41)
Yes, to be sure, still a strong day to the upside here. We topped out near 176.60.
The prevailing shape before today's move was a rising wedge. We had a trend line going up across these low points here and another boundary line going across the highs with a more modest slope here to give us this triangular shape with both pointing upward here. Typically, this is regarded as more of a bearish type setup, but as you can see, it certainly doesn't always hold true. What you'd be looking for would be a break out beyond either of these two boundary lines. In this case, that did happen here. So now our gap is between roughly 170 to 172 An area to watch for potential support would be another gap that lines up roughly with some old highs, not really perfectly here, 168 And then also here, old highs, subsequent lows, near 166 Next, we think about our moving averages in this case here.