• A trade is often easiest when you can simply define right and wrong.

Doug, the eternal optimistic pessimist on equities over the past few weeks and months, is being rewarded today. Maybe my put purchase seemed a bit out of character or counterintuitive earlier today, since I haven't exactly pushed weakness lately, but it had to do with nothing more than the risk/reward on a technical setup and not my dark powers or Collins Curse.

A trade is often easiest when you can simply define right and wrong. If there is a clear line in the sand, which, if crossed, tells me I'm wrong on my position, then I actually prefer those trades. My risk is defined. My risk is clear. My trade is simple. Simple won't always mean profitable, but it does equate to sustainability.  

It's been quite some time since we've had a trend-down day, but we sure had a lot of them on the way up. Is this a one-time thing or a change of character? Too early to tell, but I won't feel comfortable long until we successfully test 1610 at this point.

• Consider COG if you are looking to add upside exposure.

It may not seem like there's much to like today, but I would disagree. Every day presents bullish and bearish opportunities and I view Cabot Oil & Gas (COG) in a bullish light. This is a natural gas play, and I like and am long natural gas. Consider COG if you are looking to add upside exposure.

These names can be very volatile, so selling premium or put spreads is off the table for me. I prefer the potential power of the upside to the net credits and risk that come with COG. There appears to be good support around $36 and $37 on the weekly and daily charts, respectively, but I'm drawn to the potential breakout with a measured move towards $42.

COG -- Daily

Source: StockCharts.com

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COG -- Weekly

Source: StockCharts.com

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In a setup like this (directional, bullish, with a measured target), I will move away from the simple call or call spread to a combination directional trade. I want to set up a combination trade where I can maximize a trade at my target, but still make a profit if the stock exceeds the target or comes up a bit short. Also, I want to minimize time decay, so my combination will likely feature a starting point leg that is at or in the money.

Since I have a target of $42 for COG, I want to center my trade around the closest strike, which is $42.50. With the stock around $39, I want to use an at-the-money or in-the-money strike for my first leg, which would be $37.50 since the only other strike is a $40, which is too far out-of-the-money, and $35, which risks too much. The last leg becomes a $45 since moving it to $47.50 risks my initial trade capital if COG were to go above $47.50. That's how I concluded that I want to buy a COG $37.50-$42.50-$45 skip/strike/call butterfly expiring in October for $1.75 or less.

The upside on the trade is a value of $5 if COG closes October at $42.50. If COG goes above $45, it is still worth $2.50. The intrinsic value is currently $1.50, so I only lay out about $0.25 in time value, which is acceptable. The risk is similar to buying the stock and stopping at $37.25, which is above where I would set my stop if I were actually buying the stop.

For these reasons, I find this a very attractive risk-reward.

• Triggers for USO.

Simple channel trade for United States Oil Fund (USO).  Over $39.00 and its a buy.  Under $38.80 and its a short. Those are my triggers.

I would set a stop of $0.25 (channel width plus a nickel).

• Sentiment needs to be considered more on a name like AAPL.

Apple (AAPL) is struggling today and this $490-495 area is key.

I do have a trade on with AAPL and would still look at the same trade today. Granted, today you can catch a net credit in the $1.90 to $2.20 range rather than my $1.25, but it is still attractive.  

I was actually bullish on AAPL, but given the run the stock had, it was another one I wasn't willing to put out initial capital to chase either via shares or call shares. Also, there was some downside risk to AAPL, so this wasn't a chart where I simply wanted to sell premium. Sure, if I were looking for an entry then maybe selling an October $430 or $440 put made sense.  

Apple (AAPL) -- Daily

Source: StockCharts.com

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Sentiment needs to be considered more on a name like AAPL than one like Halliburton (HAL) in my view. It went from loved to hated to loved again and pretty much every other emotion in between. As such, there is a chance for another negative sentiment swing. Fortunately, the charts seem to be showing multiple support levels lower and we're likely to have some buyers who feel like they missed out waiting on the sidelines. When this type of scenario sets up I like to use a combination which is what one might refer to as selling a bullish put combination. Basically, I want a trade where I have a net credit in hand in case the stock goes higher, but I also want the opportunity to make more if the stock pulls back into support.

Apple (AAPL) -- Weekly

Source: StockCharts.com

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For AAPL, I went long 1x October $475 puts, short 3x October $465 puts and long 2x October $455 puts. There is more upside if AAPL moves lower, but only to a point. The unique thing about this setup as opposed to the simpler selling of a bullish put spread is it allows me to be more patient with the position and flexible with my stop.  You have to be willing to be patient here if you want to catch the potential upside. A pullback is not necessarily unwelcome. In fact, if I see the net credit creep toward $3.00, then I will add to this position. A pullback does increase the potential for a loss, but it is also the only way to see the additional upside as well. Unless AAPL pushes under $450, I'm willing to work with this position for several more weeks.

• I sold a third of the SPDR S&P 500 (SPY) puts at $0.80.

I wanted $0.85, but we are having a hard time pushing lower and implied volatility is coming in just a bit.

• Could see $163.50.

SPDR S&P (SPY) weakening here and I could see $163.50 today or tomorrow. Bought weekly SPY $163.50 at 0.71.

• This is a short- and long-term chart I find attractive.

The action in Halliburton (HAL) today is worth noting, as it is strong on a weak day.

Clearly the move in crude helps here, but this is a short- and long-term chart I find attractive. HAL was a position I entered yesterday and continued to add to today.  Even though the action was a little bit of a yellow flag yesterday, the strength today helps alleviate worries. Until I see $47 broken on the downside, I favor bullish exposure on this one. Still, crude has gotten a pop due to the situation in Syria, but it may be somewhat short lived. Really, it is hard to tell. With that potential in mind, it makes it tough to chase the long side on HAL straight up either via stock or call options.

Both charts though show good support in the $45-47 range on multiple levels as well as momentum, so if I want some type of exposure which could benefit from either  a strong stock or multiple support levels, then selling a bullish put spread and bringing in premium is the direction I want to go.

Halliburton (HAL) -- Daily

Source: StockCharts.com

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Today is actually more attractive than yesterday since the implied volatility is higher on the stock. I want my short leg to be right around support on the stock, so I'm looking at $46. I also want to keep my timeframe shorter, since I am looking at both the daily and weekly charts and my support levels are more driven by the daily chart than the weekly chart.

Halliburton (HAL) -- Weekly

Source: StockCharts.com

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By selling the September $46-44 put spread here (short the $46 strike and long the $44 strike), I limit myself to $2 risk less the $0.25 premium it currently offers. So, I am risking $1.75 to make $0.25. Percentage wise, it isn't actually bad offering up a 14% return on your cash ... if you are successful. Remember, the percentages don't matter if you are wrong.

I have a 5.67% cushion here until the intrinsic value of this trade would start to move into a losing territory, which is fairly big for less than four weeks. But this one will take some time to start to decay, so I have to be patient with the trade. If HAL closes under $46.75 in the near term (next week), then I will likely look to take a loss on the trade and move on.

• Call the cavalry!

Someone needs to get in there on the Collins Curse. We joked about it in the comments section here and on Twitter and in the chatroom, but it has been a great barometer and worked well for getting long metals and miners yesterday before the close and even shorting the bounce this morning.

A quick look at the S&P 500 (SPX) demonstrates why I am concerned. If the S&P fails to recapture 1641-1642, then I believe we are headed towards the 1608-1610 area in the next week, possibly even before the end of this week. A late-day stick save to around 1643 or 1644, along with a CCI measuring greater than -100, may be enough to hold off any more selling for a few days, but the outlook is diminishing here for those looking for the move to 1700.

S&P 500 (SPX)

Source: StockCharts.com

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But the bears can't take out their party hats just yet.There are still plenty of hours left in the day here just to get a little push back into the 1640s.

• One looks for movement, the other might call for a spread.

Is there a trade in every chart? Of course there is, but the risk-reward may be enough to make even those with an iron stomach nauseated.

So, while every chart may have a trade, I thought I'd go through a few today of recent trades or trades I am looking to place and the rationale behind a particular trade with a particular chart.

First up is Boeing (BA). There are two possible setups on BA, even with the current market volatility. The daily chart shows a very developed wedge pattern (possibly too developed), but this immediately pushes me towards two trade setups. First, a trade looking for movement such as a straddle or strangle. Second, depending on the longer-term trend, a spread could come into play. I am not looking to sell premium on a developed wedge. Furthermore, I want to clearly define my risk in case I am wrong on the break, if it does occur.

Boeing (BA) -- Daily

Source: StockCharts.com

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The secondary indicators on the daily pattern are a bit muddled for BA. This isn't uncommon as a wedge looks to resolve. The coming together of momentum and moving averages somewhat defines the wedge, so I need to turn to the weekly chart.

Boeing (BA) -- Weekly

Source: StockCharts.com

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The price pattern on the weekly chart is much more bullish in terms of price action.  I can see two support trendlines and price currently above resistance. Although this doesn't take a straddle play off the table, it does take the risk-reward profile of a pure put spread off the table. It also adds in the consideration of a call spread play here. I put the odds of a move higher towards $110 than a move back to $100.  MACD has turned lower, but this could be a simple sign of a consolidation.  Ideally, the CCI would push back above 100, which is what I want to see for a call spread.

My first inclination here is to be long the September 20 $105 straddles around $4.60 as $98 and $110 are my two short-term targets. Even though the bearish target is lower, I see it as a lower probability than the bullish target. If I absolutely had to pick one direction, it would be with a September $105-110, even with today's market action. Preferably, I would wait until the end of the week to see where the current price bar closes since the weekly chart is more influential for me at the moment. For now, I've gone with the straddles at $4.60.

• We have seen a bump in the IV on J.C. Penney (JCP).

I will probably look at multiple trades on this one, but first up is a ratio put spread where I am long 1x Sept 6 $13 puts and short 2x Sept 6 $12.50 puts for a net credit of $0.04.

This is just a short-term trade that profits on any close over $12 by next Friday.

• Worth a look from just a trade standpoint.

The consensus on J.C. Penney (JCP), from a sentiment standpoint, seems to be it could now move higher with Ackman out of the picture. I don't see a lot of rationale in the Ackman fade trade.

I'm sure he laughs about it as he makes money angels in a big pile of bills. Still, many stocks are driven by emotion and we could see exactly that happen in JCP. I don't believe Ackman has been the problem at JCP, it's product, promotion and price.

There is a huge short interest of around 23% and it is very possible some of these shorts will happily take shares off of Citi's (C) hands below $13. Long story short, JCP is worth a look from a trade standpoint, scalp or swing, but I still see no reason to develop a longer-term bullish thesis.

I'll be watching the implied volatility this morning. I would love to see a nice spike in volatility off the open and look for a diagonal or calendar spread opportunity on the call side as well as a ratio put spread trade.

• Is VFC moving from hit to miss?

Retail has been hit or miss this quarter and with a move higher of 26.5% year to date, it is easy to think VF Corp (VFC) is one of those hits.

Well, it has been. But the landscape appears to be changing. VFC topped EPS guidance last quarter, but revenues came in a bit light. Not something I like to see from a retailer where cost cutting can only go so far and margins can only be pushed so wide. Furthermore, guidance was tepid, which can spell trouble for a retailer with a mid-teens P/E ratio and a PEG ratio closer to 2 than 1 (1.70). There isn't enough short interest here to spur a squeeze and insiders are doing more selling than buying.

On the technical side, there is nothing to offset the troubling fundamental picture.  I've made notes on the charts, so as not to clutter up as much space here, but simply put, without a short-term punch back over $195, VFC could be setting up for a 5-10% move lower.

VF Corp (VFC) -- Daily

Source: StockCharts.com

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VF Corp (VFC) -- Weekly

Source: StockCharts.com

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The $185 area is huge and needs to be staunchly guarded by the bulls. Given the early-morning weakness in equities, I'm not so certain that will happen. But the $185 area is more important from a weekly close than a daily close. I'd be interested on a move lower into the $160-165 area, but for now, based on the technical picture and slowdown in fundamentals, I am looking more towards the short side than the long side.

• We all want a redo.

Skittish. The market is being described as skittish.

It's funny that a drop of fewer than 50 basis points was enough to rile folks up in the media, both traditional and social. It doesn't take much to turn the masses bearish these days, even if it doesn't show in the market. But after chatting with several other trades like I do every day, I believe we've come to a conclusion why this continues to occur.

It isn't really about fear so much as it is about desire. It is about opportunity lost -- the one that got away.

You show up at your 20-year reunion and there she is (or he, let's keep an open mind here), the one who got away. Maybe a few drinks for some liquid courage and then you approach her. You exchange pleasantries and catch up a bit on your pasts. Somehow you manage to work in the fact you had a crush on her some 20 years ago. There's a pause, then a response, but not the one you were expecting.

"Oh, it's too bad you never asked me out. I always thought you were cute/funny/smart."

The adjective doesn't matter since it is likely different for every person, but in that moment, a sense of regret for something you can't go back and redo fills your glass in the place of the previously-consumed liquid courage.

We all want a redo.

Bank of America (BAC) under $5? Apple (AAPL) under $100? Priceline.com (PCLN) under $100? Yes. Yes. And YES PLEASE! But these are the ones that got away. People want the big 2008-09 drop not to hurt others, but to get that generational bottom chance again.  By definition the change should not occur again. But it has been enough time where most people only remember the "if I only" or "what if" followed by buying something, almost anything really, that is now up 2x or 3x or 9x (hello Priceline). Was William Shatner, The Negotiator, really our crush from back in high school or college? For a 900% return in only a few years, I think many of us would give it some serious consideration.

We all want a redo and the chance to ask Shatner out. It isn't fear driving this skittishness. It is the wish for lower levels. It is the chance to empty out that glass full of regret and remorse. It is the chance to buy stocks at much, much lower levels, but -- there is always a but -- would you? Can you count on yourself timing the bottom perfectly? Is it 10% down? 20%? 30%? More?  If you waited until, say, 20% lower and then we fell another 20% beyond that, would you have the ability to hang on. And remember, hanging on is more emotional than financial unless you are jacked up on margin. Catching the March 2009 low was averaging down, at best, for most traders. I remember the phone calls and the fear on the other end of the line. It has been long enough now where many only look back and see the opportunity they missed and forget the fear they experienced.

The market rhymes, but is like a snowflake where no two days, setups, situations, etc. are exactly alike. The next time down, there may be no help from the government. The next push lower may not find support after a 50% drop. Hell, the next time down may not happen any time soon, but there is a recent example to help some get a little glimpse at how they may react: the gold miners.

Did you jump at the gold miners? Did you buy too early? If so, how did you handle the quick additional drop of 10% or 20% or 30%? I admit it was hard and I know folks who just didn't find comfort with the drop even if logic told them it had gone too far. This was just one sector. Imagine if it were across the whole markets hitting names that normally don't cause an investor or trader to lose sleep. It's one thing to say Silver Wheaton (SLW) and Barrick Gold (ABX) just got clipped for 40%,, but try saying the same thing with Google (GOOG) and Bank of America and Johnson & Johnson (JNJ).  I promise you, buying won't come as easy as you think it will and you just might find asking for that date 20 years later is even harder now.