Stock market faces a critical decision now, trader says

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Stock market faces a critical decision now, trader says (via TradingNation)

, could give clues as to where the market heads next — the ETF has retraced two-thirds of the drop from February into March, a key technical pattern. Now, it needs to break through a zone of "potential resistance" forming at $220, an area the QQQ ETF butted up against in early March.

"If we are to fail, it should happen in this gray rectangle from $210 to $220 in the Nasdaq. If that were to happen then I think it would not be unreasonable to see a move back down into that zone," said Gordon.Gordon has a way to take advantage of a possible retest of the lows using options., selling the $190 strike put. It's a $10 spread for which you'll pay about $1.70. … So, that's $170 of max risk that you'll take to potentially make $830," said Gordon.

He notes that even if the chance of a retest is only as much as 30%, the attractive risk-reward ratio makes it a "good proposition."

 

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