RIO has recently rallied 8 days up after following an impulsive move down that lasted only 4 days. This looks like some sort of consolidation and should move lower to retest the recent lows.
The low volume on the climb shows a lack of commitment from the buyers so we favour a move lower from here. A move above yesterday’s high of 83.33 would cause us to reassess our position.
Markets often trade 1:1 or 2:1 in terms of days up vs down, so 8 vs 4 is a common set up.
RIO - a strategy we looked at yesterday
An options trade to consider is a RIO Bear Put Spread
B RIO Sep 82.01P @ 2.22
S RIO Sep 76.01P @ 0.73 cost 1.49 / 6.00 spread
Max loss = 1.49
Max gain = 4.51 4:1 risk reward
B/even = 80.52
Max profit if RIO closes below 76.01 by September 29
