The market remains mostly flat after an impressive rally a few weeks ago. With the S&P closing the distance between a marco level of 4100, one can begin to see a stalling out in the market. Personally, I believe this is the level to watch in order to take short positions. Not because we think the market is overly bullish, it’s not — we think it still looks bearish on a yearly scale — but because this gives us a better entry for our style of trading.

Let’s say you have a weak looking stock like the one from our watchlist today, and let’s also say you have a large level of resistance close to where the stock is currently trading. The longer you can be patient in waiting for that price to meet or exceed your resistance level, the better entry you’ll get if the trade eventually breaks in your direction.

This matters for two major reasons:

1. It gives your stop-loss much more room to breathe
2. You capture more of the overall move

For Lululemon (LULU), that resistance level is 306, but there is a catch with resistance levels like this. If the price can reclaim this level and hold above it, it would likely mean higher prices. However, we are currently looking the possible trade in today’s video breakdown as a potential bearish play.

Be sure to watch the full video below to get all the levels you need to know if you were to put this trade on.

And for even more about my favorite stocks, setups, and strategies, join my students and I in The Profit Machine. Every week, you will get exclusive access to all things option trading, from the stocks I trade the most, and the setups I look for when trading. The best part, you’ll receive all my trades every step of the learning process, so not only will you get a world-class education, but you’ll also earn while you learn.