The options trading system used by this firm is looking for a specific type of market condition; the “spring to up-thrust”.
We’ll give credit where it’s due; our idea of looking for this type of set-up came from my former mentor, David Weis.
Years ago, in one of his daily updates he commented on how the market tends to form a spring and then go straight into an up-thrust.
It does not happen every time of course. However, an up-thrust properly identified, provides the swiftest down move (potential) available in the markets except for an outright crash.
Price action can form this set-up on a print or close basis. However, from empirical data, the close basis yields the best opportunity.
The chart inserted is a good example of the spring to up-thrust set-up. TGT lost seven months of gain in just ten trading days.