Setup: RMBS gapped down roughly 24% on the Apr 28 open, breaking well below the prior consolidation range of 120-141. The 4h chart shows a violent reversal from the 160 peak — multiple large red candles with expanding volume, the highest in months. On the 1h, the bounce off the open low (~104.50) has stalled and is now flagging in the 107-109 zone with declining volume on the recovery. The last few 1h bars show small bodies and upper wicks, classic exhausted-bounce structure. Price is trading beneath what was the Apr 10-16 breakout shelf (110-112), now acting as overhead resistance.
Flow: Options flow is overwhelmingly bearish — 18 bearish-tagged trades vs 6 bullish, with a net premium sentiment of -$399K. The dominant flow is in May 15 puts at the 110-115 strikes, bought on the ask in size (99, 110, 100 contract blocks), confirming institutional conviction on continued downside. The C/P premium ratio of 0.11 is extremely skewed bearish. IV is elevated (75-90% range across strikes), which argues against buying long premium outright and favors a put spread to neutralize vega while retaining directional exposure.
Plan: Stop is placed above the 112-113 area, which is the gap-fill shelf and former breakout zone — a reclaim there would invalidate the breakdown thesis. Target is the 95 area, which aligns with the pre-April-8 base and offers R/R above 2.5:1. The thesis fails if the broad market reverses hard on a macro catalyst or if RMBS gaps back above the breakdown level on any counter-catalyst.
📍 Entry: 108.5
🛑 Stop: 113.5
🎯 Target: 95
⚖️ R:R: 2.70
Flow: Options flow is overwhelmingly bearish — 18 bearish-tagged trades vs 6 bullish, with a net premium sentiment of -$399K. The dominant flow is in May 15 puts at the 110-115 strikes, bought on the ask in size (99, 110, 100 contract blocks), confirming institutional conviction on continued downside. The C/P premium ratio of 0.11 is extremely skewed bearish. IV is elevated (75-90% range across strikes), which argues against buying long premium outright and favors a put spread to neutralize vega while retaining directional exposure.
Plan: Stop is placed above the 112-113 area, which is the gap-fill shelf and former breakout zone — a reclaim there would invalidate the breakdown thesis. Target is the 95 area, which aligns with the pre-April-8 base and offers R/R above 2.5:1. The thesis fails if the broad market reverses hard on a macro catalyst or if RMBS gaps back above the breakdown level on any counter-catalyst.
📍 Entry: 108.5
🛑 Stop: 113.5
🎯 Target: 95
⚖️ R:R: 2.70
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