Red Market Playbook: Fortress Covered Calls, Bearish Watchlist, and Bullish Setups
Red Market Playbook: Fortress Covered Calls, Bearish Watchlist, and Bullish Setups
When the market turns red, a lot of traders try to be heroes. They try to pick bottoms. They guess. They hope.
That’s usually how people get hurt.
In this update, Mark Yegge walked through what he showed his friend “Juicy Joe” (a covered call income trader). The main point was simple:
In a red market, don’t fight the tape. Trade what the market gives you.
That includes two things:
- Bearish candidates that are breaking down
- Bullish setups that are still working even while the market is weak
And the twist is this: you can still use Covered Calls for Passive Income and even Retirement Income goals in a red market—if you know how to use the fortress strategy and manage risk.
Image suggestion: A split graphic: left side “Bearish Watchlist” (Reddit + Adobe charts), right side “Bullish Watchlist” (AU + NVDA + MU), with a label: “Fortress covered calls = income + cushion.”
First, a Quick Disclaimer
Mark was clear: this is education, “hypotheticals,” and not financial advice. The examples discussed are for learning and process.
If you’re using this for Investing decisions, your job is to study the method, test it, and build your own plan.
What “Red Market” Really Means
A red market is basically a market environment where:
- trends are breaking down
- risk is higher
- rallies can fail fast
- bottom-picking gets punished
So instead of trying to outsmart the market, the better play is to:
- size down
- play defense
- focus on income
- only take the cleanest setups
That’s where Mark’s fortress approach comes in.
Understanding Covered Calls in a Bearish Market
Most people think covered calls are only for bullish markets.
Not true.
A basic covered call is:
- buy 100 shares of stock
- sell a call option against it
- collect premium (cash)
But when a stock looks bearish, Mark often shifts from “traditional” covered calls to something more defensive:
The Fortress Strategy (in-the-money covered calls)
The fortress approach leans more protective. Instead of selling calls out-of-the-money, you may sell them in-the-money to create:
- more downside cushion
- more immediate income (“juice”)
- a more defensive position
This is still an income strategy. It’s not about being right on direction. It’s about getting paid and managing risk.
Behind the Scenes: The Bearish Watchlist
Mark showed a “short list” screen: stocks that look like they’re trending down and may be short candidates (or candidates for defensive in-the-money covered calls).
He mentioned names like Accenture, Adobe, ADP, Blackstone, and others—but he zoomed in on two examples:
- Reddit (RDDT)
- Adobe (ADBE)
Let’s break those down.
Bearish Example #1: Reddit and the “Dreaded H” Pattern
Mark walked through how he analyzes a stock step-by-step:
- start on the weekly chart to see the big trend
- check key moving averages (like the 50-day/200-day equivalents)
- look for breakdown patterns
- then drop to the daily chart for the “setup”
What he saw on Reddit
On the weekly chart, he pointed out something like a “death cross” behavior (a major moving average crossover that often signals weakness).
Then on the daily, he highlighted a pattern he calls the “dreaded H.”
In simple terms, it looks like:
- a sharp drop (the left side)
- a rounded bounce (the middle)
- then another weak rollover (the right side)
His key point: if Reddit hits a certain swing level (he referenced roughly the 127–128 area), it often wants to go lower.
The income angle: in-the-money covered calls
Instead of buying puts (which can be expensive), the approach he discussed with Juicy Joe was:
- use an in-the-money call strike
- collect premium (“juice”)
- use that premium as a cushion if the stock drifts down
- roll down if the stock keeps falling
This is the fortress mentality:
sell premium, build cushion, manage the position.
Bearish Example #2: Adobe and the AI Threat Narrative
Mark’s Adobe breakdown was interesting because he explained both:
- fundamentals (great company, historically profitable)
- and the chart (still weak)
The story he sees
He believes AI is putting pressure on “software as a service” businesses because:
- tools can now be built faster
- coding barriers are dropping
- software moats may shrink over time
He didn’t say Adobe is “done.” He said the chart is weak and the business model is being challenged.
What the chart showed him
On the weekly:
- a long downtrend from prior highs
- a death-cross type signal earlier (2024 area)
- weakness continuing
He also pointed out very low relative strength (he referenced a 15 RS, meaning most stocks are doing better).
The covered call setup
He mentioned an area that looked like resistance (around the 283 level) and then showed how Juicy Joe could sell calls near the money to generate monthly income.
Key lesson: even good companies can be weak on the chart. In a red market, you respect what price is doing.
Why This Matters for Passive Income and Retirement Income
If you’re building Passive Income or planning Retirement Income, a red market can be emotionally brutal.
That’s why an income-first approach can help:
- you’re not waiting for price to “finally go up”
- you’re collecting premium as part of your Investing process
- you’re focusing on rule-based decisions
But this only works if you manage the downside. That’s the whole point of fortress-style covered calls and trade adjustments.
The Bullish Watchlist (Even in a Red Market)
Mark also showed a bullish list from his Cash Flow Machine screen.
His point:
Even when the market is red, some stocks still set up bullish. Your job is to find clean charts with strength.
He highlighted a few names:
1) AU (AngloGold Ashanti)
Why he liked it:
- strong uptrend on the weekly (lower left to upper right)
- very high relative strength (he cited 97)
- improving numbers
- a pullback to the 50-day moving average, which he views as healthy in an uptrend
He connected the macro idea too:
- printing money + geopolitical spending can be bullish for hard assets
- hard assets → gold
- miners benefit if gold stays strong
Then he showed a covered call idea: with the stock around 110, the “near the money” calls had meaningful premium over ~38 days.
2) Broadcom (AVGO)
He noted it was getting above the 50-day moving average, which he sees as a “good things can start happening” zone.
He also flagged a key chart level to watch (around the 352 area), especially if it clears on volume.
3) Nvidia (NVDA)
He called it flat for months and hovering around the 50-day, but said:
- not many good things happen below the 50-day
- good things often start above it
If it can reclaim the 50-day and hold, he sees it as worth watching (especially if you believe the AI story).
4) Micron (MU)
He described:
- a dip below the 50-day
- a quick recovery back above
- then a gap-up confirmation
He suggested it may want to challenge a higher resistance zone again (he referenced around the 455 area).
The Real Skill: Trade Adjustments
Mark said something important:
The money is made in the trade adjustments.
Nobody is right 100% of the time. Most traders are right 50–60% at best.
So the goal is:
- be wrong small
- have a defense plan
- know when to adjust
- know when to admit you’re wrong
That’s what makes an income strategy sustainable.
10 Life-Improving Tips for Covered Calls in a Red Market
- Don’t bottom-pick in a red market—trade what you see.
- Use the fortress strategy when downside risk is high.
- Think in terms of “juice” (income) plus cushion, not home runs.
- Don’t buy expensive options unless you understand the math—premium selling is the core edge.
- Always know your adjustment plan before entering.
- If a bearish chart is already far from the ideal entry, don’t chase it.
- Respect the 50-day moving average—below is caution, above is opportunity.
- Favor high relative strength names when trying bullish covered calls.
- Size down in red markets. Small positions keep you alive.
- Track your trades like a business: entry, strike, premium, outcome, lesson.
FAQs
1) Can covered calls work when a stock is going down?
Yes, but risk is higher. That’s why some traders use in-the-money covered calls to bring in more premium and create more cushion (fortress style).
2) Why not just buy puts in a red market?
Buying options can be expensive, especially when volatility is elevated. Covered call sellers prefer collecting premium instead of paying it—if the setup fits their plan.
3) What is a “dreaded H” pattern?
It’s a bearish chart shape Mark uses: a drop, a rounded bounce, then weakness again—often signaling a stock may continue lower after a key swing point breaks.
4) What’s the biggest risk with covered calls?
A sharp downside move in the stock. Premium cushions a little, but it doesn’t eliminate stock risk. You need position sizing and adjustments.
Call to Action
If you want to apply this right away, do this:
- Create two watchlists: Bearish and Bullish.
- Pick one stock from each list and mark the key levels (50-day, resistance, support).
- Write down your covered call plan: strike, premium target, and what you’ll do if the stock moves against you.
And if you want to go deep on charts, offense/defense, risk management, and covered calls in person, Mark mentioned a small 3-day Strategy Room event near Phoenix, Arizona, April 17–19, 2026 (limited seats, hotel rooms go fast). Check the pinned link or description where the video was posted.
Conclusion
In a red market, the winning move usually isn’t being brave.
It’s being disciplined.
Mark’s behind-the-scenes process is a good template for systematic Investing:
- build bearish and bullish watchlists
- use charts for structure
- use covered calls for income
- shift to fortress-style in-the-money calls when defense matters
- and most importantly: manage positions with a real adjustment playbook
That’s how you keep trading from turning into guessing.
