|Futures remain green this morning and the SPY has moved up overnight. |
The SPY is currently sitting at 332.55 in the premarket having bounced off resistance at almost 333 and support at 332.42. It has moved in that range all morning. In the premarket charts at the moment we see that the 10 moving average line is slightly above the 20 moving average line on the 5 minute chart, but below it on 10, and 15 minute chart. A mixed signal.
Additionally, buying volume is much lower at this point than it was yesterday. But two volume spikes this morning were buying spikes. The SPY has been trending higher and we are currently looking at potential gap up of a full point. So the SPY is in that in between place here so I’ll look to play the longer term and overnight trend up today. If that buying volume comes in prior to open and If the SPY pops, it will be a quick text from me. But if it drops, I would wait for a bounce off resistance or if it just moves sides ways I’ll look for buying volume to confirm my decision.
In order for this trading plan to be in play SPY must remain trading above that key support level near $332.20. If I see this it would trigger a buy to open followed by sell to close CALL option move today.
Resistance: 332.64, 332.74, 332.84 Support: 332.42, 332.30, 332.17
Today’s Trade of The Day is SPY January 29 333 Call
|We saw SPY fall yesterday and keep going lower overnight. The SPY is currently sitting at 330.90 in the pre-market having bounced off support at 330.50 a few times. |
In the premarket charts at the moment we see that the 10 moving average line is below the 20 moving average lines on the 5, 10, and 15-minute chart. A downward signal. In addition, buying volume is elevated from at this point than it was yesterday.
The SPY has been trending higher but as I showed in the pre-market video it’s sitting on the 3 moving average line on the daily which. A moving average line that has turned sideways. Futures are down, overseas markets are down and we currently are looking at a gap down of a half-point. So the SPY is in a tricky place to trade here.
Does this dip get bought up or does it continue to fade lower. I’ll play this one by indicators pointing down. If the SPY pops for some reason I would wait for a bounce off resistance or if it just moves sides ways I’ll look for buying volume to confirm my decision. In order for this trading plan to be in play SPY must remain trading below that key resistance level near $331.37. If I see this it would trigger a buy to open followed by sell to close PUT option move today.
As a reminder, I encourage you, if you do jump in, manage your stop loss according to your tolerance.
Resistance: 330.93, 331.15, 331.31
Support: 330.70, 330.61, 330.49
Today’s Trade of The Day is SPY January 29 330 Puts
Markets are up again, but there are some notable exceptions. Financials (XLF) are down almost half a percent on the back of bank earnings. So far they’ve reported higher trading revenues and an upbeat economy, but poor net interest margin (caused by the low interest rates).
Crude oil got smoked off the back of an inventory report but made a solid recovery. Here’s something really neat. Take a look at the trendline on the daily chart.
Crude Oil Futures Daily Chart
It held price yesterday, and we saw price rally back to get above it again today.
Also of note, volatility isn’t dropping. That’s pretty impressive. The rise in the VVIX starts to get me thinking that the market is nearing a top as well.
GoPro Inc (NASDAQ: GPRO) is not a Wall Street favorite. But, that is exactly why I’m giving it a shot through earnings. It’s been thrown into the garbage can and absolutely nobody likes it.
First off, holding anything through earnings is of course an inherent big gamble. So make sure your risk tolerance is something you can handle if you are playing ANYTHING through earnings.
Ok, so a few reasons why I like this trade:
- GPRO is hated. Nobody likes it and nobody expects anything good. We are contrarians, which leads to huge pops when correct.
- There is a large short interest of 26% and the options are really cheap to hold through earnings at .36 a contract. Good news and GPRO can easily double in valuation in my opinion.
- In part of the China trade deal, China is set to enforce laws that prevent “knock offs” of intellectual property. That’s one of GPRO’s biggest problems. They have no protection for their product. If pushed through, this change in policy would allow that. I expect GPRO to talk about that on their call.
- They just came out with a new 360 degree camera that is quite honestly the best product I’ve seen out there if you are into action filming. I think people are going to be surprised with the holiday sales numbers there.
- And, the chart is technically sound for a breakout. Bull flag and relative strength after the Las Vegas CES conference earlier this month.
|Advanced Micro Devices, Inc. (NASDAQ:AMD)is gaining pace ahead of earnings. |
Tech savvy traders seem to be playing the 130min chart but looking for a run higher into earnings and specifically buying the calls that expire the week of earnings.
The idea here is that we’ll get a rise in the price of the option through the delta (if we are right and AMD goes higher) and we’ll also get a rise in the price of the option due to the increasing IV (implied volatility) due to the fact that the IV tends to go up into earnings. If you don’t know, the IV determines the amount of premium in options. Anyway, here is the trade and the chart setup:
A perfect trade would be Earnings Run: AMD 31 JAN 20 50 CALL @1.47
Iran blinked and the markets are happy that there is no looming war or disruption in oil on the horizon (certainty). In looking at the charts, you will notice that we have had a sort of sideways action with little steps higher on the daily chart. As much as it seems like we are going up every day, we are really going up and down and staying in a range overall. This is more of what we expected with the weekly chart energy being now down to 24.
In fact, you can see on the weekly chart below that we have had essentially a sideways move the last 3 weeks. The trend is slowing and starting to walk more sideways in a range giving the flat, subdued market that I mentioned. We will have good up days and down days that match each other but trending another 200-300 pts. on the S&P is going to be tough right now.
This type of market is great to burn time on our positions helping us profit faster and with the swings up and down, it allows us to get filled on some of the extrapolation orders we have put in place, like the AMZN call spread order this week.
It looked into Tuesday AM like we might have to adjust the fill price to get it, but then we had the spike up in AMZN and just got briefly above the $4.00 mark long enough to fill. Now AMZN is back down about 25 pts. from that level. In fact, all our new trades for the week have filled (ISRG, AMZN, ABMD roll, CLR roll).
So, what now? I would not be surprised to see the market chop up and down through the end of the week. The daily chart is fully charged again, but I don’t think it can really trend straight up because of the weekly chart exhaustion. As I mentioned in last weekend’s newsletter, we are waiting for the market to tell us which way it wants to go for the next month or so. We may see that by the end of the week or into early next week.