I blogged earlier today about the trend lines in the SPY and SLV. The day unfolded pretty much as I was thinking … going forward I remain positive for buying any dips Wed and Thursday morning due mainly to OpEx week.
Here is the chart I posted at just after 11am eastern this morning …
Here is the complete day's chart … I tried to replicate the scenario I was playing on top of the actual data. It was pretty close to what actually happened. My thoughts remain that the combination of OpEx week and the recent hard sell-off in commodity equities and other market leaders will give us bounces higher for the next couple of days.
I am carrying a core position in POT, FCX and AAPL which I am trading around. I am long these stocks in part due to their option profiles.
I also traded GS long when it showed it could get back above the opening price which was also the LOD from yesterday. The option profile is not really big but it is telling me to carry a core position the next two days. I will most likely get that core on tomorrow morning and trade around it going into Friday.
Here is how I look at the options for GS …
The difference to Put Option writers if GS closes Friday at $140 vs $150 is $25 million. It doesn't take much to trigger ALGO black boxes nowadays, so you should be able to see the motivation as we get closer to Friday for Put Writers to place some "strategic" buy programs in at critical times. This buying nowadays drives day traders/momentum players to chase the stock and voila … before you know it GS is at $150 by 4pm on Friday.
While I like to look at the option chains directly you can also do a quick and dirty via the "option pain" web site at http://www.optionpain.com/MaxPain/Max-Pain.php
Here are the GS charts of interest …
Here are the charts supporting my core holdings …
I tweeted about the APPL earlier this morning when it was getting in the low end of that $330-$335 bottoming area that I was waiting for. Now I am going to hold for the $340 target sometime here before Friday. Note that AAPL can get to the $340 areas and still remain in a downtrend.
I posted a blog this past Saturday that talked about POT as a potential stock that could bounce off of the 200SMA on the daily chart. That has worked out well so far and there appears to be a possible cup and handle pattern that should let POT get to that magical $55 area where put option writers will save $13 million versus the $50 area.
FCX has an option chain that is less obvious of where the Put writers desire Friday's ending price. One of the reasons I am long this as a core right now is the possible inverted H&S pattern on the Copper ETN. I also tweeted today about FCX when it was testing the breakdown price of $46.20 (March 10th low). Price held and I strapped on a core holding as part of my SPY outlook/scenario.
Anyways, lots of traders hate OpEx week and actually avoid trading during it. I agree that price patterns are less reliable during the week but coming into this week having sold off so hard I think the odds have changed and prepared traders have a definite edge.
Good luck … Leaf_West