Midweek Options Update 11/25/20

Happy Thanksgiving! With the shortened trading week this week we are seeing a continued low volume move to the upside. Many of our key markets are at or near all time highs as we go into home stretch of the trading year. When volume gets low like we are seeing this week, we tend to see price action favor the upside. The big test will be next week once we get back from the holiday week as volume will again pick up.

With markets closed on Thursday and only open for a half day on Friday it will be difficult to get any big reversals. The all time high on SPY is only stones throw away at 364.38. We could potentially test that level over the next few trading days. Unless volume picks up, we believe the all time high will be difficult to break. Should we get a pullback off that level the 2 big support levels that we are tracking on the daily chart are at 358.92 which is the 8 EMA and 353.56 which is the 20 EMA.

The volume has struggled to hit 50 million shares on SPY the last 2 weeks. This is half the levels that we like to see long term. In order for volume to pick up we will need to see price move lower from current levels.

Over the last few weeks we have seen the financial, energy, and retail stocks lead the charge on the upside while the tech stocks took a break. Over the last few days we have see a rotation back into tech while the other areas pause. Until we get all sectors moving lower together, it will be difficult to get a significant pullback. The sector rotation helps prevent any selling from taking hold.

We continue to focus on using more credit spreads for the time being due the contracting volatility and range. Should we get 2 way price action to pick back up going into December we will shift our focus back to using more long calls and long puts.

In this week’s midweek options update video we take a look at where we stand on the index products going into the end of the week. We also recap our trading so far this week as well as take a look at a few new trades setting up for the next 3-5 trading days. Take a look and let us know if you have any questions that we can help with. mike@netpicks.com

 

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