Midweek Options Update 2/10/21

Last updated on February 17th, 2021

For the first time in over a week, we saw a nasty little selloff mid morning on Wednesday in all of the index products. This came after opening at new all time highs yet again. The selling didn’t last long as the dip was bought up quickly which has been the norm on any selling the last number of months. The move higher was aided by Fed Chairman Powell speaking this afternoon saying it’s still full steam ahead with support for markets.

The new all time high this morning on SPY came in at 392.28. Above this level and we will be looking at 393.00 and 393.50 as the next areas of potential resistance. There is a lot of talk of the S&P hitting 4000 before the next pullback. Given that 4000 is less than 100 points away that is very doable.

In the near term we are still massively overbought. We would love to see a deeper pullback before another run higher. Volume has been light all week with SPY struggling to hit 50 million shares trade on a daily basis. We still would like to see this number closer to 100 million shares on a daily basis but will need more selling in order for that to happen.

What is interesting is the VIX has actually hung in there given the strength in the overall market. It is still trading above 20 which is historically a high level. The level of complacency is still extremely high right now as everyone just expects all dips to be bought. However, is the VIX telling another story? That will be interesting to track over the next few weeks to see if volatility was predicting a much needed pullback.

The ATR (Average True Range) is started to stabilize this week around 4.60. This is a good start but we would like to see this number trend back higher towards 6. That would indicate much better intraday trading conditions with back and forth movement instead of the one directional move that we have seen the last few weeks.

In this week’s Midweek Options Update video we will review where we stand on the key markets leading this market. We also recap our latest Overnight Pop Trade that we closed out for a nice winner on SPY on Wednesday. We will also outline a few new trades that we have our eye on for the end of the week on PYPL, IWM, and BABA. Take a look at let me know if you have any questions that we can help with. We will be back on Friday for our next Weekly Recap live on Facebook and YouTube. Mike@netpicks.com.


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