Midweek Options Update 2/3/21

All the attention the last few weeks has been on how the Reddit stocks like GameStop and AMC Entertainment have been trading. During that time the overall market took a back seat and has quietly moved back towards all time highs. The move higher has been on lower volume and tired looking market internals, but we price is king and price has been super strong this week.

Key Price Levels On SPY 

The all time high on SPY is up at $385.85 which is less than $2 away. That is our line in the sand on the upside. Unless we get a pick up in volume in the next few days, we expect that all time high to act as strong resistance. We would love to see that level hold leading to a pullback before another wave to the upside.

Should price start to pullback from these levels we are watching the 8 EMA and 20 EMA and SMA as areas of support below us on the daily chart. That is a range of support between $378.50 – $380. That range would need to break on a closing basis if we are going to get a bigger move lower to develop.

On this latest move to the upside volume has been really light with SPY struggling to hit $50 million shares on a daily basis. We would like to see that number closer to 100 million shares on a daily basis but for that to happen we will need some selling to kick in. The Daily ATR (Average True Range) on SPY has also flipped lower to $5.09. As this move higher continues, we are seeing the intraday movement contract leaving traders with a slower environment to work with. The ATR number should tick back higher if we can get some selling over the next week.

The VIX is hanging on to the 20 handle but just barely this week. We have seen it move from over 30 last week to down around 22 currently. As the market continues to climb the wall of worry, we are seeing the volatility sucked out of the market. We don’t want to see this VIX number below 20 as that will lead to much slower markets to work with.

Stocks To Watch

In this week’s Midweek Options Update video we take a look at how our Overnight Pop trades have been performing. We were able to close out of 2 more winners on Wednesday on SPY. These overnight trades continue to be really solid performers for us. We also take a look at 2 new trades that are setting up for us going into the end of the week. We take a look at trades on SLV and MSFT. Take a look at the video below and let us know if you have any questions.

We will be back on Friday for our Weekly Options Recap to take a look at how we ended the week and also preview next week.

Author: CoachShane
Shane his trading journey in 2005, became a Netpicks customer in 2008 needing structure in his trading approach. His focus is on the technical side of trading filtering in a macro overview and credits a handful of traders that have heavily influenced his relaxed approach to trading. Shane started day trading Forex but has since transitioned to a swing/position focus in most markets including commodities and futures. This has allowed less time in front of the computer without an adverse affect on returns.