Weekly Options Recap 1/16/21

Markets finally started to show some signs of two way price action this week which we have been waiting patiently for. Over the last few months we have seen markets brush aside bad economic numbers, negative news headlines, political uncertainty, and the pandemic showing no signs of letting up. New all time highs have been a regular occurrence over this stretch.

However, over the last 2 weeks we have started to see more signs of a tired market. Volume on the upside moves has continued to contract with SPY struggling to hit 50 million shares traded on a daily basis. The market internals that we track have indicated that fewer stocks are participating on the wild moves higher. We will typically see these types of traits during the tail end of a market move.

Key Price Levels

With that being said SPY is only $6 off the all time high which was made back on 1/8 at $381.49. While we did see some selling to end the week, it’s still nothing on the panic level as of yet. The selling to end the week did come on bigger volume with SPY trading 107 million shares on Friday. Some of that big volume was due to options expiration on Friday but it was still 2x the volume that have been seeing on the latest moves higher.

With markets closed on Monday due to the MLK holiday, it will be interesting to see if we can continue to see the selling going into the shortened week next week. We will be tracking the $381.49 area of resistance on the upside should we get another buy the dip scenario. On the downside the low on SPY on Friday came right on top of the 20 EMA and SMA on the daily chart. This 373.40 will be a big support level that we will be watching going into next week. Should that level break we have a nice air pocket down to 365.66 which is where we have the 50 EMA and SMA.

Earnings Season

We did see earnings season kick off last week with a few of the financial stocks releasing earnings on Friday. While the earnings numbers were decent out of those stocks, they still sold off which could be an indication that a lot of good news is already priced into this market. We will continue to see earnings released dominating the headlines over the next 3 weeks as almost every individual stock on our list will be releasing. This is something that we will need to watch closely as the earnings releases can lead to very large overnight gaps.

If you are looking for a quick way to see when the stocks on your watch list are releasing their earnings numbers, we recommend using https://www.earningswhispers.com. This site has a free tool that will allow you to look up the day and time of all upcoming earnings releases.

PLUG and XLE Trades Setting Up

In this week’s Options Recap video we review the Overnight Pop trades that we closed out Friday morning for nice profits. These trades continue performing really well for us each week. We also review key markets that we are tracking going into next week. This includes a walk through of trades on PLUG and XLE that are on our radar for next week. We walk through those options trades in detail in the video. Take a look and let us know if you have any questions that we can help with. Mike@netpicks.com.

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