As we head into a holiday shortened week next week we certainly saw some profit taking on Friday. SPY is currently testing a very key support level at 355.99 which is the 8 EMA on the daily chart. We have been tracking this level over the last 2 weeks waiting to see if it will break on the downside. It held as support 3x last week which goes to show how crucial that level is. If we do see a break through that level, we have an air pocket down to the 20 EMA at 350.50. Should we get down to test that level we would expect the bulls to put up another fight at that point.
The tricky part going into next week is the Thanksgiving holiday on Thursday. With a shortened week on tap we will most likely see very low volume. When volume gets light we tend to see markets favor the upside. If we do see a move higher next week the areas of resistance on our radar on SPY are at 362.50 and then the all time high at 364.38.
Our plan for next week is to continue trading as normal. We expect there to be decent trading Monday and the first half of Tuesday before the holiday slowdown kicks in. We tend to favor using more credit spreads during these slower weeks and that will again be our plan next week.
With the continued uncertainty around the pandemic, markets are again showing some signs of fear picking back up. We still have many markets up near the highs which is going to make it more difficult for a sustained move higher without a pullback first. We would still like to see a pullback into support in order to build some energy for another run higher going into the end of the year.
In this week’s Weekly Options Recap video we will cover where we stand on key markets going into next week. We will highlight our plan of attack for the holiday shortened week and also cover how we did on our Overnight Pop trades that we closed out of during Friday’s session. We finally wrap it up by taking a look at a few new trades that are setting up for us next week as well. Take a look and let us know if you have any questions that we can help with. Mike@netpicks.com