This Is A Chance For Both Sides To Shine

February 16, 2023
Author: Peter Stolcers, Founder of OneOption

Buyers is this the dip you wanted? Then show me some stacked “greens”. Sellers, is this the crack in the dam you have been waiting for? Then show me some stacked “reds”.

PRE-OPEN MARKET COMMENTS THURSDAY – The PPI came in at a “hot” .7 reading and all of the gains from yesterday have been given back. As daunting as this drop seems, that is all that has happened at this stage.

Swing traders are long SPY at $409. We will hold without a stop. Sell bullish OTM put spreads on strong stocks. If you have a neutral bias, sell OTM call spreads on weak stocks. Take advantage of this trading range and generate income while we wait. If the drop today fizzles out like the others, I will be looking to sell more OTM bullish put spreads on strong stocks below technical support. That is the side I favor. Until we breach the 200-Day MA I will view drops as opportunities to sell these spreads. In the chart you will see a blue box. If we enter that area, I will be neutral. I will manage my longs and I will not add to positions. If we breach the 100-day MA, we will exit our SPY long and consider pivoting. I believe this outcome has a low probability. Buyers and sellers have had an incredible amount of news to trade off of recently. The volume is light and the range is tight. I believe it will continue. If the market shows me that I am wrong, I will adjust. Until then, only a move through those levels will force me to change my thesis.

Day traders should respect the early move. This is a nice gap down. There is horizontal support at $405. Buyers and sellers have been active. Expect swings. If we start off on a heavy volume drop with stacked “reds” favor the short side. If we bounce right into the gap on stacked “greens” look for a nice bounce and a possible gap fill. Anything in between, will produce nice moves both ways.

I encourage all of you to start selling some OTM option spreads to generate income. The market backdrop has changed. Establish them based on your market bias. Day trading will be tough and these core positions will help you make money when we have dull days.

Support is at $405 and resistance is at the high from Wednesday.

Until we have a technical breakdown, I am trading as if the compression is going to last and I am favoring the long side.

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