Day Trade From the Long Side This Week – SPY $203 Needs To Hold

December 28, 2015
Author: Peter Stolcers, Founder of OneOption

Posted 9:50 AM ET - Last week the market showed some vulnerability. Monday we breached major support levels and we made a new two-month low. Some of that selling can be attributed to option expiration and some of it to the interest rate hike by the Fed. When I see this type of price action into year-end it is a bearish sign. The next big move will come on the downside. We are in holiday trading mode. The price action will be choppy on and the volume will be light. This week I will focus on day trading. All I need are a few good trades each day. I prefer trading from the long side and I will be looking for breakouts through horizontal resistance and relative strength. This strategy has worked beautifully this month. I don't want to do much credit spreading. We could see some big moves in both directions and I don't like the risk reward. I will not be buying options or taking overnights either. If the SPY breaks below the 200-day moving average ($203), I will buy SPY puts. I don't plan to hold them overnight unless I see follow-through selling. The declines are fast and furious. SPY puts can be traded with ease and that is why I prefer this approach for my shorts. I plan to take profits when we hit an air pocket. The move Thursday and Friday after the FOMC was a classic example. If you overstayed your welcome, you lost money. Official PMI's will be posted Monday and this will be the first economic news from China in the last two weeks. Their economic activity has stabilized and I don't believe this number will be a big drag on the market. We will see some "window dressing" this week and that means there will be rotation. These moves are temporary and they are ideal for day trading. I will be patient and I will keep my trade count/size relatively small. I'm just looking for a few good trades each day. Look for choppy trading with very little follow-through this week. . . image

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