Stock Option Trading Strategy – Long calls on energy construction and drillers and bull put spreads.

Two of the themes for my daily commentary this week have been choppy trading and expiration related buy programs. Tuesday the market got the news it wanted and it rallied on a lower than expected CPI number. By the end of the day the gains were erased and the market reversed. I viewed that as a negative development and I was surprised that the typically bullish bias of expiration week was not able to support prices. I felt that the market had a chance to continue lower on Wednesday. That's how the day started, but by mid-morning prices firmed up and the market started to grind higher. That was the move I was looking for on Tuesday. Perhaps too many other traders expect the same and it failed for that reason. Regardless the S&P 500 made a new six-year high. As you can see in today's chart, tech stocks did not fare so well. They are still caught in a trading range. The market will need participation from these stocks if it is going to push higher. Even though the market is basically unchanged today, it is being held up by a handful of stocks. The A/D is a negative 1:2 and most stocks are trading lower. I believe we will see a quiet day today. The energy stocks are moving higher today and my calls are working out well. In particular I like the oil construction firms and the drillers and many of them are making new highs. My bull put spreads will expire tomorrow and I have already established a few for June. Now that the market has been able to hold the SPY 146 level for a few weeks I am prepared to turn bullish. The wounds from the February decline have healed. As a result, I will consider buying calls on the next dip.

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