By: Tom Gentile
on November 15th, 2022
The equities markets have been on a nice run higher since the October lows. The concern is this nice run could be putting the SPY, (our representation for the equities markets) in a situation where it is considered overbought.
When things get overbought the tendency is for them to eventually sell off. The sell off could be just a sideways stall, a small or more meaningful pullback.
One thing to look for is where the security or securities are hitting an overhead resistance point/price.
That overhead point/price is where some selling may come in to the play and the security or securities retrace.
The trick is finding a potential price point where the current run is potentially going to atop and retrace.
It’s at that price point one can sell and take profits on securities previously owned (or options). It is a price point where one can consider selling a security short or initiating bearish option strategies.
Figure 1 shows a 150-day look at the SPY. The Fibonacci Tool takes the closing high price and draws a line connecting to the closing low of that 150 days.
Securities do not go up or down in a straight line and you can see even in the downtrend there are up moves, come call up legs and down moves or down legs.
A Fibonacci cluster is where more than one Fibonacci retracements or extension levels over different price swings and time frames convene near one price area.
The premise of a cluster is that multiple Fibonacci extension or retracement levels form at or near one price, that price is likely to be an important support or resistance area.
If you overlay Figure 2 on Figure 1 you would see SPY testing a Fibonacci retracement level for both, one at the 50% level in Figure 1 and the other at the 61.8% level in Figure 2.
Even though the percentage retracement levels are different, (because they are commensurate with the percentage level for the number of days chart the Fibonacci tools is placed on), the price for SPY that may be a more solidified resistance $401.75.
App: Toms Option Tools
Toms Option Tools scan the markets for bullish and bearish trade opportunities using our proprietary scans and strategy algorithms. TTR Darknet finds bullish entries based on triple stack channel collisions. Money Calendar identifies seasonal patterns with at least 90% accuracy looking back 10 years. Weekly Cash Clock finds short term opportunities that last a week on average. Microcurrency Trader applies Darknet technology and moving averages to cryptocurrencies. Velocity Trader utilizes volume spike and Velocity indicators on custom stock lists. Quantum Scripts scans the markets for momentum acceleration signals and employs Quantum noise filters. Optimal Trader finds directional pre-earnings opportunities that are optimized for entry date, stock movement, and volatility surge. My Trades tracks the profit/loss of your trades, displays stock charts and risk graphs, creates new trades, and edits existing trades. Morning Report provides top 10 option rankings in 6 categories each day.
Stock and options trading has large potential rewards, but also large potential risk.
You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.
This is neither an offer to buy/sell/ or recommend a particular stock or option.
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.
No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
Disclaimer of Warranties and Liabilities Tom Gentile and TomsTradingRoom, LLC including employees, consultants, and editors (“Publisher”) cannot and do not warrant the completeness or accuracy of the content found in our areas, or its usefulness for any particular purpose.
Tom Gentile and TomsTradingRoom, LLC also make no promises that our content or the service itself will be delivered to you uninterrupted, timely, secure, or error-free. Under no circumstances will Tom Gentile and TomsTradingRoom, LLC be liable for direct, indirect, incidental, or any other type of damages resulting from your use or downloading of any content on our site.
This includes, but is in no way limited to, loss or injury caused in whole or in part by our negligence or by anything beyond our control in creating or delivering any portion of Tom Gentile and TomsTradingRoom, LLC.
You are agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that Tom Gentile and TomsTradingRoom, LLC will not be liable for any I, investment decision made, or action taken by you, or others based upon reliance on news, information, or any other material published by Tom Gentile and TomsTradingRoom, LLC.
Tom Gentile and TomsTradingRoom, LLC relies on various sources of information that we believe to be accurate and reliable. However, we make no claims or representations as to the accuracy, completeness, or truth of any material contained on our site.
Tom Gentile and TomsTradingRoom, LLC are educational portals, providing content for educational and informational purposes only. Neither Tom Gentile nor TomsTradingRoom, LLC are a broker/dealer. Investors need a broker to trade stocks and options and must meet certain requirements. All securities, futures, and investments data and ideas are offered to self-directed investors. All prices in USD unless noted otherwise.
A full disclaimer can be found here: http://www.tomgentile.com/legal_disclaimers.html.