Check out the All-Time Highs on S&P 500

Tom Gentile

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By: Tom Gentile
May 22nd, 2024

4 mins read

Originally published via our newsletter previously. Subscribe for early access!

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If anyone wants to tell me that hearing the markets are at all-time highs is sounding like a broken record, I would tell them, ‘yeah, but it is the kind of music I will NEVER get tired of listening to.’

The SPY not only broke above, but also closed above 5,300 for the first time ever.

Don’t think I am forgetting the Dow or the NASDAQ. That is not the case. 

The Dow closed at 39,908.00+349.89 (+0.88%)

The NAZ closed at 16,742.39+231.21 (+1.40%).

Where many investors may consider taking profits on a position that is at their all-time high in fear or concern of others doing the same, resulting in a pull back from these highs, others find buying or adding to their positions (averaging up) as a way to go.

I talk of a strategy for consideration on stocks at all-time highs in my Tools and Observation of this week’s newsletter.

Tom Gentile
C1P: Chief 1-Percenter

Market in Focus — SPY – SPDR S&P 500 ETF Trust

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Two things based on the chart iomage above on SPY.

First: The solid, green line is a representation of an ascending support on SPY.  It was broken last month, but has since rallied back strong.

If the old resistance new support pattern plays out, I would montor the price of SPY what looks like 6-points higher (about 60-points higher in SPX) as a possible resistance.

Second: I believe the momentum in the markets is higher. Knowing prices don’t move up and down in a straight line I have a horizontal, green, dotted line indicating price resistance at 523/524.

Should a pullbakc occur happen I woul be encourwaged for higher prices if that old resitance becomes new support.

Tools and Observations

52-Week High Strategy

I have learned and therefor know many investment strategies.  Since I am an options trader more than an investor I make it a point to see if there is an investment strategy (or more) than translate to an effective options trading strategy.

One I like is the 52-week high strategy. When a stock is at a 52-week high I consider bullish a bullish options strategy on it. More often than not a simple long call.

I learned of this strategy from studying William J. O’Neil, founder of investor’s Business Daily. Though I must tell you when doing a search on the 52-week high strategy I don’t see much reference or credit given to Mr. O’Neil.

The Concept of the 52-week High Strategy

The gist of the strategy is to buy or buy more of a stock that is hitting it’s 52-week high in price.

The tendency of those stocks is to continue trading higher. I am not going to go in on Mr. O’Neil’s CANSLIM process, but many of those principles, to me, are what makes stocks at 52-week highs worthy of consideration.

They typically are what I call First-In-Class stocks: Leaders in their industry, quality products/services, and quality management to name a few characteristics.

Instead of buying stock I consider a long call option about 30-45 days out until expiration. I consider an option with a 70 Delta, thus giving me an opportunity to have the option move at a larger price relation to the stock.

Delta is basically, how much and option price will increase with the first $1 or 1-point move ion the security. If the stock makes a $1 move the option should, in theory, move $0.70.

Those options with a 70 Delta are In-The-Money (ITM) options and will cost more than those At- or Out of-The-Money.

My tools have a can to find securities making 52-week highs.

With the markets at all-time highs, I want to look at those securities making 52-week highs anticipating continued upside price action in those along with the markets overall.

I ran the search for 52-week highs on the S&P 500 list and 78 securities or 15.6% of the S&P are at their 52-week high.  Below are the first 10-on the list.

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Tom Gentile
C1P: Chief 1-Percenter

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