Could the Markets Have Found a Bottom for Now?

Tom Gentile

Posted in Technical Analysis

By: Tom Gentile on May 2nd, 2022 • 3 mins read

Another Wild Ride in the Stock Market Today

There have been times in this bearish market slide for the markets where the markets close higher for the day. It is then immediately followed up in the next day or two or three with a sell off.

What makes us think this day, where the markets ended up bullish, closing near their highs of the day, any different.

It may not, but the fact the markets had an impressive bullish reversal day at a key price support may make for at least a reason to expect a bit of follow through instead of an immediate sell off again tomorrow.

Image 2

Support is shown above with the horizontal green line at $15 on the SPY, which is a tracking ETF for the S&P 500.

Last Friday, it broke that support on a closing basis and that could have spelled ‘real’ trouble for the markets today and moving forward.

The markets ‘Did’ sell off today down over 500-points, but towards the latter part of the day it got some bullish activity and turned positive and stayed that way in to the close.

We Need to see the Stock Market have Bullish Follow Through

One-day does not make a trend. Nor does it speak for a full-scale reversal in either direction.

 When it comes to break down of support or break out of resistance, a more conservative trader likes to see it break a key level for more than just one day. Many traders I know like 2-3 days consecutive closes to have the conviction to start trading in that direction.

More aggressive traders will take a 1-day period, (bar or candlestick) and start trading that way.

The risk a false-bar (candle) break.

Meaning a security can make a move for one- day (period) and revert back to the trend it was in prior to that one-day break.

I am not going to go full-on bullish, but I like that fact we had a reversal day off of support enough to at least start thinking of a bit more bullish option trading.

Morning Reports: Unusually High Option Volume
Morning Reports: Unusually High Option Volume

I am not recommending an options trade here. Nor should my tools be looked at as a means to get options trade recommendations.

It is a research and analytics software that can scan for securities and options on those securities based on a number of factors. When a security and an option on that security populates you have to consult with your financial professional/ broker as to its suitability for you in your account.

The thing I do want to point out with the Morning Reports list is it finds 10 securities per list based on the heading title of that list.

The list above shows the most options volume for the day prior telling where options traders are putting their money to work. There is no guarantee the stocks will go higher if it is a call or lower if it is a put.

But, if one wants to look at it that way that is an option up for consideration.

Look at what the stock first on this list, Micron Technology, Inc. (MU), did today. Granted the whole market had a nice bullish turn around, but this one was a tell if one wanted to look at it that way.

Image 4
Image from Think or Swim
Image 5

App: Toms Option Tools

Market Insight articles may show images of lists of stocks meeting a variety of options parameters like Unusual Call and or Put activity or Expensive IV found on my app Toms Option Tools.

Other times I will have other charts may work to amplify my educational points. 

Those options data lists, however, can be found on my app Tom’s Option Tools. Use your device to search up and download this app and get free access to the Morning Reports section of the app.

Other parts of the app are available at a premium subscription rate, but the Morning Reports Lists are yours free.