By: Tom Gentile
on January 24th, 2024
The reason given for the down day in the markets is attributed primarily to the US Retail Sales numbers that came out today.
They were reported at 0.6% vs expectations of 0.4% in the month of December.
The sales results excluding autos were up 0.4%, which was better than the 0.2% expectations. Year-over-year, retail sales ended 2023 up 5.6%.
Large in part what the assessment seems to be is the dialogue of the Fed raising interest rates somewhat more aggressively in 2024, (there could be up to 6 quarter point cuts this year), might not play out exactly like that.
What this report indicates is the consumer is keeping up with inflation. This time of year the US economy is / was expected to slow down. So long as the consumer is showing resiliency the Fed may not have to be that aggressive.
That seems to be a bit of a pall on the market currently.
Market in Focus: QQQ – Invesco QQQ Trust
The tech-heavy ETF, the Q’s is an ETF that tracks stocks in the NASDAQ 100, and it tries to replicate similar type returns of that index.
One can make a case technically the Q’s have a double top formation.
Though that can be the case the slight concern is the more recent top is slightly lower than the previous one.
This may indicate conviction for that price of the first top around $412 isn’t quite there and the ETF may scale back in price until that prior conviction at $412 comes back (and maybe drives it higher).
As of now I would monitor support at 395. If it comes back to that price will it hold as support, break it, OR maybe it doesn’t trade back to that level.
Tools and Observations
In looking at my Darknet Scanner, I am looking for a security, ETF or stock that is hitting a multi-channel support area.
It’s what you will sometimes hear me refer to as Channel Collision. The scan looks at securities that if you place a short-, middle-, and longer-term channel on the chart the three of them stack on top of each other and the price of the security is testing the support levels of them.
When that happens there tends to be a bounce or a successful test of the support and the security trades higher for a period of time: it is a move over the next 20-30 days as I’ve seen them.
The scan goes further than showing the chart and the technical setup. My tools also search up an option that has the lowest percent to double out of the options in its chain of options.
- Remember with the percent to double calculation we are looking for an option that requires the lowest percentage move in the security’s price for the option premium to double in value.
That is for the call option and is there for one to consider if they want to simply trade a long call.
There are other bullish option strategies one can use should they have the anticipation of the security trading higher, but I am going to keep things simple for more of our students who are newer to options trading.
To find the scan page in the tools simply click on the icon for Darknet. Or do the sequence, Home > Darknet Signals and you get to this page:
On this page you will see this rectangle/box where you further choose parameters to bring up a search for the security’s that meet the criteria for a stock that could be poised to move higher. It will also show the lowest percent to double option I already referenced.
Click on the window titled Trade Type Displaced and left click to select ‘Call Option Trades.’
We are searching over the optionable stocks in the Yahoo database along with ETF’s that are optionable.
The Trade Type Displayed window is the only thing to click on to switch just that parameter.
All other settings for all other parameters in this box is all one has to click on to change. Leave everything else as is.
Click Search and you will get any securities that meet the criteria and the option with the lowest percent to double.
Here is the list results at the time of this writing:
It is sorted by the lowest percent to double option to the highest (in descending order).
The option with the lowest percent to double is on the security General Mills, Inc. (NUSE: GIS).
This shows that GIS needs to make a 4.75% move higher in order for the February 09, 2024, $62 Call to double in value.
4.75% higher for GIS that is trading at $63.39 equals $66.40.
When you click on the ticker symbol in the list you will bring up what I call a Darknet chart as it will show the chart with the Darknet Signal (B, R, or A).
There is a help file in the tools to educate you on the letter signals, but the ‘B’ is a Bullish signal.
The B at the far right of the chart is the most recent B – Bullish Signal.
There are times where a security shows more than one time where the Darknet signal populated and ran in the time frame shown on the chart.
Some securities don’t have active Darknet signals whereas others do.
GIS is one such security where the Darknet scans pick up opportunities more frequently.
Remember my three-step approach to options trading.
- Spot the opportunity.
- Build an acceptable risk option trade.
- Manage the option trade.
Using the Darknet Scan helps accomplish this process.
— Tom Gentile
C1P: Chief 1-Percenter
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