Posted in
Technical Analysis
By: Tom Gentile
on June 2nd, 2023
Why wait to show you the chart on the SPY, the ETF that tracks the performance of publicly traded stocks in the S&P 500.
One can see on the chart SPY tried to close above and maintain a breakout above prior resistance of 416-417.
A conservative approach to trading technically is to give the security at least 3-days to hold above the resistance price it is breaking out above.
The most recent time it tried prior to this most recent breakout it did not hold.
This time it is not only holding, but marching higher.
5-trading days SPY broke out and then instead of trading back under the price of the breakout it instead tested that resistance price on a retracement, making that old resistance now new support.
As for a price target for the SPY right now, the prior resistance closing high back on August 16 is a reasonable price target, as I see it.
If one wants to use a technical stop point reference consider a stop on a close back below that prior resistance 416-416 price.
Good News Prompting This Bullish Move – Resolution of US Debt Concern and May Jobs Report
One of two concerns facing this market prior to today was whether or not our US Government would suffer its first default on its debt.
The Fiscal Responsibility Act was reached days before the US defaulted and now awaits President Biden’s signing.
The other item that was a concern was the May jobs report that came out this morning.
Nonfarm payrolls grew much more than expected in May.
The number came in showing they rose 339,000. Expectations were for a190,000 increase. This is the 29th straight month we’ve seen positive job growth.
There seems to be signs that inflation is starting to wane. This could mean the Fed has reason to paus on its compulsion to raise rates any further. Maybe not for good, but a pause is possible. Whether or not this means the Fed will be able to pull off a soft landing or not is still to be seen.
Options Trading Action to Consider from Here
If one wants to go after bullish option trades now, I see that as an aggressive approach. A more conservative approach is to see if we get some profit-taking, and the SPY pulls back to test that prior resistance as new support again and then consider initiating bullish option trades.
There may be more upside follow through which may mean one has to initiate bullish trade on the guise of looking for strength to beget more strength.
I will look to my scans and the Morning Reports lists for option candidates that look promising in either case.
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.
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