The Market May Have Established a Support Area and maybe Even a Trading Range

Tom Gentile

Posted in
Daily Report

By: Tom Gentile
December 8th, 2022

3 mins read

SPY at Support

Once again, I provide you all a chart on the SPY.  SPY is my representation of US Equities and the chart I start with in my technical analysis in determining a directional bias, up – down or channeling sideways for the stock market.

I also have another chart view on SPY and my other corners of the market called my ‘All-in-One’ chart that I will introduce in future educational pieces.

Once I have a directional assessment on the nigger picture markets I then go to the sectors that coincide with my directional view on the bigger index.  Then from there I whittle my search down to charts on stocks in that sector looking for correlations between them all to determine what security I wish to pursue options trade on.

Image 28
Figure 1: 100-Day Candle Chart on SPY

I have documented the ascending support in previous articles.  I’ve also pointed out the SPY is testing that price are and that it may turn out to be a support area.

Testing a support area means it is at that price support. Becoming a support would need the security to trade at a higher price up and off that support.

Yesterday’s price action is what the technical traders using Japanese Candlesticks would call a ‘Doji’ day.

Doji Candlestick

Real quick reiteration of a Doji candle.  It is a very narrow range candle where the open and the closing price is pretty close to the same price.  Loosely translated Doji means a ‘return to home’.  When we say the open and close price of the candle body is close to the same price it means the stock opened, maybe went higher or lower or both, and then returned back to its open price.

This signifies indecision between bulls and bears, and neither was in charge or really took the price higher or lower on the day.

It is the subsequent days that will determine if this doji bring a pause int the existing trend and continues or reverses.

Today’s price action saw the markets gap up a little bit and close higher, (the first closing high over the past 6-trading days),

Box Trading Range

With the price action looking like a formed support area, we can look to a higher price point pivot and start to establish a sideways trading range or box trading range.

When one can establish a support and a resistance price area that is when the trend shows up on the chart as a sideways trend.  As long as the security trades between support and resistance one can consider option trading strategies based on that price action.

One such idea is to Buy to Open a call option on support and Sell it to Close at resistance.

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.


Disclaimers

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.

Sign Up Now for Free Education!