By: Tom Gentile
on June 14th, 2023
Originally published via our newsletter previously. Subscribe for early access!
Option Trading Tip? Focus on a Market
There are going to be times when providing you options trading education we will highlight a sector or what Tom calls a ‘Corner of the Market’ that seems appropriate to focus on.
We focus on market sectors to run technical analysis on so we can assess if the direction of that market is in a bullish or bearish phase. (or sideways) so we can then direct our attention on finding a stock in that market we can trade in a bullish or bearish manner.
There are a core 5 sectors we pay attention to when doing our market analysis and they are represented by an ETF used that is deemed an appropriate representation of stocks in that market.
Here are the corners of the market analyzed in our Options Trading Research:
Equities we analyze the SPY. This is the SPDR S&P 500 ETF Trust (SPY)
Bonds we analyze TLT. The iShares 20+ Year Treasury Bond ETF (TLT)
US Dollar we analyze UUP. The Invesco DB US Dollar Index Bullish Fund (UUP)
Commodities we analyze two areas. Oil and also Precious Metals
Oil and Energy we analyze USO. The United States Oil Fund, LP (USO)
Metals we analyze GLD. This is SPDR Gold Shares (GLD. At times we also look at SLV – which is the iShares Silver Trust (SLV)
— Tom Gentile
C1P: Chief 1-Percenter
Market in Focus
Last Friday SPY broke out and closed above the horizontal resistance line drawn in on the chart image above.
It broke out above that resistance line prior to last Friday, but that breakout did not hold, and the price of SPY retraced back to the 410 price before making this latest leg up move.
Last Wednesday-Thursday tested that resistance again, but this time bounced and is holding to present day.
The last three trading days, Mon-Wed (today), appear to be more of a consolidation than a pullback and we anticipate a continued bullish move is coming.
Options Research Tools
SPY broke out to recent highs last week. One can either believe it will not be sustained and anticipate a pull back OR they can go with the breakout and anticipate the strength of the market being analyzed will get continued strength in buying and move higher.
This is a bit like the founder of Investor Business daily, William J. O’Neil teaching that stocks at 52-week highs have a tendency to run higher.
Again, the belief is strength begets more strength.
My Options Trading Tools, www.tomsoptiontools.com, has the scanning capability to search up stocks and or ETF’s that are making new 52-week highs.
Not only will it show those securities at new 52-week highs, but it will also show others that are close or almost at 100% of their 52-week high.
This scanning tool can also search for securities at or near their 52-week lows, but since we are anticipating a continued bullish move higher in equities we will run the scan for those securities at or near their 52-week highs as of the close of market today.
Options Research on Securities at or Near their 52-Week Highs
We run the scan to find stocks to trade options on.
To run the scan, log in to the tools.
Do the following sequence: Stocks > Stock Analysis > Hi/Lo (meaning hover over and click your mouse on those tabs / line items).
Below is what the screenshots look like in the tools.
- The list generated is not to be taken as a list of recommended stocks. My team and I are not Registered Investment Advisors nor is my Option Trading Suite of software a brokers trading platform offering recommendations.
- www.tomsoptiontools.com is a software that helps perform research on stocks, ETF’s, and their options to help one find Option Trading Opportunities.
Here are all the securities out of the stocks in the S&P 500 that are at a 52-week high, meaning they are at 100% of their 52-week high.
— Tom Gentile
C1P: Chief 1-Percenter
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.
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