Last week here I wrote that the path of least resistance remained higher despite the possibility of remaining in a range. Importantly, I showed the Wednesday open interest and suggested that pullbacks to or under 237 would likely be bought. Thus, the pullback early in the week provided an excellent opportunity to get long into Wednesday. Below you can see my reasoning for going long SPX calls last week at the lows on Tuesday.
Indeed when price was at 2360 (the low on Tuesday was 2358) we bought SPX calls. We sold half the next day for more than a double and still have over a week on the rest.
Last week I also stated that I believe SPX gets back near 2400 and likely higher before any meaningful downside. I continue to believe that to be the case; however, it doesn’t mean it has to happen next week or in the next few weeks. Price can remain rangebound and as you will see below, that might be the case next week.
Open Interest for next week:
SPY-W: (20 of 27 pins since Wednesday expiration inception).* The current best pin for this coming Wednesday is around 238.5. Put support doesn’t step in until 235 and there is heavy call resistance at 240. Thus, one could make a very strong case that price will not close over 240 on Wednesday. And with little put support until 235, SPY doesn’t have much holding it up in terms of options; however, before you bears get too excited keep reading below.
SPY-F: The open interest for Friday’s expiration has a range of 237 to 241 with the best pin currently being 238. Given that the trend remains bullish, should price fall to or below 237, it is likely another buying opportunity. And, of course, any upside will face resistance at 241 with price unlikely to close above there by Friday’s expiration.
In sum, SPX is currently basing within a bullish trend. Should price fall below 237 early in the week, it is likely a buy the dip opportunity. If it ends up not being a buying opportunity and price closes below there on Friday then bears will have a reason to start to get excited. Should SPY move higher next week, it likely remains below 240 till at least after Wednesday’s expiration and likely closes below 241 by Friday’s expiration. It seems likely that SPX will continue to remain in rangebound consolidation next week.
If you are struggling to find good set-ups or remain on the right side of the trend, consider joining SassyOptions premium. A premium subscription includes all day analysis, individual stock set-ups with their open interest and real time trade alerts.
Alternatively if you would like this coming weeks open interest analyses and strategy for AAPL, AMZN, BIDU, FB, GS, GOOGL, NFLX and TSLA you can get that here by first subscribing to five day access to that post.
*An explanation as to how I define pinning can be found here.
Wednesday 3/15: successful pin.
Friday 3/17: successful pin.