Looking for a bounce next week and open interest for October 4th expiration

Last weekend I wrote “Next week there are plenty of reasons to support the idea that we will pull back or at least hang out and consolidate.” I should have just taken the week off because there wasn’t a whole lot going on. I did book my TLT profits, but I believe that trade is not over and will look to re-enter. If you are swing trader I think we will see interest rates continue to move down for the next couple months which will lift treasuries.

Looking toward next week, I think the prospects of moving higher are much better. We filled our Larry Summers resignation gap and unless our inept government further disappoints us (which would be challenging considering our already low expectations) I am looking for a move back up. If we do trade down, we have support around 1683 and if we drop even further, I still believe 1670 will hold.  We currently have some resistance around the 1705 area, but I think once we clear there we are set to make all new highs. My current intermediate term target is around 1746’ish. I also believe my post, from 2 weeks ago, which you can read here still stands. One thing I would add to that blog post is take your favorite stocks and view them on a weekly chart. It’s very hard not to be bullish going forward when you seem them.

Open Interest and commentary for October 4th expiration

One difference this week that you should take notice of is that we have two expirations for SPY this week. The quarterly options expire Monday September 30th. These options have been available for a while so many of the calls or puts have been open for a long time (I imagine many were purchased for protection rather than outright bets on where SPY would go). Inerestingly enough they still sit right around where price is now. I’ve never tracked pinning on quarterlies, but I thought it would be interesting to take a look at them. If we were to pin on Monday to benefit the sellers then we would technically close between 170 and 171. Considering we are closed Friday at 168.91 we are quite a distance away. If we see a big gap up Monday then I would presume it may be possible. Absent that I would dismiss the possibility.

SPY Quarterly:

Now onto weeklies:
SPY: Closed right above the 20 day MA and I think has a good chance of getting above the 10 day MA of 170.50 next week. This week puts dominate with 169 leading the pack. We are currently right under there at 168.91.

AAPL: Currently holding above the 20 day MA. If I had to guess, I would say we move up early next week especially since Carl Icahn is having his special date with Tim Cook Monday evening. However, I would need to see a lot of proof before I thought the move would hold. As usual we have very high open interest calls sitting right there at 500 waiting to take your money.


AMZN: I have read a lot about how AMZN is at the top end of a channel running from 2009 and to expect a 5 to 10% pull-back. There may be merit to that channel theory, but since AMZN is close to all time highs and above all key upward trending MA’s it still looks bullish to me. Highest open interest is the 310 puts.

BIDU: I think BIDU looks great right now. It made a 52 week high on Friday and I expect it to keep going. Of course, it’s always good to keep in mind that Chinese names can carry a little extra risk. It would help the risk/reward ratio if we see strength early in the week since the highest calls are 155.

CMG: It’s still hanging in there even after last Friday’s weak close. It is however under the 10 day MA and I wouldn’t want to get long it until it can close above. On a weekly chart it’s holding its 20 day MA and I don’t believe the run is over (yes even with the high PE).  Highest calls are 430 and 440. Looks like it may have been a spread; however I don’t know if it was bought or sold.

FB: Wow! Really what more can you say. It does look pretty stretched above its key MA’s and has an overbought RSI (note: overbought can stay overbought). I would love to see a healthy pull-back or some consolidation so that I can feel comfortable getting long. Right now the highest puts and calls are sitting at 50 so maybe next week will be the week it consolidates some.

GOOG: I recall many people looking for this to bounce to 920 last week. Honestly, I don’t see its current appeal as a long. It’s under its 10, 20 and 50 day MA’s on the daily and under the 10 and 20 day MA’s on a weekly chart. Having said that, given the market we are in I’m also not eager to short it right now. I will leave GOOG to those that know it better. Keep in mind the OI doesn’t always give many clues, but here it is with 860 puts dominating.

LNKD: What a crazy week. Looked very bearish at the start of the week and then had a couple upgrades and jumped big. Then Friday came and it had a decent size gap down. Considering it was an out-performer this quarter and not too far below its 10 and 20 day MA’s we may see a pop next week. However, if it stays below its 10 and 20 day I would say stay away. Highest open interest is 230 puts, which is slightly beneath the 50 day MA.

NFLX: Definitely surprised to the downside with an ugly candle Monday. However, it didn’t last long and the dip was bought. It still has a healthy 13.5% short float and I don’t see anything bearish about its chart. Calls dominate this week with highest open interest at 340.

PCLN: Seriously, you know every time I see those 4 letters put together I feel such a sense of satisfaction. I said last week that you shouldn’t let that 4 digit number scare you. I still think it has upside and let me let you in on a little secret….PCLN tends to be one of the top performers in the 4th quarter. Having said, that it is difficult to trade because the daily and weekly swings are fairly large as are the spreads. This is a buy the dip name to me. Calls and puts are basically even with highest open interest puts at 970 and calls at 1000.

TSLA: A couple traders that I respect have recently been talking about it possibly getting ready to pull-back. I have no opinion on that. I personally am not eager to short this monster even though one day I’m sure a short will pay out big. Short interest is still too high (27%) for me and I don’t want to short it going into the end of the year until I see some solid evidence it’s ready to give up some gains. Highest open interest is the 200 calls.

Good luck next week.