Open Interest, levels and then some for week of September 13th expiration

SPX finished last week up 1.4%. Last weeks range was 1633.41 which happened on Tuesday to Friday’s high of 1664.83. All week we made higher highs and higher lows. I still believe that the correction is mostly over and if your time frame is longer than a week, I would even call the pullback from the August 2nd high a consolidation period rather than correction. I don’t believe we are yet on the trajectory to go straight up, but I think we have levels to call strong support should we go back down. My first level of support is around 1652, which roughly aligns with 165 on SPY. I will point out my reason below when I show the SPY open interest for next week. After that we already have the known support areas of 1640 and than 1627.50. I don’t think we get there, but with Syria and taper drama it doesn’t hurt to be aware of them. If instead we continue to rally next week, watch for resistance at the 50 day MA, 1665.81, then 1670 and 1680 where the gap is sitting.

TLT – I asked on stocktwits/twitter last week who thought that TLT was forming a short-term double bottom. I didn’t get many replies, but the ones I got were mixed.

There is no doubt the longer term trend is down because interest rates (which have an inverse correlation) really have no where to go but up over the long haul. Having said that, the rate at which they shot up I believe factors in tapering and then some. Furthermore, bearish sentiment on treasuries is at extremes. I like the risk/reward trade of going long $TLT setting a stop just below 102, which has both recent and long term price memory.

Weekly view:

One positive that we can take away from the fact that we did reach 3% on interest rates is that the market didn’t panic. It didn’t even flinch – so I think we can pretty safely assume that it’s old news and baked in.

Open Interest
Once again, open interest should be viewed as another tool to help gauge your trading. When price gets below the high open interest puts or past the high open interest calls, I first consider the volume (was it too low?). If it wasn’t then to me it’s a sign of either major strength (pushes strongly past high call open interest) or major weakness (breaks easily through high put open interest).

SPY – if we drop to 165 (highest open interest puts) early in the week, I will buy it with a tight stop. If it fails I would get out of the way because it could be a set up for some liquidation due to sellers staying delta neutral. Read here for more understanding on that point.

AAPL – the open interest that sits at 500 is starting off with decent size volume already at almost 12,000 contracts. That does not mean we can not get over 500, but the earlier in the week we do, the better. Remember if we push through it easily with volume it’s a sign of good strength. Right before the bell on Friday the WSJ reported that AAPL planned to ship a cheaper iphone to China Mobile, which as Josh Brown (@ReformedBroker) points out would be a “game changer.”

Did AAPL not rally on the news because it is already baked into the price?  I doubt it. It was more likely due to pinning and we may see a large gap up Monday morning. If we do and it holds then I think that 500 open interest level is meaningless and it will shift by Tuesday morning.

AMZN – reclaimed its 10, 20, and 50 day MA’s last week accompanied by stronger than average volume. It looks to be setting back up to be a powerhouse. As long as 295 holds I think it sees higher prices next week. The only thing that has me cautious is that AMZN typically has equal put and call open interest, whereas this week the puts are negligible.  Unless it closes below 295 though, it shouldn’t be of any concern. The highest open interest is the 310 calls.

BIDU – It closed below the 10 and 20 day MA, which are pretty much aligned with each other. If it can get above 137 then the next resistance will be at the high open interest calls and technical resistance level of 140.

CMG – As I said last week, CMG typically has a long consolidation period and then runs big. Until that happens it will chop around and then close Friday very close to where the puts and calls intersect. Currently that is at 410.

GOOG – Came back through its 10, 20, and 100 day MA’s last week. It’s currently sitting below its 50 day MA at 886.61.  Highest open interest is the 890 calls. So 1st resistance is the 50 day and then be mindful of the 890 calls; however, often the open interest is easily broken with GOOG.

FB –  It easily closed above its high open interest calls of 43 last week. That shows real commitment and buying power that will likely continue into next week. Currently it’s already above next weeks highest open interest also at 43.  The next level is 45 where the 2nd highest calls and the highest puts are. Any pullback next week I think would be a great buying opportunity.
LNKD – Not only did it close at all time highs, but it did so after news came out that they would be selling some common stock for $223. I would definitely look for continued strength next week and not pay much attention to open interest until later in the week.
NFLX – Made a 52 week high on Thursday and everyone seems to be watching that 300 number. It could easily get there next week, but I wouldn’t be surprised if it took a week off to consolidate a bit. The 10 day MA sits at 286 so if Friday’s pullback persists, look for support there. The highest calls sit at 300, but I think 300 will only pose resistance because of its psychological number and not the open interest. 
PCLN – has consolidated very nicely since its earnings breakout and it looks like it’s getting ready to claim that high again. It closed near the highs of the week and the next small resistance area that I see is at 970. Through there and its a clear shot back to 992. Then comes that big hurdle… 1000, which I want more than anyone since I timestamped months ago that it would get to 1000 before GOOG. Obviously it’s much closer, but it still has yet to happen. Highest open interest is the 975 calls.
TSLA – Once again the high open interest puts held it up last week. It did however close just below its 10 day MA. I do not think that means we call a top, but it wouldn’t be unhealthy to pullback a bit maybe to its 20 day MA or support around 155 or even 145. Having said that, I don’t necessarily think it will all happen next week, nor am I saying it will even happen. I just personally wouldn’t be going long right here right now. One thing, among many, going for people that are long, is that put open interest once again is very high and could keep propping it up. The current highest put open interest sits at 155.
Good luck next week. Enjoy your football all weekend!
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