The Bears Take a Stand + Open Interest for SPY, BIDU, LNKD, NFLX, PCLN, TSLA & TWTR



The combination of sentiment and momentum divergences finally mattered supporting the current pullback taking place. I don’t think there is anyone that would argue we weren’t in dire need of a reset regardless of how unpleasant it may be. Considering the current backdrop of liquidity, it seems pre-mature to start preparing for a major correction. For now, my plan will be to manage the risk I currently have and to be on the lookout for when we put in a tradable bottom. If we breach SPX 1750 then I will re-think the idea that we are just experiencing a minor pull-back. Things I will be looking for regarding a tradable bottom are:

  • a pick-up in volume, something we already began seeing
  • a few over 1000 ticks
  • an improvement in the put/call ratio
  • improving breath with or without price following
  • high-flyers starting to under-perform (a good sign of people selling winners as well as losers)
  • hitting important support levels such as between 1750 and 1770
  • a catalyst that traders (and CNBC) will use as an excuse to rally (i.e. good earnings from high flyers, FOMC policy decision, China or emerging market improvement, etc.)

There are many catalysts next week with the likes or earnings from CAT, AAPL, FB, AMZN, CMG, GOOG, MA and the FOMC policy decision. I will highlight most of those open interest charts in a separate post.

Current Open Interest View of SPY, BIDU, LNKD, NFLX, PCLN, TSLA & TWTR

SPY: Price is already below the highest put strike of 179.5.
BIDU: Between the recent China pitfalls, the possibility of Chinese companies needing to find new auditors, and the internet outage, BIDU definitely had a bad week. Price is currently lower than the two strikes (165 and 170) that have both high and fairly equal amounts of puts and calls.
LNKD:  Interesting relative strength on Friday given the market conditions. The highest strike is the 230 calls and not many puts. Let’s see if we get follow through from Friday.
NFLX: They deliver again and given that they held their gains while the market sold off, it seems that price is being accepted. Highest strike is the 400 calls. I imagine we will be seeing 400 as the highest strike until we strongly close above it on a weekly basis.
PCLN: Finally got over 1,200, but failed to hold onto gains which probably had a lot more to do with market conditions than the stock. The highest strike is the 1,160 puts.
TSLA: Held in nicely last week. Highest open interest is the 180 calls.
TWTR: Another stock that showed relative strength to the rest of the market. Perhaps it’s setting up for a pre-earnings run?