Premium Level Open Interest Strategy for Week 5/30/17

Please note that open interest often changes during the week when a stock has a big move. This provides a great starting point, but it would be up to you to continue to track it throughout the week if you are trading one of these names. If it’s an earnings name, the chart will be updated the day after the report comes out. The technical levels should remain fairly consistent. If you did want updates and real time trade alerts then consider becoming a full premium member. Finally, news items trumps open interest.

Open Interest: I am going to try a bit of a different format for a couple weeks by splitting my more technical notes from the open interest notes and see how it goes. For the most part I am fairly bullish on these momentum stocks going into next week as long as SPX remains above 2404. If SPX falls below that level at the start of the week then these stocks are likely buy the dip opportunities depending on the speed and momentum of SPX below 2404. On the other hand, if the market is massively bullish at the start of the week then I think it would offer an opportunity to day trade long and also take profits on our calls, but to reduce longs by mid week. I say that because often a very bullish beginning of a shortened week will often pull back mid to late week. A very bullish start of the week would also take SPY and many of these stocks over their high call strikes, which could result in a pullback later in the week if the open interests don’t shift. Of course the other scenario is a very flat market, which probably wouldn’t surprise anyone.

SPY-W: (29 of 37 pins). There is a fairly decent range for SPY to trade in without much call resistance or put support. There are both some calls and puts at the 240 level, but it can easily shift and isn’t nearly as relevant as the 245 strike that will act as a big level of resistance if SPY were to trade up there. So basically, SPY has decent room to move between Tuesday and Wednesday before expiration. 

SPY-F: (23 of 32 pins). This one is much more constrictive with the current best pin being between 241 and 242. If price is able to get over 242 prior to Friday (especially if it is in the beginning of the week) then this open interest can shift with some of the calls closing out; however, the longer price stays under that level the more difficult it will be for SPY to rally much further next week. If price does get over 242 and 243 early in the week and the open interest does not shift, then there will likely be a pullback by the close on Friday. To the down side, 241 and 239 offer the best put support; thus, any moves lower to the start of the week offers a buy the dip opportunity if those puts remain in the open interest. 

AAPL: There is just nothing interesting to see here (yet). When price can get and importantly hold over 155 then buyers will likely step in and call options can pay well. As long as it stays under that 155 level it will be difficult for it to have a large upside move. The 20-day MA is around 152.15 so that could be a decent place to try long for a small pop. Under there and it could head back to 150 and 148. The WWDC (World Wide Developer Conference) starts on June 5th and ends June 9th so a pullback into support might offer the most ideal set-up  next week because then it might run-up into the event as it gets closer.

  • OI: Lots of calls from 150 to 160, but also a decent amount of puts at 152. I guess I would say the best pin is around 152, but it’s kind of a complicated open interest and might suggest another week of a very tight range. The peak of the calls is at 155 so if price can get over that level and hold, it correlates well with technicals and has a good chance of rallying higher. This can also be a short for a scalp if it gets to 155 and begins to stall.

AMZN: On its path to 1,000, one likely scenario next week could be that price stalls between 982 and 1,000 (give or take a few points) for a while, before moving higher. However, once AMZN does get through 1,000 (I would say 1,003’ish because it could get over 1,000 by a point or two and quickly fail) it very likely has another big move higher (maybe not next week though because of the high calls). I would very much welcome a dip to 982 and have a trigger there in case it does move down to that level.

  • OI: The open interest below suggests that AMZN may struggle to get much over 1,000 if it does rally. There are some calls at 995 and 1,000, but really the bulk of the resistance comes from 1,007 and 1,010. This suggests that a move over 1,000 next week could be a fake out and that buying a dip would be a better strategy than chasing a breakout unless the open interest shifts. 

BIDU: This one continues to stall around the 192/193 level, but it does seem very close to a breakout. BIDU is one of those stocks that will be frustrating for a while, but then out of nowhere rip huge. If it loses Friday’s low (under 190), I think it will be supported by the 10-day MA  around 189. That can be an entry point for a long position. If BIDU does fall below there and doesn’t quickly recover then the breakout may take longer than I anticipate. Over 194 and I don’t think it will look back with targets of 198 and 201 initially.

  • OI: The current OI suggests a pin of 190 to 192; however, as I’ve said before about BIDU, when it gets momentum, the high call strikes can be plowed through. However, given the high call strikes, if BIDU pops early in the week, but struggles to get and hold over 194 then it likely will fall back to pin.

FB: This one was able to shift the open interest last week with the mini rally it had so it’s possible it comes back into play. If price can get over 152.60 then 153.60 is the all time high. Over that level would likely target 155, but I wouldn’t play this unless it stayed over 152 (where the high calls are). It actually did close above that level so I have my eye on it to see where it opens on Tuesday morning. A drop to 149.60 also offers a decent entry to get long for a few point pop (assuming the market is holding up).

  • OI: 152 is the peak of the call open interest. For that reason if FB can open above that level and not fall back then I think it’s worth getting long for targets listed above. If it does rally above that level and the open interest doesn’t shift, then it could be worth cheap puts late in the weak. 

GOOGL: This one is similar to AMZN in price and also has the big psychological 1,000 number right in front of it. If it doesn’t take out and hold over 1,000 (I would say 1003’ish to be more safe) then it may just stay rangebound between roughly 985 and 1,000 or even go as low as 978 (a gift of a buying opportunity if it came next week). Similar to AMZN I think this will be a wait and see regarding how to play it. If it gets over 1,003 and momentum is strong then I think it’s a go with (at least until mid-week). If on the other hand it just trades within a range then I would want to buy calls at the bottom of that range if given the opportunity.

  • OI: The only real resistance is 1,000, which is why it really needs a lot of momentum over that level to get going. It also means a rally over 1000 early in the week with no open interest shift could result in a late week pullback. However, a dip between 978 and 985 early in the week offers the opportunity for a long trade.

GS: This actually closed over its high calls on Friday, which tends to be a good sign going forward. It is still just rangebound right now, but when it finally gets over 233 AND HOLDS I think it explodes higher. Although it may take a while to do that, over 226 next week would get me interested because I think it can easily move toward 229/230. If on the other hand it drops back below 221 then nothing has changed and it still has a shot at filling that gap down at 212.92.

  • OI: The current best pin is between 222 and 225; however an early move over 226 or a gap higher can easily shift this open interest and thus would get me long. Alternatively, if GS rips higher and does get toward 233, but there is still high calls in the open interest under that level, then if offers a decent short trade for a pullback late in the week. 

NFLX: This continues to deserve the reward for the stock that ‘makes a new high and quickly drops.’ I do think that part of why it didn’t participate on Friday had to do with the open interest, but in the end it held over 160, which has been a level of struggle for a while. 164.10 is the all time high and I think over that will take it to 166/167. It may get there and drop right away because of its pattern, but if it can hold over 167 then 170/171 is the next target. If NFLX drops back below 160 then its back in the no play zone, but a dip to 157.50 would be another place to get long again if that should happen in the next week or two.

  • OI: The current best pin is 162 with the only resistance being the 165 level. A push above there and, as I said above, it likely targets 166/167 initially and possibly more especially if the open interest shifts. With regard to the put support, a dip back to 157.50 offers a long opportunity.

TSLA: 327 is the level it needs to break to get a big move higher. It’s possible it will get there (or a little above) and fall right back down so it’s something we should keep in the back of our minds. If it does gain momentum over its all time highs though, then it could easily see 335/336. If it pulls back before making new highs then 320 is good support and a place to get long.

  • OI: The main call resistance it has to deal with is 330. Thus anything over 227 may target that area or get a bit above it and then pull back a bit. However, if it can then hold over 330, there is nothing stopping  it from targeting at least 335/336. There is no put support till 305, but I would be surprised to see it trade down there next week.