In this week’s video wrap, we look some swing trade options setups and the market reaction to today’s weak non-farm payroll numbers. ES futures tanked this morning for the couple hours trading was open while trading for equities is closed. Downside targets for support in the S&P500 are covered in this week’s technical analysis video.
CRM Salesforce.com never got our entry for the bear call spread we mentioned in last week’s video but we did enter into an AAPL options play with a bear call spread this week. We also cover some swing trade setups in Oracle ORCL, Walmart WMT, Silver SLV, and Amazon AMZN.
Weekly Market Wrap Video Transcription
Hey guys! It is Friday, April 6th 2012. The markets are closed today, but in our weekly wrap, I want to go over the ES Futures. Today, these were from a couple hours and non-farm payrolls came out well below expectation. Basically, the Futures market went down slightly over 1%. And I think they were open for maybe two hours or so.
S&P500 Technical Analysis
What I’ve drawn here is a mini head and shoulders pattern. I was looking at this on the SPY. The SPY had actually made a new high so it threw this off. But basically, if you take the distance from the top of the head to the neckline and you duplicate this line to where we broke down, this is your minimum target for it to be a true head and shoulders. And that puts us at about 1350 on the ES Futures. And if you see what that coincides over here, it’s right around this level, slight chance we’d get down to 134ish. But let’s look at this on the SPY real quick.
You can see what I was talking about. This actually made a new high, but if this thing breaks down, you’re still looking at the 50. You might get a little bounce from there, but you have this gap fill from 137 to 138 area, 138.25.
I think this is probably where we’re headed on Monday. And then from there, we’ll have to see. It could be one or two days down. And then, maybe we go up here to the blue 50 day moving average. We look for a bounce up. And then, I think at that point, we’re probably in a sell the rip kind of trade before we buy in the dip. Anyone who bought the dip on Wednesday or Thursday this week is probably going to get punished on Monday.
Now, at that point, if that’s the case, if the dip buyers do get punished on Monday, and then when this comes back up to retest this level (this 140 area on the SPY), then you’re going to get a lot of people who are going to be selling that because previous support acts as resistance. So, Monday will be interesting. I’m actually mostly short right now.
Last Week’s Review
In last week’s video, we talked about CRM. I actually never got in this because it never got up to the previous high that I was looking at this 160 level. I was hoping for it to get up to 160. It never quite got there, so I actually did not enter that trade.
What I did enter in this week though is a 645, 650 bear call spread on Apple. I have sold the 645 and I bought the 650. And I think I got around 280 to 285 for that, and taking a little heat on it right now. Actually, I got it on this day. When we had this gap up on this spinning top candle, that’s when I picked it up. So I’m actually probably even suddenly down on the trade now.
But again, these are April options, so if you do get a pullback – In the market, Apple does pull back. I probably would have to get out. I probably won’t hold this until expiration, but still looking for basically Apple chop sideways and stay below 645 by April expiration.
Another name I was looking at this week and never got in because I didn’t want to buy. But this looks like a great long setup in Amazon. You can see we have this triangular pattern breakout. We break above the 200 day moving average, we pull back, and we’re basically sitting right at the 20 and right at the previous triangle trend line.
If we do get some pullback on the market and this thing can hold in here or even get down to the 50, where you’re in the middle of the triangle, I would actually look to get long Amazon. And I would probably do that with some May calls at that point. Probably, I’d have to look at the option chain. I haven’t looked at it yet, but I’d probably go slightly out of the money and look for a retest of the 200 day, so I might go with the 195’s or something like that.
Not really wanting to sell any bull put spreads yet because we’ll see how low this goes. If this goes at the bottom, then maybe I’ll sell something down there. But right now, again, I’d be interested in buying some calls. If we get down to this 187, 188 area or if this holds and consolidates here around the 190’s, that would be a good long play.
What I did pick up on Friday, we actually picked this up on our service, were some Oracle puts. We took a small position in Oracle. And basically, Oracle had this earnings pullback. I’d gone long in the earnings, so I made a little money on this pop and I got stopped out pretty quick. I trail stopped some of it, dropped down, basically came back up, and we’re sitting at a 382 retracement that coincides with these moving averages.
So, if I do a Fib retracement down here, you can see we’re right at the 382. I managed to close above it yesterday (on Thursday), but you can see we’re still below the 200, and the 20 is starting to roll over here. So I’m actually holding Oracle puts at this point, basically looking for a retest at these lows and potentially an extension to the 27 extension if we break that, which would put us right around 27.80.
So, I’m also short silver with the bear call spread. I sold the 32, 34. You see my red line; this is a strike that I sold. I took a little heat on this early in the week. I sold this around this level. But again, this has dropped, so this one’s going well. Again, these are April options. I’m looking for silver to stay below 32 for the next couple of weeks, which I don’t think that’s going to be a problem.
One other trade that I’m not in, We’ll see how Monday opens. I would like to get short on Walmart. This is a similar setup to the Oracle trade. Not as clean, which is probably why I didn’t get into it, but I wanted this to get a little bit higher for me to get some puts. I was actually trying to get in at this 618 level and we never got there on Thursday, so I actually missed this. We’ll see. If this thing does stay below this blue 50, you might be interested in a trade for Walmart (WMT) moving back down to about 58 and a quarter.
So, that’s all I really want to cover today. Again, the markets were closed today. The Futures tanked after the jobs report, so we’ll see if there’s any other news out of Europe this weekend that will further the selling.
One thing we need to keep an eye out is the minutes came out, but Bernanke not too long ago came out and said that job picture is not quite there and they may be willing to step in. And so, you hear a lot of talk about QE3 on the table again. I think it is on the table. It doesn’t mean they’re going to do anything, but this will keep the market from actually crashing too far. I don’t think we’re going to roll over all the way down here, but we could be retesting this 130, 140 area 134 in the SPY. I think first target is we’ll see what the 50 moving average does. And then, again, if we get a bounce up, you might look to go short at that point.
That’s a Wrap
So, hopefully that helps. If you guys have any questions about options or anything else, let us know. We’ll talk to you later.