Chop Chop Chop and Open Interest for December 13th Opex

The Week That Was:

My wrap-up regarding last week can be viewed by the above image. 

Moving Onto Next Week:

So now what? Well your guess is as good as mine. Longer term, things still look great. All we have done is gone sideways after a very large move that began in early October. On a shorter time frame, it’s really anyone’s guess as to what to expect next. I know that sounds like a cop out, but to be fair I typically give my perspective of the short term general market direction. Having said that, I do think if there is more downside next week it will be contained and that every small dip will be bought up. There is also a theory that I have seen play out many times that says the market puts in a low the Thursday or Friday before options expiration (meaning monthlies) and then rallies Monday and throughout the following week. That would aline perfectly with the historical seasonality trend that the back half of December is typically much stronger than the first half. Furthermore, I think regardless of the overall market, we will still see individual stocks move on their own. If you think about it, even if we do stay range-bound in the major indices, there isn’t much time left for funds to buy the yearly winners so they show up on their year end books. 

Open Interest:

The following are are all for expiration on December 13th. Note that open interest is a helpful tool in gauging risk/reward in conjunction with more formal technical analysis, not an exact science.

SPY: There are some puts at 179 and 180, but really the best support (should the down move not be over) comes around 178 where we have a wall of puts as well as a technical support area. If* we get there look for a reversal candle to go long.

AAPL: So was the China news a “sell the news event?” I will leave that for you to decide, but here are the facts so far. We had about a 35 point move in five trading days and closed above the upper Bollinger Band for five straight days. We closed at 565 on Wednesday before the WSJ news came out and then Thursday closed almost three points higher at 567.90 and still above the BB band (albeit we did open 10 points higher than that). Finally Friday we pulled in to close at 559.57. Granted there could be much more downside to come (a real type of sell the news), but I think range bound consolidation is more likely until AAPL isn’t overbought anymore or we get some type of news such as number of units sold on day one etc. The highest open interest is the 570 calls, but not by much. If AAPL gets moving in the beginning of next week it will likely shift up. If it continues sideways to down then you may get an even lower highest call open interest.

AMZN: Another “sell the news event” because of drones or maybe just an excuse. AMZN had been up six straight days with a 25 point move. It still looks good and since the 10-day moving average acted as support last week, if you wanted to try a long it would be a good stop. If we do go higher, based on 400 being a round number (and stock market participants having decided to make those a big deal) and that the highest calls being at 400, it’s fairly safe to say it will be heavy resistance. 

BIDU: Way too many people were anticipating that 170 break so some good ol’ chop is what everyone got. The best scenario I think would just be a gap up over it. Maybe we get that early next week and the highest calls shifts up. 

FB: Currently stuck right below the 50-day moving average. The $50 price seems like a magnet to me right now. 

GOOG: How about that last minute action on Friday taking it to all time closing highs. Based on its recent consolidation and the year end being very near, it seems bullish to me. If we fail to go higher next week look for 1045-1050 to be support. 

LNKD: Looks like some non-believers in the recent rally with those 230 puts, most of them being bought on Friday. I personally think we see this go higher. Click here to see what I’m looking at.

NFLX: Talk about choppy action. The 360 calls may contain any rally next week, if it gets one. It has room to the downside with support coming in at 348.92, the 20-day moving average.

PCLN: It has backed off very little and was held by its 10-day moving average last week. I also noticed it’s right back inside the channel that I pointed out a while ago when I incorrectly thought it would contain a move higher. You can see the updated channel here. Very wide range and very low volume on the current open interest. 

TSLA: So far it looks as if it has bottomed for the year and on a daily it looks like there is an inverted head and shoulders (if you believe in those) with the neckline right at 145. For a viewing see here. Keep in mind it could still be very news driven. Has a lot of calls at 140 and 150. Last week it took out one set of heavy calls and got stuck at the second set. 

TWTR: Hahaha, where are my haters? What did I tell you??? I said it will get chased. Well there you go. Just wait till it takes out 46.94 and then 50.09. Lots of puts at the 44 strike next week. I don’t know if these were bought or sold or if it was mainly by one participant. For the time being I will look for those puts to keep it supported. A break of 44 without a very swift recovery and we may have to just be more patient.