Omicron frothiness

Good morning guys and welcome back to our Daily Charts column! As you may have seen from our social media pages, we are currently on holiday in the Seychelles but continue to trade while enjoying the beautiful weather and nature!

Yesterday, I came in very light given Friday’s ugly candles in the main indices on fears of the new Omicron Coronavirus variant. At the end of the day on Friday, I exited most of my positions, leaving behind some long dated $AAPL calls, some biotech stocks and a few aggressive $SPY and $QQQ calls for a possible rebound on Monday.

I was correct in my judgment that Friday’s reaction was over the top and therefore we had a nice gap up in the indices. At the open I trimmed more than half my options and therefore booked some nice profits. Yesterday, it was difficult to engage stocks which already started the day 2% higher if you came in flat overnight.

By the end of the day, the indices gave back some of the reclaimed momentum as the whole variant story is still in its early stages. More concrete results we will find out by the middle of December. Moderna’s CEO comment that the current vaccines are not as effective did put a dent on the rally in the last hour.

For today, with futures down I will continue to monitor the debate around the variant and its macro effects. I will pay particular attention to stocks and sectors that managed to stay above the moving averages on Friday and had strong rebounds yesterday.

$QQQ chart

The tech sector had a strong bid from the start yesterday and I managed to make good money on my $QQQ calls. Most dips throughout the day have been good entry points. The last hour drop should have made you reduce some size. With futures down today, see if tech can hold above the 8EMA around 397.3 for continuation. If the variant is indeed a major concern, tech is one of the few sectors in which money will hide in the next few weeks. The next big resistance area is 401-403.

$TSLA chart

By now you should know my affinity of $TSLA’s stock. Yesterday, I re-engaged this stock as it broke above 1108, Friday’s high. It offered me a great cashflow trade for more than 30 points. $TSLA is still looking good from a technical perspective and I continue to hold some calls for this week. The only concern is whether Mr. Musk will continue to sell shares this week. For today, see if it can hold above its 8EMA at 1110. The next big resistance area is 1180.

$AAPL chart

$AAPL was difficult to trade yesterday as it oscillated in the first few hours. As a result, I put on some $162.5 call options for this Friday in case it gets going. With futures down this morning, $AAPL may be a candidate for a red-to-green type of trade. It needs to hold its 8EMA at 158.33 in order to show some commitment.

I suggest taking the day slowly at the open as we are due for more volatility given the fact that this is the last trading day of November. Tomorrow, new monthly inflows will hit the tape, and if you would like to be opportunistic, finding a good bargain today in a strong stock such as $AAPL or $TSLA may pay off nicely tomorrow. Look at the indices to see if they can recoup early losses from pre-market and whether we care rebuild, or if we shall retest Friday’s lows. I plan on protecting capital in the next 2 weeks rather than going all long or short. We are in unchartered territories until we find out more about the new Coronavirus variant. As always, for a more detailed analysis of the markets, I suggest you subscribe to Alex’s Morning Game Plan.

Have a good day and if you have any questions please do not hesitate to drop me an email at [email protected].



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