I hope you had amazing and active day yesterday! When life gives you lemons make money. Finally we get continuation from the indices and the bulls pushed through with force, with the S&P having the best day since March 2020. I had patience, which I recommended thoroughly, and it paid off. When I saw the levels kept where they were supposed I went aggressive with my capital, and trimmed along the way using a tier system. This move pushed my portfolio up 2% in just one day, and now I am invested just one third of what I have been, waiting for a digestion day. The futures up slightly, but after such an aggressive move don’t chase things today. We can have a digestion for the first part of the day and push higher, or stay at these levels for today. If you missed yesterday’s move don’t get frustrated and try to make it up today, because it can hurt. The shorts were finally squeezed so they had to buy back shares when certain levels were reached, hence you had massive moves to the upside. The earnings season so far was impressive, and volatility decreased to low levels, therefore the algorithms got buy signals. Technical analysis works, and gaps got filled, and moving averages were conquered in the majority of big stocks.
When the $SPY opened above all moving averages, it dipped slightly to the 50 day EMA, and then it pushed well above last week’s high it meant that risk could be put on and capital can be injected into the market. I had some $436 calls for today, in which I made 4 times profit, and I sold them for cash flow. When the market is on the verge of a move I always buy call options with short expiration in the indices for some cash flow. They are low in value, but if the move is aggressive like it was yesterday, they can triple or quadruple in profit. Risk is small and possibility for profit is terribly high. I did the same on Tuesday for Wednesday and lost out, but the loss was so minimal that I could try it again the next day, and I recovered my loss and made a big profit on top of that. When there is confusion in the market I tend to go with the indices, which is why I kept presenting you the same charts in the last days, because they are the best to try out for a big move. Today watch for the $SPY to keep half of its candle in order to prepare for a leg higher, to $444.89.
This gap up in tech even if it maybe does not look that impressive like in the S&P it is a clear trip out of the woods. It had to fight the 21 and 50 days EMA and it did it. The important part today is to hold above $363 and to consolidate above $365.2. We had a bit of specific action in this sector: with semis ($AMD, $NVDA) shining, $FB making an impressive move, $GOOGL grinding higher, $AAPL recovering from the sell program, $MSFT pushing up above $300, but with $AMZN lagging like a soft giant. The next two weeks are pivotal in tech as earnings are coming and they have to deliver for the sector to recover to its all times high, which is 1% higher. Yesterday was the first day when the $QQQ showed us that it wants to come out of this downtrend that started in the middle of September, and if it has any muscle memory it should deliver in the coming days. You can try out this sector with some call options for the end of October, which are low in price and can produce a generous cash flow.
$TSLA had another leg higher trying to reach $821 but it did not manage to get there. This was the 4th day up in this stock and it may need some digestion since it is quite extended. I bought some shares yesterday and trimmed most of them at $820, but I don’t have much involvement for today because it may need another couple of days of rest. Earnings are on the 20th of October, so I have some aggressive call options for next Friday, and if earnings push it towards its all time high I will get paid nicely. I never take stock into earnings because it can go both ways and losses can be catastrophic. The call options are small in value and the loss is calculated, you cannot lose more than what you paid for them.
The wisdom pill for today: Don’t chase things if you missed them. Wait for market discovery, trim into strength to buy into weakness. I am going to take things slowly today because we have the big options expiration for the month and things can become chaotic. It can be choppy and painful if you find yourself buying in the wrong moments. We may see some strange moves at the end of today’s tape since stocks can get manipulated by algorithms in order to close at certain levels for maximum profit in call options.
We Grow Together!