BY LICIA LESLIE
February 4, 2024
Hi Shoppers,
On Thursday night, went out Friday morning, I called the S&P 500 Index (Ticker: SPX) to trade $4980.
The high on Friday was $4975.29, less than five bucks away, that’s .001%.
So where do we go from here?
There is an interesting Relative Strength Index or RSI pattern happening.
Let me show you.
The Relative Strength Index measures a stock’s momentum trading higher or lower.
When the RSI is above 70, the stock is considered overbought, RSI below 30 the stock is oversold.
RSI works best when a stock has been trading in a range rather than a trend.
I would not recommend buying and selling solely off the RSI indicator as stock can remain overbought and oversold for great lengths of time.
There is a signal created when the RSI does not reflect a new high/low as the stock is making a new high/low.
This is an RSI Divergence and I see it happening in SPX:
As the SPX has ticked higher, the relative strength index has made lower highs.
This is a bearish indication.
This combined with my target resistance and the psychological number of $5000 could be signs of a pullback.
I will be watching SPDR S&P 500 ETF (TIcker: SPY) to open and trade lower Monday morning.
If SPY rolls over here, support comes in at $485.25.
If we do trade lower, I will be purchasing puts that expire Friday:
I like the 494/484 put vertical for around $2.50.
I will be purchasing the 494s with a 10.85 implied volatility and selling the 484s with an IV of 12.35.
This puts edge in my spread.
Be patient and let the market play out for the first hour before hopping in.
Trade Review
Delta Airlines (Ticker: DAL) is still trading in that box range. I am watching for a tick higher before hopping into those calls.
Thanks for Reading … See You Next Tuesday,
Licia Leslie
Licia Leslie
Head of Technical Analysis
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