What Are the Charts Telling Us?

Licia Leslie

Hi Shoppers,

This market is still making massive moves up and down.

I don’t know about you, but I am finding the news on Russia and Ukraine very confusing.

Is Russia invading … ?

Russia is invading …

Russia has invaded certain areas …

Is that a real invasion … ?

What is Biden going to do … ?

Biden is applying sovereign debt sanctions …

How will NATO and the US get involved?

We are coming up on the 100-year anniversary of the creation of the USSR …

Is Putin hell bent on Russian dominance?

How and when will all this end?

Earlier this week, S&P 500 E-mini futures traded down almost 100 points and remain down.

Crude oil futures traded almost $100.

And Gold futures traded over $1,900, revisiting the high of last June.

The good news is, I have a tool to help me decipher all this …

And show you what I am seeing in the charts and my trade idea to play it.

Here’s How I See It

As you can see in the following three charts, as the S&P 500 (SPX) has been trading lower overall, crude oil and gold futures have traded higher:

But take a closer look at these three charts and tell me what you see …

Yesterday’s candle on each chart is a major doji – i.e. a possible signal for a reversal.

That gives me a …

Trade Idea

If SPDR S&P 500 (Ticker: SPY) opens and trades higher today, I will be a buyer of a call spread in the Feb. 25 expiration cycle:

- - I will leg into a call spread by buying the call strike that is slightly out of the money – the 430s or 431s.
  - Then I will sell the strike that is $5-$8 out of the money.
  - I am legging into the spread because the out-of-the-money calls are trading at a lower implied volatility than the at-the-money calls. I do not want to buy a higher implied vol than I sell.

This spread expires Friday, so I am looking for a quick move higher.

Thanks for Reading … See You Next Tuesday!

Licia Leslie