Options Trading Newsletter - Issue #186 - China 52 Week High...
China 52 Week High...
China 52 Week High…
My phone was popping with 52 week high messages on Yahoo Finance for past couple of days. Many of these stocks were cursed and condemned just weeks or days before. Guessed right, China counters. BABA, GXC, KWEB, MCHI, FXI, ASHR, many others and even the HSI index were all on its high, as if it is on crack, super high super fast. I think many are chasing and there are certainly much money made last week and continuing this week. How long will it last? I’m not surely you will never know when it could suddenly reverse. I used to chase such price movements in the past but today we all know that it is like a gamble as you will never know when it could reverse the other way as fast it went up.
So whatever you do, don’t overtrade your positions and have a tight watch on your risk management. Because it can be painful and take years to recover your losses, especially in these China stocks if you are not careful. Hope everyone have a great trading week and have fun taking profits on President Xi’s gift for 2024.
ES (5800)
9 points up for the week! And yet, we saw a rally of 50 points on Friday after the positive jobs report? And it is the same sideway price action for past 2 weeks and yet we are calling new highs, pretty odd to say that the market is strong for the moment. Until it breakout above the current range , we are skeptical of major runup. Further, the election is coming close and fund managers may go on risk off mode until things are clearer ahead and it is also a good time to profit take at the highs now.
The support is however sitting on the previous July high level of around 5721 as we saw several bounce above this level past week. We see long daily wicks at the support level, indicating buyers are still holding on the levels strongly. If it breaks down from this level, we could see 5641-5675 as the next area of retracement.
ES momentum is continuing lower and we could see it going negative soon.
Trading range for the week is 5750 to 5850.
NQ (20227)
Same 9 points up for the week! NQ broke below the previous August high but managed to recover close back to the level in those down days before finally rallied above on Friday. We should still see the sideways price action until any of the lower (20000) or higher (20500) level is broken.
This week, Thursday CPI and Friday PPI data. I am not sure how relevant the market sees this anymore but I would anticipate that it could probably not come any bad news considering that the election is just around the corner. Nobody wants to handle bad news at times like this, if you know what I mean.
This week should be crucial for NQ to show its has still the power to perform. If it does not break 20500 level, it could form a new price action downwards to 18850-19200 levels.
Short term, NQ should be bound for a retracement as momentum is sloping down and we see it starting to bleed red below the histogram to negative level.
Trading range for the week is between 18850 to 20600.
HANG SENG INDEX (20632)
When the Chinese fire their rocket, it goes straight up! But rockets being rockets, when it runs out of fuel, the gravity takes over. How long can this parabolic movement go up? As tomorrow the China market will reopen after the long national holidays, we could see some continuation of the FOMO buying after the local retail have missed the skyrocket movements. Institutional, would have either benefited through the Hong Kong market which have many listed China companies dual listing there or through ADR in international markets.
So beyond the next 1-2 days, we could see the cooling effect to start coming in. We have taken the opportunity to exit many of the long holding positions of China counters, some even at a loss as these positions had recovered significantly over the past 2 months and even more since the past week from its lows.
As you saw, the last runup in October 2023, had almost lost everything in the following months, hence, we expect it is a matter of time, before some of these gains are given back to the market. So, it would be better to recoup and redeploy into other more stable and less volatile counters.
Keep a watch that HSI do not drop back below 22,700 level, which is actually very likely to happen in the next weeks. We see more sustainable support to be at 20,000 level.
OPTIONS TODAY - UPDATE IMBALANCE IRON CONDOR NVDA
Another $4+ up week for NVDA, possibly with the hype of its $100 million minuscule investment in OpenAi funding round. The trade still have long way to go and it’s better if it goes directional earlier in the trade than later as any one sided movement could tire off and retrace later when the duration remaining is shorter. We will continue to monitor the trade and see if it hits resistance at $129 levels above.
OPTIONS TODAY - UPDATE ON NEUTRAL IRON CONDOR SPY
SPY went to +$2 for the week closing at $572.98. The upper leg is ITM now and taking some losses. As the trade has only 2 more weeks to expiry, we would only need 1-2 down days for the trade to quickly turn back into profitability. Possibly, Thursday or pre CPI market can selloff for profit taking, who knows, lets be nimble for profit taking and remember we have made profits off closing the Bull Put Spread leg earlier. But as the trade is close to expiry, the best time is to exit this week at latest. So keep a tight watch on the price action.
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