Happy Holidays! It’s about time to put the turkey in the oven and get ready for a food coma for those in the United States. And it appears the market is already in a holiday coma!
As I look at the broad market, we are sitting near highs, pushing for new highs, and every once in a while getting a little bit of profit-taking from longs, as illustrated here with ETF SPY:
There’s a lot of seasonality that goes into the end of year, and it seems like the market is looking to repeat that move – there aren’t many sellers since profit-taking results in a tax bill, and there’s really not a ton of interest in anyone trying to establish a short position without a big fundamental input that is continuing to look less and less likely. So, we drift higher until something changes, and since it appears no one knows what that something could be, we just keep drifting.
But that doesn’t mean there isn’t an opportunity still out there. And with that in mind, I once again look at USO, an oil ETF:
Oil is acting like it has found a floor for now, and if that can hold, then we can look back at last week’s idea in ICLN:
ICLN seems to have found a spot to stall for now and may continue to have upside if the 50-Day Moving Average can turn into a support level instead of resistance. But I see this formation setting up very cleanly in a similar ETF, the Invesco Solar ETF, TAN:
As you can see, this ETF has been using the 20-Day Moving Average as resistance the whole way down (much like ICLN) and is now using the 50-Day Moving Average as resistance. It’s very similar to ICLN but has yet to break through the 50-Day Moving Average, and that could create a squeeze opportunity.
So, I’m going to continue looking at alternative energy names, and I will do so now with a primary focus on the solar energy names. If I can find a gem within the sector that looks explosive with short-squeeze potential, and if I can leverage that trade using options, this could set up a home run trade for me.
As always, go to http://optionhotline.com to review how I traditionally apply technical signals, volatility analysis, and probability analysis to my options trades. And please, if you have any questions, never hesitate to reach out.
Keith Harwood
Keith@optionhotline.com
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