Not even a better than expected jobs report couldn’t propel the S&P500 past its highs for the week as traders instead appeared to “sell the news.” This is yet another example of price being more important than news. Again, what the news is is irrelevant, the price level at which the news is received however, is very much so.
The markets have rallied roughly 5% over the last few weeks. If this jobs report had come out around 1,250 then we may very well have traded higher today. Instead though here we are around 1,280 on SPX so Europe seems to be the reason we couldn’t break out today. Funny how that works isn’t it? Instead of reading what CNBC would us to believe is the reason we stalled out today we’re just going to attribute it to technicals. The S&P500 tried to test the 1,284 high of the week pre market but failed, and therefore resistance was respected.
To us this is a clear sign that we should still be using this weeks high as a level to trade against, meaning initiate short positions with your stop loss at 1,284. We expect a breakout of 1,284 to lead to a test of 1,300 but until that happens we have to take advantage of the better risk/reward scenario being presented. Currently, that scenario continues to favor the bears.
Turning to an option trade we recommended Wednesday @ the close, NFLX performed very well for us today. We recommended scooping up next weeks 85 strike calls on NFLX under $1.50 and to position for a move towards $90 (really we did, read the post). Today we saw these calls absolutely explode as NFLX soared nearly 10%. At one point today the calls hit a high of $4.73 for a dazzling 215% return in 24 hours! If that wasn’t enough, we then put on a live trade for our members where we netted 70% in 8 minutes! Continue to watch NFLX as there is alot of volatility in the shares and good trading opportunities continue to arise.
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- SH @ the close 1/4/2012: Stocks end sleepy session flat; NFLX rockets
- SH @ the close 10/17/2011: Markets sink as financials takes a dive; VIX soars
- SH @ the close 9/13/2011: Stocks drift higher in uneventful trading
- Stockhaven @ the close 8/12/2011: Stocks pare gains for the day, losses for the week
- SH @ the close 9/26/2011: Markets surge higher on oversold rally