S&P 500 Approaching Major Resistance

[Watch today’s update to find out where the major resistance levels are in the E-mini S&P 500 futures and to learn about option strategies for taking advantage of the coming volatility.]

In last week’s update I pointed out that the S&P 500 was rallying towards stiff overhead resistance, but while the short-term momentum was up traders had to either go with the upside momentum or wait for short-term momentum to turn back down before attempting to get short.

Last week’s price action saw a huge rally that has made the situation extremely interesting from a trader’s perspective. Major resistance levels are now being hit so a trader should be on high alert and planning out exactly what they want to do to gain exposure to the coming volatility.

Ample opportunities for traders

Even if the S&P 500 is going to head higher (The most important resistance level is above 2800), we should see some volatility along the way which can give traders ample opportunity to enter trades that can become free carried fairly quickly.

I describe an option strategy (I don’t make any recommendations, this is just for educational purposes and to give us something to follow up in coming weeks) that could be used to create a cheap straddle or strangle so traders can be exposed to making money whether the market rallies or falls.

The higher this market trades now the greater the opportunity for the nimble trader to build a position that could reap significant rewards if the selling from last quarter returns.

Write to me at letters@moneymorning.com.au if you would like me to analyse a particular market or explain any aspects of my trading model and I will incorporate your requests into future updates.

Cheers,

Murray Dawes,
Editor, Alpha Wave Trader

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