This Is How I’m Playing Any Upside Gap On Tuesday

Stock
index futures opened Monday’s session
unchanged after a very tight
overnight session and traded in a 3-point range for the first 4 hours. But with
nervousness still present from Friday’s wild session, and poor intraday
performance from GE and INTC, it didn’t take much to shake the trees.

The March SP 500 futures closed
Monday’s session with a loss of -14.00 points, and closed at the bottom of the
daily range. Volume in the ES was estimated at 644,000 contracts, which was
behind Friday’s heavy pace, but still above the daily average. Looking at the
daily chart, the ES posted a market structure high and broke several levels of
support, including its 20-day and 10-day MAs and a minor trend line, but still
settled above last week’s low. The next major support below that would be the
50-day MA at 1135. On an intraday basis, the contract has become a bit extended
on the downside, with 13-min resistance up at 1150.


The Banking Index (BKX) gave a
pause with an inside reversal, but still no major cracks. The Dollar Index (DXC)
also posted a narrow range and continues to hold its breakout area from last
week. The SOX broke its daily bear flag and also a head-and-shoulders neckline,
with next daily support at the 480-70 level. The VIX broke its 10-day and
20-day MAs, but the area we’ll want to watch again is the 100-day MA at 16.55.


The futures were slightly
firmer after hours after Texas Instruments upped guidance for the 2nd time in 6
weeks. Tuesday is absent of any economic or earnings reports, and a lack of any
other catalysts for that matter. With the weaker-than-usual closing PREM, I’ll
be looking to short any opening gap to the upside and for an afternoon
continuation of Monday’s weakness.

Program Trading Levels

Fair Value – (0.26)

Buy Program Premium – 0.65

Sell Program Discount – (1.18)

Closing Premium – (3.50)

Closing Bias: If the futures gap up at the
open, watch for a retracement down towards the gap fill.

Please feel free to email me with any questions
you might have, and have a great trading day tomorrow!

Chris Curran