The S&P 500 reversed a two-day trend and closed higher on the day, for 3.5 point gain on Wednesday.
NEWS RECAP
Alcoa kicked off earnings season with a positive outlook, with better-than-expected revenue. The health care sector also may have helped to push the index higher on the day.
The European Central Bank left its interest rate unchanged at .75 percent. There was not much of a change in jobless claims (+4,000 for the week), and the market was quite stable prior to the open.
Traders may be giving a close watch to new technical levels. I believe the market will need lots of fuel stay above 1460. I feel resistance should come into play near 1465, but further positive earnings reports could give the bulls some strength.
TRADE IDEA
I like playing a longer term upside move here. Using a bull call spread allows us to define risk.
I am looking to buy the March S&P 500 E-mini (ES) 1490 -1540 call spread at a price of 13 points or better. In this instance, the risk would be $650.00 plus commission and fees on the trade.
THE DETAILS
The maximum you could collect on the trade would be $2,500.00, if both strikes settled in the money at the time of expiration, minus all commissions and fees. We have 64 days until contract expiration, which should give us time for a strong upward move. If you are able to trade multiple contracts, I would look to take profit on some near 26 points. If the trade is not moving in our favor, I would look to exit two weeks prior to expiration.
THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
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