The whipsaw continues, and while this is creating a lot of frustration for many, it’s creating a massive opportunity for many.  And there will be incredible opportunities coming out of the whipsaw, too!  It’s all about knowing the trading style that suits best and leveraging that strategy when market conditions align.

If intra-day trading isn’t your thing, don’t fret.  There’s no need to force trades.  When I was a market maker, this was the best environment to trade – markets were wider, so I could get a higher bid-ask spread.  Lack of liquidity is a great thing for liquidity providers when the volume is there, and the volume has been there.

But it doesn’t last forever.  When the market returns to a semblance of normalcy, the opportunity will return for the medium and longer term trader and investor.  Patience is key in this environment.

And patience is the name of the game when I look at my AI-generated signals.  When the opportunity for a trade only lasts a few hours, I don’t want to look for multi-day holding periods.  For my AI-generated opportunities, I’m looking for multi-day holding periods.  And the signals for when those will return are starting to show through, so I’m going to focus on the names that are showing that potential for real opportunity and showing high expected value trades with options.

The starting point, of course, is to evaluate the broad market with the S&P 500:

We broke through pretty much all the key technical levels, but we did recover to a fairly unchanged market by the end of the day on Tuesday.  The range was $12 in SPY – more than 2% of the value of SPY.  That’s a lot for the broad market to digest.  But within that volatility, there are signs of life in many names, and Artificial Intelligence can help me find the signals within the noise.

One such signal appears to be coming through in Royal Caribbean (RCL):

In many ways, RCL looks terrible.  It broke through the 100-Day Moving Average on Tuesday last week and sold off along with the rest of the market.  BUT it held the 200-Day Moving Average.  About an hour before the close, it was actually above Monday’s high after rejecting new lows and rejecting the move below the 200-Day Moving Average.  IF the market stabilizes as we conclude this week, it appears that RCL may be primed for a recovery rally back toward the 50-Day Moving Average, and if it can achieve that, I can use a complex options structure like a call debit spread or a put credit spread to achieve a significant return.

Much of this depends on market stability, but it also depends on market signals that show relative investment flow to a handful of names.  These are indications that the investment community has concluded much of the risk-off behavior and may be looking at the opportunity side of things again.  And if my reliable artificial intelligence signals can show me that potential being there, then I’m that much more excited to evaluate the trade’s upside that I’m seeing in my own technical and options analysis.

If you want to learn more about utilizing AI for predicting dynamic markets and the incredible opportunities that can be captured utilizing state-of-the-art technological advancements in trade recognition, join me and Vlad Karpel today on our webinar where we talk through the leveraged opportunities that we’ve historically identified by combining AI and options analytics!

And as always, please go to http://optionhotline.com to review how I traditionally apply artificial intelligence, technical signals, volatility analysis, and probability analysis to my options trades.  And if you have any questions, never hesitate to reach out.

Keith Harwood

Keith@OptionHotline.com