While most of us in the United States were eating turkey and watching football over the Thanksgiving holiday, there was a little credit crisis going on overseas in Dubai. While that rocked financial markets around the world for a couple of days, stocks bounced back some on Monday.

Once again bad news is not really slowing down the stock market’s bull run. Investors are still using every pullback as an opportunity to add to their long positions. Savvy traders are using options to take advantage of this situation by structuring trades that reduce their risk in case this little credit crisis turns into another big event. You might want to take this approach yourself, by considering a Bull Call Spread or a Bull Call Diagonal Spread.

JD

The stock market started the week by hitting a new 52 week high, but has been essentially running in place ever since.  This rebound off of the support levels it reached at the end of October continues a pattern of bouncing between its upper and lower Bollinger Bands for the past six months. It would not surprise me if this pattern continued for at least another couple of months.

It makes sense to take some profits on your bullish positions going into the November expiration and the Thanksgiving holiday. In fact, you might even consider taking next week off and giving thanks for a much better year for the stock market than anyone would have imagined a year ago.  With the market in position to drift back down towards its lower Bollinger Band, you are likely to be in a better position to continue with some bullish trades when you get back to trading on the first of December.

JD

While I am on vacation this week, check out my comments on the merits of last week’s Put Spread Stock Collar post and how this would compare to the Bull Call Spread for the cautious bull on AAPL.

JD

The 50 day MA has provided strong support for the SP 500, DJIA, and the Nasdaq as the stock market has risen from the ashes of the March lows. After last week’s pull back, the DJIA is still being held up at this level, but the SP 500 and the Nasdaq are being held back by this widely followed moving average.

While all three of these indices broke down through the 50 day MA back in June, they were all held up by the lower Bollinger Band,  just as they are today. What may be more important here is that the 200 day MA is not providing the reinforcement that it was back in July.  Should we break down from here, that is most likely how far down this market could go. That would turn this 5% pull back into a 15% correction.

With unemployment coming out on Friday, this will be an important week for the financial markets. This could be a good opportunity to add to long positions, take your profits and sit on the sidelines while the market corrects, or at least add some insurance to your current positions by using option strategies.

JD