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The SPY Bears Look Strong, But Bulls Have Opportunity

Benzinga2021-07-19

The SPDR S&P 500 ETF (NYSE:SPY) opened down 1.23% Monday morning after declining 0.78% intraday on Friday. The sell-off is being attributed to the increased spread of the COVID-19 Delta variant and inflation fears but the dip could provide opportunities for bullish traders.

On Friday, options traders seemed to forecast a gap down on Monday morning and purchased over $9.12 million worth of bearish SPY put contracts. A number of traders purchased puts with a strike price of $430 with an expiry of July 21 which opened "in-the-money."

Big tech earnings kick off this week with Netflix Inc(NASDAQ:NFLX) reporting Tuesday afternoon and the dip could provide a strong buying opportunity if the streaming company beats expectations. The spread of the Delta variant could also cause the Federal Reserve to pause its talk of tapering, which would be a good sign for the bulls going forward into the third quarter and beyond.

For technical traders, regardless of the narrative around the recent pullback, the SPY has key levels to watch.

The SPY Chart: The SPY created a bearish double top pattern when it hit a new all-time high of $437.92 on Tuesday and Wednesday of last week. On Friday, the SPY printed a bearish engulfing candlestick pattern indicating lower prices were in the cards for Monday. An engulfing candlestick pattern is recognized by a candle that fully eclipses the previous smaller candlestick and has little or no upper or lower wick.

On Monday morning the SPY opened just above a key support zone at the $425 mark, tested the level as support and bounced. The SPY has another support level just below at $422.82 that may provide support if the SPY loses the $425 level.

The SPY is trading below both the eight-day and 21-day exponential moving averages (EMAs), which is bearish, but the eight-day EMA is trending above the 21-day EMA, which is bullish. This indicates indecision in the short term. The SPY is trading well above the 200-day simple moving average, which indicates overall sentiment remains bullish for the longer-term outlook.

There is support below at $425.77, $422.82, $417.81 and $412. The SPY has psychological support at $400 although the level has yet to be tested by price action.

SPY Price Action:The SPDR S&P 500 was trading down.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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Comment33

  • lfc
    ·2021-07-20
    Gd read
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  • Buzzcsh
    ·2021-07-20
    @STSS   drop
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  • LST3
    ·2021-07-20
    Good 
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  • 堵神
    ·2021-07-20
    Please like and comment thanks ☺️
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    • KlWong
      Done
      2021-07-20
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  • KCtan1688
    ·2021-07-20
    Down
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    • KCtan1688
      Cliff down
      2021-07-20
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    • nayoowin
      buce
      2021-07-20
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  • Gackky
    ·2021-07-20
    now bears are reigning..while bulls are hiding.  it is a cycle
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  • Kevin92
    ·2021-07-20
    Like and comment
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    • WeiChyi
      K
      2021-07-20
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  • nywles
    ·2021-07-20
    Gd read
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    • JooL
      [What][Miser]
      2021-07-20
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  • J90
    ·2021-07-20
    Hm
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  • ty91
    ·2021-07-20
    Like please 
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    • nywles
      ok
      2021-07-20
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    • jiawenc
      ok
      2021-07-20
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  • ML808
    ·2021-07-20
    Hold cash and wait for opportunities.
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  • Kalpana
    ·2021-07-20
    Good
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  • Derrickmin
    ·2021-07-20
    Great
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  • Sunny0809
    ·2021-07-20
    Good 
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    • Kalpana
      ?
      2021-07-20
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  • jyip93
    ·2021-07-20
    Like and comment 
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    • benalizz
      woah
      2021-07-20
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    • yonglh
      Ok
      2021-07-20
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  • Mglay
    ·2021-07-20
    Like
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  • Jackyjw
    ·2021-07-20
    Nice 
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    • jyip93
      Like and commeny
      2021-07-20
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  • Walker975
    ·2021-07-20
    Please like and comment 
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    • Walker975
      thanks
      2021-07-20
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    • Jackyjw
      Comment
      2021-07-20
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  • ALLOYHUAT
    ·2021-07-20
    Like
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  • Bluukiss
    ·2021-07-20
    Don't panic! Keep holding!
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