SPY approached a significant resistance level at $610.78, as noted in previous analysis. This level has been identified as a major resistance. It marks a point where price action encountered strong downward sell pressure, causing traders to sell their position from all-time highs.
The psychological impact of this threshold cannot be understated. Traders often watch closely for signs of momentum to slow down at all times highs, either breaching or bouncing off this key marker. In this case it sweeps all-time highs as we’ll confirm on lower time frames.
Market sentiment will be pivotal during these crucial moments; bullish expectations could drive prices above $610.78 if there’s enough buying support, while bearish pressure might lead to rapid pullbacks should sellers dominate the narrative at such critical junctures.
We’ll discuss what happened, how to identify, how to confirm the shift, and how to take advantage of it via stock options trading. For those seeking guidance, the best options trading advisory service can help navigate and help understanding these key resistance zones is crucial to making informed trading decisions in a volatile market as they do trading stock options where an example will be provided.
What Happened at SPY All-Time Highs
So, what happened at all-time highs? The initial all-time high was set on Friday 1/24/2025 at $610.78. The next day we had a huge gap down as a sell off commenced premarket the next trading day.
This signifies a few things at this 610.78 level.
- Big selling pressure
- Key Level
- Significant Order Flow
Now if you look back even further to Friday 12/6/2024, there was a previous high set at $609.07. Once that price was touched, we saw a drop until Monday 1/13/2025. So, once we see all-time highs, we’re looking at huge pullbacks.
Always reference what happened in similar environments at different points in time.
How Do We Identify the Move
“Ok so price is creating new highs, so what? My portfolio is in great shape as we are creating new highs.”
You are correct, but what if I tell you that once the market has a break of those new highs, the market looks to pull back? How do we take advantage of it?
Great questions. We look for price action to tell us.
Once price reaches a level of liquidity above the old all-time highs set on 1/24/2024 of $610.78, we shift down to a lower time frame to validate confirmation that the market will look to drop lower.
How to Confirm the Shift on the Lower Time Frame
Since we are looking at the daily level, we switch to the 1-Hour time frame to validate the move to the downside.
So, we look for a sweep of the recent highs and a manipulative move to the downside called a Market Structure Shift (MSS).
Which is what we get on Thursday 2/20/2025, when we get a close confirmation below $609.63.
Once that is set, this tells us that the market is set to keep moving to the downside.
Also, we get a Break of Structure (BOS) that same day.
As mentioned previously, once price confirms a Break of Structure, it looks to pull back.
But now that we have confirmed the move to the downside, this will look to pull back up before continuing the move to the downside.
Fast forward to the next day Friday 1/21/2025, SPY proceed to sell off aggressively. Exactly the move we’re predicting and what we were looking for!
Once we get the close on the 1-Hour over the new low set of $599.50, we are now in trending move on SPY to the downside.
Take Advantage Stock Options Trading
How do we take advantage of this? This will vary depending on how aggressive of a trader you are.
If you are a highly aggressive trader, which is how we trade and signal via our options trading alerts in our stock options trading rooms, you set an expiration date for same day expiration, called 0DTEs (0 Days Till Expiration). This would be a day trading strategy.
For example, you could take a SPY 2/21/25 $608 Put play worth $0.60 (or $60/contract) at market open and aim for the next liquidity level of $607. Once price reaches that level, you can sell the contract for $2.02 at around 10:31 am EST.
That’s a 236% gain!
If you are a less aggressive trader, you can use the weekly expiration date giving you time if the trade goes against you. You can consider this more of a swing trade as you typically hold these longer.
If you are a conservative trader, you can choose an expiration date that weeks out, months out, or years out. Make sure you have a good understanding of expiration dates before every placing a trade.
Conclusion on SPY Technical Analysis of All-Time Highs
Understanding SPY’s price action at all-time highs is crucial for traders looking to capitalize on market movements. The resistance at $610.78 served as a pivotal level, triggering a major sell-off that confirmed a Market Structure Shift (MSS) and Break of Structure (BOS) on lower time frames. By recognizing these key signals, traders were able to anticipate the downside move and position themselves accordingly.
The ability to identify and confirm these shifts allows traders to take advantage of market dynamics using stock options, whether through aggressive 0DTE plays, swing trades, or longer-term strategies. As always, managing risk and understanding expiration dates is essential when trading options.
By analyzing past price action, watching for liquidity sweeps, and confirming shifts on lower time frames, traders can consistently improve their market timing and execution. Stay sharp, stay disciplined, stay patient, and always trade with a plan!
We'll discuss Stop Losses and Take Profit levels in a detailed full strategy in a later article.