This week is options expiration week. Seasonally, the week starts out strong but then pulls back before options expiration. Generally, we can expect a weak rally Monday through Wednesday, followed by a bearish Thursday and Friday.
Monday begins the expiration week. We have bad news coming out of Japan and good news coming out of China. But seasonality shows that this Monday typically moves up slightly, as investors buy in expectations of Friday’s options expiration.
TJX reports. The company is strong fundamentally, but the technicals show that a top might be in. Notice the most recent candlestick: an inverted hammer.
An inverted hammer candlestick typically implies that the strength of the bulls has been exhausted. Short covering ends, and investors take their profits here. This spurs a pullback, which could be good if you have a bullish outlook on the earnings report.
PLCE. TGT, LOW, and CSCO all report earnings today.
Most eyes are on WMT and the stock is unpredictable after earnings and therefore not a good earnings play, unless you are a gambler.
Friday tends to be seasonally volatile as a result of options expiration. Historically, this Friday is a bullish one, with the market rising 1% to 2%. With the following week likely to be bullish, at least at the beginning, Friday is a good opportunity to take long positions and cover your shorts.