Dan Passarelli, CEO - Market Taker Mentoring 

It's been a very volatile week. Big up days. Big down days. What's next? Is there a market bounce coming? Or will we continue lower?

Dan Passarelli of Market Taker Mentoring answers this question using technical analysis. The first thing to look at is stock support and resistance. specifically, if we look at the exchange traded fund (ETF) SPY we are sitting at a key support level right now.

But in addition to that technical indicator, we can also look at some market studies. Dan looks at the relative strength index, or RSI and notes the market is getting close to (but is not yet at) an oversold level. Chances are this coming week will be a key week for the market.

Dan Passarelli, CEO - Market Taker Mentoring 

We've had a lot of volatility lately. Earlier this week we had some huge down days. And today the stock market trading was up 2.5%. There are a few key reasons for all this active trading. Let's talk about it. Here's why the stock market rallied today.

First it has a lot to do with earnings season trading. At this point about half of the S&P500 companies have announced earnings. 3 out of 4 of them did better than expected. So there's a chance market trading could lean to the upside going forward.

Dan Passarelli also cites meme stock action as yet another opportunity for traders outside of just trading earnings.

Dan Passarelli, CEO - Market Taker Mentoring 

If you look at the option chain for AMC options, you're probably wondering: Why did so many calls trade in AMC today? A lot of times, that leads to a big momentum move in the stock. But we didn't see the stock rally much today. Just a couple percent.

So what gives? Well, some of the reason is that they were not all call buying trades. Some were traders selling calls. Another reason is just that there are short sellers who push the stock lower. It becomes a battle between the bulls and the bears. And in this case it ended up a draw.

That said, market makers now have a lot of short gamma trades on and that can lead to an exaggerated move higher if the stock begins to move higher. We'll be watching AMC the next few days to see what stock action happens.

Dan Passarelli, CEO - Market Taker Mentoring 

Stocks sold off today: Will they rebound? Option trader Dan Passarelli says yes, but probably not for a while.

So what does this mean to the stock market, stock investors and options traders? What kind of trading strategies should people be focusing on? Dan says, for one The Great Rotation from tech stocks to cyclical stocks. Those are your everyday blue chips, or specifically brick and mortar retailers and such. The sorts of companies that don't need as much of a low interest rate environment to thrive because they sell stuff people need regardless.

Dan also says to focus on niche option trading strategies like earnings plays, specific momentum plays and especially short squeezes.

Dan Passarelli, CEO - Market Taker Mentoring 

A lot of traders panic when markets are falling. Even if markets are just trending lower, traders get bummed out. But I'm here to tell you nothing is farther from the truth. I'm here to tell you why trading down markets is better than trading up markets.

This statement is especially true for option traders. See, when markets fall, options get more expensive because implied volatility rises. That's the supply and demand component of option prices.

While calls may lose value and puts may gain as the underlying stock falls, they both get "a bump" higher along side that directional effect because of the rise in implied volatility.

Dan Passarelli, CEO - Market Taker Mentoring 

Traders have a hard time picking the direction correctly and consistently after earnings announcements. So why trade direction? Options enable us to trade other qualities that are "direction indifferent". This is why I like earnings time spreads.

Trading earnings time spreads is a powerful strategy. Instead of relying on the stock going your way, we're instead trading volatility. Specifically implied volatility. There are a few nuances to trading volatility. In this video I share some of them and show you where to find another resource to take your earnings trades even further.