Last Friday 454 points drop was really a knee jerk reaction to the geopolitical uncertainty. N225 opened strongly (352 points) on Monday back above 15,000. However, in the next four days, it was trapped in the same 15,000-15,500 tight range it used to be.
Looking at the bigger picture on daily chart, N225 not only go back to the previous tight range of 15,000-15,500, it is also in the middle of Bollinger Band. While Thursday high could theoretically be considered as lower high (since Friday high is lower than Thursday high), I would rather wait for Monday to decide as Friday high is just about 10 points lower. Let's see.
Looking at the weekly chart, N225 is back again to the 15,000-15,500 tight range. It is also an inside bar. Thus, no clear indication where it is heading. We just have to wait and see.
Looking at the monthly chart, N225 is still on the uptrend. This month bar is a long pin bar. If it manage to close higher than last month high (which is about 450 points away), it will be a bullish pin bar. We may see N225 continues its climb. However, if it close below 15,000, then we have a lower high. We could be in a reverse trend or at least pause of up trend. Let's see.
NKVI dropped 22.58% this week after N225 recovered from its knee jerk reaction. So if you have sold a Put Bull Spread when the volatility is at 23, your Put Bull Spread will have a big gain when volatility drop back to 18 this week. Not to mentioned the recovery of N225 will put the Delta in your favour.
Anyhow, we are again back to the low volatility of below 20. We just have to trade with caution. Any mean reverting of volatility is bad to our option selling.
SPX closed at 1955.06, dwon 0.12 points on Friday. This won't have much effect on N225 when it opens on Monday.
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