Will Options Expiration Derail This Breakout?

I'm always nervous when the stock market advances for 2-3 weeks and into options-expiration week.

It leaves market makers the opportunity to manipulate prices lower to eliminate a big portion of in-the-money call premium. Block, Inc. (SQ) is a perfect example of a stock that's been on an absolute roll, jumping from 59 to 75 over the past three weeks to test a major resistance level. SQ hasn't been able to close above 75.25, even though January 2023 represents the third month in the past five that SQ has reached this level. Will the third time be a charm?

Enter Block, Inc. (SQ):

I like a lot of what's going on here with SQ. The AD line is soaring and relative strength is building. SQ belongs to a fairly strong space. But the biggest problem I have with it is timing. There is a lot of net in-the-money call premium that market makers would like to eliminate later this week, to save themselves millions. Be very, very careful of a false breakout. We could see a significant selloff in the short-term if some sort of reversing candle appears here at key price resistance (think perhaps a shooting star candle). However, I really like SQ, so if it does pull back temporarily, I believe it could be a great buying opportunity

Happy Trading! Tom Bowley Chief Market Strategist EarningsBeats.com Better Timing. Better Trades.