How to Pick Positions with Indicators: EMAs, SMAs, Fibs, RSI, and SQZMOM
- Rise
- May 4
- 2 min read
Updated: May 8
Technical indicators don’t predict the future — they describe the present and the past. But they’re incredibly useful for identifying where a stock is likely to find support, where momentum is heading, and when to time your options entries.
EMAs (Exponential Moving Averages)
20 EMA: Short-term trend indicator. If price is above the 20 EMA, short-term momentum is bullish. 50 EMA: Medium-term trend. Many institutional traders use this as a key level. 200 EMA: Long-term trend. If price is above the 200 EMA, the stock is in a macro uptrend. I prefer selling CSPs on stocks above the 20 EMA. A bounce off the 20 EMA with good premium = high-quality CSP entry.
SMAs (Simple Moving Averages)
The 50 SMA and 200 SMA are the most watched by institutions. When the 50 SMA crosses above the 200 SMA, it’s a golden cross — historically bullish. When it crosses below, it’s a death cross — historically bearish. I use SMAs for macro context and EMAs for timing.
Fibonacci Retracement Levels
Fib levels are drawn from a significant low to a significant high. Key levels: 23.6%, 38.2%, 50%, 61.8%, and 78.6%. The 50% and 61.8% levels are the most powerful. I frequently sell CSPs at strikes that align with key Fib levels.
RSI (Relative Strength Index)
RSI measures momentum. Above 70 = overbought. Below 30 = oversold. I prefer RSI between 40-60 for CSP entries — not extended in either direction.
SQZMOM (Squeeze Momentum Indicator)
When the squeeze fires (momentum bar turns from gray to green), it often signals the start of a significant move. I use this to avoid selling options right before a big volatility event.
My Combined Indicator Checklist for a CSP Entry
Price is above the 20 EMA (short-term bullish). RSI is between 40-60 (not overbought, not oversold). No SQZMOM squeeze firing (avoid big move potential). Fib support level aligns with my target strike. Volume on any recent pullback was lower than on up-days (healthy pullback).
No indicator is perfect. The goal is to stack multiple factors in your favor so that over time, you’re profitable. Use these as a checklist, not a crystal ball.
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