MomentumOptions.com Pre-Market Update for 1/31/2017
Volatility Spikes but Holds Fresh Resistance
The bears had one of the best sessions for 2017 as the market tested key support levels with volatility exploding past key resistance levels. We planned for both events coming into Monday’s open so there was no surprise. I was hoping the pullback would carry over into Tuesday’s session with half, or less, of yesterday’s losses. In any event, I also talked about “stretch” coming into play and the bulls will need to prepare for a bloodier battle on continued weakness.
The Dow dropped 122 points, or 0.6%, to close at 19,971. The blue-chips traded in negative territory throughout Monday with the low reaching 19,870. Support at 19,900-19,800 held with backup at 19,700-19,600 and the 50-day moving average on a move below the latter. Near-term resistance is at 20,000-20,150.
The S&P 500 sank 13 points, or 0.6%, to end at 2,280. The index fell to a low of 2,268 during the first half of action with lower support at 2,275-2,270 getting stretched. Additional help is at 2,250-2,245 and the 50-day moving average on a close below the latter. Resistance remains at 2,285-2,300.
The Nasdaq tanked 47 points, or 0.8%, to finish at 5,613. Tech tumbled to a low of 5,578 shortly after the open with lower support at 5,625-5,575 holding. A move below the latter would be a bearish development. The close above 5,600 was slightly bullish but lowered resistance to 5,650-5,675.
The Russell 2000 gave back 18 points, or 1.3%, to settle at 1,352. The small-caps were the weakest link following their backtest to 1,342 on Monday. Support at 1,345-1,340 was split but the close below 1,355-1,350 and the 50-day moving average wasn’t pretty. Another stretch point, perhaps, but levels I would like to see clear and held by Wednesday’s close. Resistance has moved down to 1,365-1,370.
The S&P 500 Volatility Index ($VIX, 11.88, up 1.30) jumped 12% after testing a high of 12.90. Resistance at 12.50-13.50 held with a close above the latter being a warning sign. Support has moved up to 11.50-11.
I have updated our current trades with most of them holding up well given Monday’s market pullback. I have New Trades ready for today, or tomorrow, depending on the action.
From desk to press, futures look like this: Dow (-37); S&P 500 (-5); Nasdaq 100 (-12).
Momentum Options Play List
Closed Momentum Options Trades for 2017: 5-1 (83%). All trades are dated and time stamped so new subscribers can look at the past history to see how the trades have played out.
Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades. Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the 8am and 12pm–2pm (EST) updates. Also, I will usually give you a heads-up if I think I’m going to send an Trade Alerts outside of these time frames.
Viavi Solutions (VIAV, $8.84, down $0.39)
VIAV March 9 calls (VIAV170317C00009000, $0.42, down $0.23)
Entry Price: $0.50 (1/25/2017)
Exit Target: $1.00
Stop Target: None
Action: Yesterday’s low of $8.40 breeched lower support at $8.75-$8.50 with both levels holding into the close. Resistance is at $9-$9.25.
TherapeuticsMD (TXMD, $5.65, flat)
TXMD June 7.50 calls (TXMD170616C00007500, $0.65, flat)
Entry Price: $0.75 (1/18/2017)
Exit Target: $1.50
Stop Target: None
Action: Resistance is at $5.75-$6. Monday’s high reached $5.71. Support is at $5.25-$5.
Green Dot (GDOT, $26.82, up $0.18)
GDOT March 25 calls (GDOT170317C00025000, $2.40, flat)
Entry Price: $1.30 (1/6/2017)
Exit Target: $5 (closed half at $3 on 1/26/17)
Stop Target: $2 (Stop Limit on other half)
Action: Shares traded up to $26.84 yesterday. Resistance is at $26.75-$27. Support is at $26.25-$26.
Sony (SNE, $29.44, down $1.08)
February 27 puts (SNE170217P00027000, $0.15, up $0.05)
Entry Price: $0.65 (12/23/2016)
Exit Target: $1.30 (closed half at 10 cents on 1/23/17)
Stop Target: None
Action: Support is at $29.25-$29. Monday’s low tapped $29.16. Resistance is at $29.75-$30. I would like to see a close below $28.75-$28.50 ahead of the weekend.