MomentumOptions.com Pre-Market Update for 3/20/2017
Tech Sets Fresh All-Time Intraday High
The market got back on track last week with Tech and the small-caps leading the way higher on Friday and the bulls getting the weekly win. The Nasdaq traded to a fresh all-time high and the small-caps went out hot ahead of the weekend while closing above a key level of resistance.
The bears have kept the action in a tight range and did a little technical damage but volatility remains relaxed. This week could remain sloppy and choppy as the week after March option expiration is typically bearish. In fact, the Dow has closed lower 65% of the time following triple-witching option expiration week over the past three decades.
The Dow fell 20 points, or 0.1%, to close at 20,914 on Friday. The blue-chips traded down to 20,911 during the first half of action with rising support at 20,900-20,800 holding. These levels have held since late February with a move below 20,750 a target area to possibly go short. Lower resistance at 21,000-21,200 held on the rebound to 20,980 intraday. A close above the latter could lead to a run to 21,450-21,500. The all-time high at 21,169 was set on March 1st.
The S&P 500 gave back 3 points, or 0.1%, to end at 2,378. The index tested a low of 2,377 shortly after the open with support at 2,370-2,365 holding for the sixth-straight session. A move below 2,360-2,350 going forward would be a bearish development. The bounce to 2,385 fell shy of resistance at 2,390-2,400 and the all-time peak with a close above the latter leading to 2,425-2,430.
The Nasdaq gained a quarter-point, or 0.0%, to finish at 5,901. Tech slipped 10 points to 5,890 with rising support at 5,875-5,850 also holding for the sixth-straight session. A move below the latter could represent an opportunity to go short. However, the run past 5,912 and a fresh lifetime high keeps upper fluff targets and resistance at 5,925-5,950 in play.
The Russell 2000 advanced 5 points, or 0.4%, to settle at 1,391. The small-caps dropped a 6-pack to 1,380 during the morning action with support at 1,375-1,370 and the 50-day moving average standing tall. The push to 1,393 ahead of the closing bell and close above lower resistance at 1,390-1,400 was a strong signal higher highs could be in store. A move above the latter gets 1,410-1,415 and fresh all-time highs in play.
The S&P 500 Volatility Index ($VIX, 11.28, up 0.07) traded in a half-point range with the high reaching 11.38. Lower resistance at 12.50-13.50 has been holding since March 2nd. Support remains at 11-10.50 with Friday’s low checking in at 10.78.
Much of last week’s rally came after the Federal Reserve raised interest rates by a quarter point, as expected, while also signaling a less-than-aggressive forecast to raise rates over the next 18-24 months. As mentioned earlier, Tech and the small caps led the way higher, advancing nearly 140 points and over 36 points, respectively. The 2%+ gains were very bullish signals.
The Dow’s 12-point climb along with the S&P 500’s 6-point pop were party favors with each index holding key levels of support ahead of the Fed news midweek. Despite the slight gains, the action appears to be bullish if lower lows don’t come into play this week.
The financial stocks closed the week lower despite the rate hike and the continued easing of regulations. The Financial Select Spiders (XLF, $24.45, down $0.24) fell a little over 1% for the week with the Friday’s chart showing a drop to $22. I checked Yahoo’s Finance site and it showed Friday’s low at $24.46.
A dividend of nearly 9 cents was paid to XLF shareholders on Friday but this should not have caused a sudden drop to $22. Most financial sites and stock and option quotes I check are nearly spot on but this was one example I wanted to point out. Obviously, a move in XLF below the 50/100-day moving averages would be a very bearish development. I will be monitoring the StockCharts quote this week to see if it changes.
Near-term support on XLF is at $24.25-$24 and the 50-day moving average. Resistance is at $24.75-$25 with Friday’s peak reaching $24.76 before the pullback. The 52-week high is at $25.30 and remains in play on closes above $24.75-$25.
Crude oil drop’s below $50 last week was a concern going forward as it could weigh on the market on continued closes below this level. The talking heads are in panic mode and the slick talking pros hope this level holds to support the Oil stocks.
I follow Brent Crude Oil as a better gauge for prices and the $50 level held last week on this month’s plunge from $57. This level has served as major resistance throughout 2017 and the move below a downward sloping 50-day moving average and a leveling 100-day moving average was a bearish development. Support is at $51.50-$50.75 and the 200-day moving average.
Obviously, lower oil prices means lower profits for some of the players in the sector and shares of Exxon Mobil (XOM, $82.00, down $0.07) have been in a major downtrend since peaking north of $92 in mid-December. The death cross formed in early February with the 50-day moving average falling below the 200-day moving average was an early indication a backtest to near-term support at $82-$81 could come. Resistance is at $83-$83.25 and the 50-day moving average.
The 52-week low for XOM is at $80.31 and short-sellers could get aggressive if shares close below $80.25-$80 in the coming weeks. The current yield is at 3% so there has been “value” buyers at these lower levels of support. However, it could be a mistake as shares could test $78-$77.50 and fresh multi-year lows if $80 fails to hold.
The XOM April 80 puts (XOM170421P00080000, $0.60, flat) can be used by aggressive traders if $80 is breeched. These put options expire in a month and would double from current levels if XOM shares fall below $78.80, technically, by April 21st. They will expire worthless if XOM shares hold $80 into expiration.
More conservative traders can target the XOM May 80 puts (XOM170519P00080000, $1.40, down$0.05) on a move below $80 as these options would allow the trade an extra month to play out. These put options would double from current levels if XOM falls below $77.20, technically, by May 19th.
If I take action in XOM, I will send out a Trade Alert. Otherwise, keep shares on your Watch List.
As far as the market, although this week and next could remain choppy on March madness, I still believe all of the major indexes will set fresh highs again before a possible 3%-5% pullback. Upside gains could be limited to another 2%-3% and April is typically a strong month following a post-Presidential election year.
The key action remains in the VIX and our first warning sign a possible market top is in. A close above 13.50 would be a good signal the bears are coming out of hibernation. On the flip side, I have mentioned throughout the year the VIX could trade at low levels and into the single-digits for weeks and months. So far, this has been the case as the VIX has not closed above 13.50 all year. The December 30th close at 14.04 was the last close above the 13.50 level. The 52-week intraday low on the VIX is at 9.97 and was set on February 1st.
From desk to press, futures look like this: Dow (-16); S&P 500 (-5); Nasdaq 100 (-5).
Momentum Options Play List
Closed Momentum Options Trades for 2017: 18-3 (86%). All trades are dated and time stamped for verification. New subscribers can look at the past history to see how the trades have played out or to research our Track Records.
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 a Trade Alert outside of these time frames.
Viavi Solutions (VIAV, $10.70, up $0.50)
VIAV April 10 calls (VIAV170421C00010000, $0.95, up $0.35)
Entry Price: $0.45 (3/15/2017)
Exit Target: $0.90
Stop Target: 75 cents (Stop Limit)
VIAV June 11 calls (VIAV170616C00011000, $0.75, up $0.25)
Entry Price: $0.40 (3/15/2017)
Exit Target: $0.80
Stop Target: 55 cents (Stop Limit)
Action: Set an initial Stop Limit at 75 cents on the April 10 calls. Set an initial Stop Limit at 55 cents on the June 11 calls.
Fresh resistance is at $10.75-$11 with Friday’s high tapping the lower end of this range. The 52-week peak is at $10.89. Rising support is at $10.50-$10.25.
The April 11 calls traded nearly 1,800 contracts on Friday and are currently going for 38 cents. I could add these call options on continued momentum this morning so stay locked-and-loaded in case I take action.
Starbucks (SBUX, $55.78, up $0.98)
April 52.50 puts (SBUX170421P00052500, $0.13, down $0.08)
Entry Price: $0.40 (3/10/2017)
Exit Target: $0.80
Stop Target: None
Action: Shares traded up to $56.13 on Friday with the 100-day moving average holding. Fresh resistance is at $56-$56.50 and the 50-day moving average. Support has moved up to $55.50-$55 and the 200-day moving average.
These options still have over a month of time premium and I still like the position as long as $56.50 holds.
Amicus Therapeutics (FOLD, $7.02, down $0.10)
FOLD April 8 calls (FOLD170421C00008000, $0.25, down $0.05)
Entry Price: $0.60 (3/2/2017)
Exit Target: $1.20
Stop Target: None
Action: Support is at $7-$6.75 with Friday’s bottom at $6.84. A close below $6.50 and the 100/200-day moving averages would be a bearish development and likely force us out of the trade. Resistance is at $7.25-$7.50 and levels I would like to see recovered this week.
Tower Semiconductor (TSEM, $22.92, up $0.19)
TSEM April 24 calls (TSEM170421C00024000, $0.35, up $0.05)
Entry Price: $0.65 (3/1/2017)
Exit Target: $1.30
Stop Target: None
Action: Shares traded up to $23.01 ahead of the weekend. Resistance is at $23.25-$23.50 with the 52-week high at the latter. Support is at $22.75-$22.50 with a close below the latter likely leading to $22 and the 50-day moving average that is still in a strong uptrend.
Flex (FLEX, $16.80, down $0.06)
FLEX April 17 calls (FLEX170421C00017000, $0.35, flat)
Entry Price: $0.35 (2/15/2017)
Exit Target: $0.70
Stop Target: None
Action: Resistance is at $17-$17.25. Support is at $16.75-$16.50 with Friday’s low reaching $16.67. Last Thursday’s run to $16.99 was a fresh 52-week high. I believe shares could trade to $20 over the next 3-6 months and I could add July call options on a breakout past $17. All of the major moving averages remain in a strong uptrend.
TherapeuticsMD (TXMD, $7.06, up $0.11)
TXMD June 7.50 calls (TXMD170616C00007500, $1.05, up $0.05)
Entry Price: $0.75 (1/18/2017)
Exit Target: $1.50
Stop Target: None
Action: Fresh resistance is at $7.25-$7.50 with Friday’s high checking in at $7.10. Continued closes above rising support at $7-$6.75 and the 200-day moving average would be a bullish development.
The mid-November high is at $7.50 with a close above this level likely leading to $9-$9.25 on breakout momentum. The 52-week high is at $9.29. The 50/100-day moving averages are also in a nice uptrend.