MomentumOptions.com Pre-Market Update for 4/3/2017
Mixed March Slightly Bullish
The market’s overall win streak was halted in March after four months of gains from November through February. The good news is the bulls showed their continued resiliency throughout last month as Tech closed higher for the fifth-straight month.
The bears will more than likely make an appearance at some in April but I have been on record throughout the year that we shouldn’t get aggressively short until the VIX clears 15. This week could be lackluster with continued divergence and a possible tight trading range as Wall Street awaits 1Q earnings season that will begin next week.
The Dow fell 65 points, or 0.3%, to finish at 20,663 on Friday. The blue-chips traded in negative territory throughout the session with the low reaching 20,660. Support at 20,600-20,550 and the 50-day moving average held for the ninth-straight session with risk to 20,400-20,350 on a close below the latter. Resistance at 20,750-20,800 held for the fourth-straight session with a close above the latter a bullish sign.
The S&P 500 slipped 5 points, or 0.2%, to settle at 2,362. The index tested a high of 2,370 intraday with lowered resistance at 2,370-2,375 easily holding. The bulls need to recover 2,380 this week to regain momentum. The close at the session low held rising support at 2,360-2,350. The bears need to get below 2,340-2,335 and the 50-day moving average this week to get a little fear back in the market.
The Nasdaq dipped over 2+ points, or 0.04%, to close at 5,911. Tech made a low of 5,901 after opening at 5,905 but quickly recovered 30 minutes into trading. The baker’s dozen drop held rising support at 5,900-5,875 with the 5,850 level being a key battle ground this week on a backtest. The late day high reached 5,927 and just missed the all-time high at 5,928 by a quarter-point. Continued closes above 5,925 gets 5,975-6,000 in play.
The Russell 2000 added 3 points, or 0.3%, to end at 1,385. The small-caps were slightly weak at the start of trading with the 2-point pullback to 1,380 holding rising support at 1,375-1,370 and the 50-day moving average. There is wiggle room down to 1,365-1,360 with a move below the latter a bearish development. The run to just under 1,390 failed fresh resistance at 1,395-1,400. Continued closes above the latter gets 1,415-1,425 and record highs back in the mix. The index is on a seven-session win streak.
The S&P 500 Volatility Index ($VIX, 12.37, up 0.83) stayed elevated for much of Friday’s session aside from the morning test to upper support at 11.50-11. I would like to see a move back into this zone that holds this week to confirm higher highs are coming. Lower resistance at 12.50-13.50 was breeched but held following the afternoon pop to 12.54. A move above the latter gets 14.50-15 back in the picture.
The bulls came close to digging themselves all the way out of the hole last week as monthly gains were still in reach up into Friday’s closing bell. The mixed action throughout the session was more of the same to wind down March and the overall results weren’t enough to get a clean sweep. However, it was close as the S&P 500 and Russell 2000 only needed another point apiece to end March higher. The Dow fell 149 points (-0.7%) for March while the Nasdaq zoomed 86 points, or 1.5%.
This week could provide more divergence with higher highs, or a tighter trading range with lower lows, and the news cycle lightening ahead of earnings season. Although March was choppy, April could provide a clearer, more bullish trend if numbers come in higher than expectations.
The Monday closes on the Dow have been bearish over the past month as the blue-chips have closed lower the past four Monday sessions. There have been a few market closings to start the week this year and overall, the index has closed lower on 8-of-10 Monday’s for 2017.
The Dow Friday closes have also been weak in recent weeks with the bears now winning 3-straight sessions. This follows 6-straight higher Friday sessions and the negative Monday/ Friday closes, overall, are a very bearish development. We will have to watch the beginning and end of week closes throughout April but the index is in desperate need of correcting this trend.
For new subscribers, up Monday/ Friday closes tend to indicate money is moving into the market. Down Monday/ Friday closes can signal money is moving put of the market. Mixed finishes to start and end the week can signal trading ranges.
Although Monday/ Friday Dow closes are NOT a major indicator in helping determine market trends, it does help in knowing if traders are willing to stay long or short over the weekend. Another interesting note is the losses on the Dow on these specific days were less than 1% in March and have been throughout the year. There was an up Friday to start February where the Dow nearly gained 1% after jumping 186 points.
When there are more up or down 1% M/F closes on the Dow, perhaps this will be a better indicator but I still find it very useful.
It was a good week for oil as the recovery somewhat helped stabilize the market. Brent Crude Oil ($BRENT) was able to hold the $50 level and reclaimed the 100-day moving average last week that is now in an uptrend. Continued resistance is at $54-$54.50 and a leveling 50-day moving average. Support has moved up to $53.50-$53.
The rebound in oil spread to the Transports as the Dow Jones Transportation Average ($TRAN) held mid-November support at the 8,800 level. The move back above the 9,000 level (now support) last week was slightly bullish. Fresh resistance is at 9,125-9,150 and the 100-day moving average. Continued closes above the latter should get 9,250-9,300 and the 50-day moving average in play.
I haven’t talked much about Snap (SNAP) and its recent initial public offering (IPO) as I have been more interested in trading the options. The company priced 200 million shares at $17 on March 2nd and there are numerous Buy, Sell, and Hold rating on the stock.
The 1-month chart show a price range just south of $19 and north of $29. Given the fact the company is losing money, and won’t be profitable for awhile, if ever, it is easy to be bearish on the stock. However, if the company can get paid advertising right and continue to grow its user base, perhaps there is some hidden value in the stock.
Near-term support is at $22-$21 with resistance at $23.50-$24. A move below $21 might be an opportunity to go short while a close above $24 might provide an opportunity to go long.
There are weekly and regular monthly options that are available to trade on SNAP. The bid/ask prices are between a 5-10 cents, in most cases, on near-term call and put options with plenty of open interest. This is important as you want to see both as an option trader. This shows easy entry and exit fills with good liquidity.
If shares clear $23.50-$24, bullish traders can target the SNAP April 25 calls (SNAP170421C00025000, $0.50, up $0.05), or, the SNAP May 25 calls (SNAP170521C00025000, $1.30, up $0.05). The regular April monthly options expire in less than 3 weeks.
Bearish traders can add the SNAP April 21 puts (SNAP170421P00021000, $0.55, down $0.15) to their Watch List on a move below $21.50-$21. The SNAP May 20 puts (SNAP170519P00020000, $1.05, down $0.20) are also a possibility if the aforementioned support levels are breeched.
This week’s action will once again center around the VIX and near-term support and resistance levels for the major indexes. The continued divergence in the Dow and Tech is also worth watching along with sector rotation. A higher Dow close and a move back below 11.50 today on the VIX would be a good way for the bulls to start the week. A lower blue-chip close and a move above 13.50 on the VIX is how the bears ate planning today’s action.
I have updated the current STM trade from Friday. I could have a New Trade shortly after the open so stay close to your email inboxes.
From desk to press, futures look like this: Dow (+11); S&P 500 (+1); Nasdaq 100 (+5).
Momentum Options Play List
Closed Momentum Options Trades for 2017: 21-4 (84%). 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.
STMicroelectronics (STM, $15.46, up $0.02)
STM May 15 calls (STM170519C00015000, $1.15, up $0.05)
Entry Price: $1.15 (3/31/2017)
Exit Target: $2.30
Stop Target: 55 cents
Action: Set an Exit Target at $2.30. Set a Stop Target at 55 cents.
Friday’s low reached $15.31 with support at $15.25-$15 holding on the morning softness. The recovery to $15.51 and rebound into positive territory keeps resistance at $15.75-$16 in play. Shares traded to a 52-week peak of $16.01 late last month. My 6-12 month target is calling for a run to $17.50-$20.
TherapeuticsMD (TXMD, $7.20, up $0.14)
TXMD May 7.50 calls (TXMD170519C00007500, $0.90, up $0.05)
Entry Price: $0.80 (3/27/2017)
Exit Target: $1.60
Stop Target: None
Action: Resistance is at $7.25-$7.50. Friday’s peak reached $7.32. A close above the latter and the November would be a very bullish development. Support is at $7-$6.75 and the 200-day moving average. The 50/100-day moving averages are in a solid uptrend.
Viavi Solutions (VIAV, $10.72, down $0.08)
VIAV May 12 calls (VIAV170519C00012000, $0.24, down $0.04)
Entry Price: $0.29 (3/27/2017)
Exit Target: $0.60
Stop Target: None
VIAV April 11 calls (VIAV170421C00011000, $0.23, down $0.05)
Entry Price: $0.42 (3/20/2017)
Exit Target: $0.85
Stop Target: None
Action: Shares traded to a low of $10.63 with upper $10.75-$10.50 getting breeched on the close. Resistance is at $11-$11.25 on a move back above $10.80. Last week’s 52-week high tapped $11.15. Earnings are expected early May.
Amicus Therapeutics (FOLD, $7.13, down $0.08)
FOLD April 8 calls (FOLD170421C00008000, $0.15, flat)
Entry Price: $0.60 (3/2/2017)
Exit Target: $1.20
Stop Target: None
Action: Support is at $7-$6.75. Resistance is at $7.25-$7.50. The 50-day moving averages is still in a nice uptrend with the 100/200-day moving averages starting to curl higher.
Tower Semiconductor (TSEM, $23.05, down $0.21)
TSEM April 24 calls (TSEM170421C00024000, $0.25, down $0.05)
Entry Price: $0.65 (3/1/2017)
Exit Target: $1.30
Stop Target: None
Action: Shares have been in a tight trading range since mid-February. Resistance is at $23.25-$23.50 with a move above the latter a bullish development. Support is at $23-$22.75. The major moving averages are in a nice uptrend with the recent 52-week peak at $23.65.
Flex (FLEX, $16.80, up $0.01)
FLEX April 17 calls (FLEX170421C00017000, $0.20, down $0.05)
Entry Price: $0.35 (2/15/2017)
Exit Target: $0.70
Stop Target: None
Action: Resistance is at $17-$17.25 with Friday’s high reaching $16.88. The 52-week high is at $16.99. Support is at $16.50-$16.25. The breakeven point for the trade is at $17.35 and I would like to see continued close above $17 this week.