MomentumOptions.com Pre-Market Update for 5/18/2017
Bears Attack, Profit Alert (IWM)
I often mention the bulls like taking the stairs to higher highs while the bears prefer the elevator, at time, to pursue lower lows. Tuesday’s 2% overall pullback was the worst day of the year for the market as lower levels of support quickly came into play. The selling pressure worsened into the closing bell and could continue today if the bulls fail to defend this morning’s open.
The Dow dropped 372 points, or 1.8%, to close at 20,606. The blue-chips opened 130 points lower at 20,846 and tested a low of 20,601 ahead of the closing bell. Backup support at 20,600 held with risk to 20,500-20,450 and the 100-day moving average on a close below the latter. A close below 20,400 this week would be a very bearish development. Resistance is at 20,700-20,800 and the 50-day moving average.
The S&P 500 sank 43 points, or 1.8%, to finish 2,357. The index opened above the 2,380 level at 2,382 but I have been warning a move below this level might get ugly. The session low reached 2,356 with fresh support is at 2,350-2,325 and the 100-day moving average. Lowered resistance is at 2,370-2,375 and the 50-day moving average. A recovery of 2,380 ahead of the weekend would be a slightly bullish development.
The Nasdaq tanked 158 points, or 0.5%, to end at 6,011. Tech opened just above the 6,100 level at 6,108 and was holding the 6,050 level for much of the day. However, once it cracked, I mentioned we would add another short position by using the QQQ’s. New support is at 5,975-5,950 and the 50-day moving average if 6,000 fails to hold. Resistance is at 6,050-6,075 with a recovery of the 6,100 level a bullish signal.
The Russell 2000 tumbled 38 points, or 2.8%, to settle at 1,355. The small-caps opened 6 points lower at 1,388 and stumbled below the 50/100-day moving averages shortly afterwards. Several layers of support failed on the close at the session low with current help at 1,350-1,340. A move below the latter and the March low of 1,335 set on the 22nd and 27th would be a very bearish development. If 1,335 fails, we will use additional IWM puts to take advantage of continued weakness. Resistance is at 1370-1,375 with continued closes above the latter signaling a possible short-term bottom.
The S&P 500 Volatility Index ($VIX, 15.59, up 4.94) surged a stunning 46% and cleared all of the major moving averages after going out at its session high. The close above 15 was a bearish development with fresh resistance now at 16-16.50. There is risk to 17.50 on an overshoot and continued closes above this level will likely get the low 20’s in play. Support is at 15-14.50. For the knuckleheads that were saying the VIX was broken, it’s fixed and shows that it is still a very, very reliable indicator.
I have set the parameters of our QQQ trade and have made some adjustments to the IWM trade after taking half profits. I could also have additional New Trades after this morning’s open, depending on market conditions.
From desk to press, futures look like this: Dow (+20); S&P 500 (+5); Nasdaq 100 (+18).
Momentum Options Play List
Closed Momentum Options Trades for 2017: 29-10 (74%). 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.
PowerShares QQQ ETF (QQQ, $136.07, down $3.55)
QQQ June 132 puts (QQQ170616P00132000, $1.15, up $0.85)
Entry Price: $0.75 (5/17/2017)
Exit Target: $1.75
Stop Target: 85 cents (Stop Limit)
Action: Set an Exit Target at $1.75 with a Limit Order on half. Set an initial Stop Limit at 85 cents to protect profits.
Fresh support is at $136-$135.50 with risk to $134-$133.50 and the 50-day moving average on a close below the latter. Resistance is at $136.50-$137.
Flex (FLEX, $16.22, down $0.49)
FLEX July 17 calls (FLEX170721C00017000, $0.35, down $0.18)
Entry Price: $0.45 (5/16/2017)
Exit Target: $0.90
Stop Target: None
Action: Support is at $16-$15.75 on continued closes below $16.25 and the 50-day moving average. Resistance is at $16.50-$16.75.
STMicroelectronics (STM, $16.09, down $1.06)
STM October 20 calls (STM171020C00020000, $0.50, down $0.20)
Entry Price: $0.70 (5/15/2017)
Exit Target: $1.40
Stop Target: None
STM July 17.50 calls (STM170721C00017500, $0.45, down $0.25)
Entry Price: $0.65 (5/15/2017)
Exit Target: $1.30
Stop Target: None
Action: Support is at $15.75-$15.50 and the 50-day moving average if $16 fails to hold. Resistance is at $16.25-$16.50.
Imax (IMAX, $27.10, down $0.50)
IMAX June 28 puts (IMAX170616P00028000, $1.40, up $0.40)
Entry Price: $0.40 (5/12/2017)
Exit Target: $1.75 (closed half at $1.20 on 5/17/2017)
Stop Target: $1.10 (Stop Limit)
Action: Shares traded to a low of $26.95 yesterday with support at $27-$26.75 holding. The 52-week low is at $26.48 and could open up risk to $26-$25, if breeched. Resistance is at $27.25-$27.50.
Viavi Solutions (VIAV, $10.90, down $0.60)
June 12 calls (VIAV170616C00022500, $0.15, down $0.15)
Entry Price: $0.35 (5/5/2017)
Exit Target: $0.70-$1.05
Stop Target: None
Action: Support is at $11-$10.75. Resistance is at $11.25-$11.50.
iShares Russell 2000 (IWM, $134.89, down $3.74)
IWM June 134 puts (IWM170616P00134000, $2.20, up $1.35)
Entry Price: $1.40 (5/2/2017)
Exit Target: $2.80 (closed half at $2.10 on 5/17/2017)
Stop Target: 70 cents, raise to $1.90 (Stop Limit)
Action: Raise the Stop Limit from 70 cents to $1.90.
Fresh support is at $134.50-$134 following yesterday’s low of $134.75. Resistance is at $135.50-$136.
Cypress Semiconductor (CY, $12.79, down $1.06)
CY June 14 calls (CY170616C00014000, $0.20, down $0.30)
Entry Price: $0.85 (4/20/2017)
Exit Target: $1.70
Stop Target: 25 cents, lower to None
Action: I have cancelled the Stop Target to give the trade a little wiggle room although yesterday’s breakdown below the 100-day moving average is concerning.
Fresh support is at $12.75-$12.50. Resistance is at $13.50.