MomentumOptions.com Pre-Market Update for 6/26/2017
Bulls Controlling June’s Action
The market traded in a tight range last week with the bulls getting a clean sweep. Tech led the charge higher after gaining nearly 2% while the rest of the major indexes had slight gains. The blue-chips extended their win streak to five-straight weeks and are up 2% for the month.
Volatility stayed near historic lows but volume was heavy on Friday on the annual rebalancing of the Russell indexes. This could lead to some short-term bullishness into month end. Economic news and political events have not had a major impact on the market as Wall Street awaits a healthcare vote, tax cuts, and second-quarter earnings season the second week of July.
The Dow dipped 2 points, or 0.01%, to finish at 21,394 on Friday. The blue-chips opened lower at 21,380 and tested a low of 21,333 shortly afterwards. Rising support at 21,250-21,200 has held for nine-straight sessions with risk to 21,100-21,000 on a close below the latter. Resistance at 21,500-21,600 held on the intraday run to 21,421 with the all-time at 21,535. My February Price Targets are at 22,000-22,250.
The S&P 500 added 3 points, or 0.2%, to settle at 2,438. The index traded down to 2,431 in the opening minutes with support at 2,425-2,420 easily holding. There is additional help at 2,410-2,400 on a move below the latter. The second half push to 2,441 cleared lower resistance at 2,440-2,450 before backing off into the close. My February Price Targets are pegged at 2,500-2,525.
The Nasdaq jumped 28 points, or 0.5%, to end at 6,265. Tech was also weak during the first half-hour of action with the low tapping 6,218. Support at 6,200-6,175 held tight with a close below the latter a bearish development. Upper resistance at 6,250-6,275 was nearly cleared following the flight to 6,269 later in the session. A close above the latter gets my February Price Targets of 6,300-6,350 back in play. The recent all-time peak reached north of 6,341. We will have to watch for a possible double-top in July, or a breakout to fresh highs.
The Russell 2000 gained 10 points, or 0.7%, to close at 1,414. The small-caps slipped 2 points to 1,402 at the start of Friday’s open with support at 1,400-1,395 holding. I have talked about how crucial it was for 1,395 to hold with last week’s lows reaching 1,398 and 1,396 on Wednesday and Thursday. Backup support at 1,390-1,385 and the 50/100-day moving averages, if 1,395 fails to hold. The rebound to 1,415 afterwards and close above lower resistance at 1,410-1,415 was slightly bullish. The late day high cleared the latter with additional hurdles at 1,425-1,430. The all-time peak is at 1,433 and my February price targets are set at 1,500-1,525.
The S&P 500 Volatility Index ($VIX, 10.02, down 0.46) stayed deflated after peaking at 10.69 on the open. Lower resistance at 11.50-12.50 easily held but are still in the mix. The low of 9.85 cleared upper support at 10-9.75 with the recent 52-week and multi-year low at 9.37. A close below 9.75-9.50 this week would be a bullish development.
Despite the whipsaw action this month, last week’s holding pattern and recovery of near-term resistance were bullish signals. The Nasdaq regained its momentum for June with last week’s rebound and is showing a gain of 1%. The Dow is up roughly 400 points for the month while the S&P 500 is higher by 27 points, or a little over 1%. The real strength has still been in the Russell 2000 as the small-caps are up 44 points, or a solid 3%.
The annual rebalancing of the Russell 1000, 2000 and 3000 indexes are rule based changes that help ensure other changes in market value or investment styles are properly accounted for. In other words, its a refresh for companies based on value or growth and other factors. The rebalancing of all three indexes represents a ton of the stocks that are publicly traded and why volume was one of the heaviest sessions of the year.
Oil prices moved a bit higher on Friday after tapping November lows last week. Brent Crude has current support at $44.25-$44 if $45 fails to hold. It is too early to say if the “double bottom” will hold but a recovery of resistance at $46 this would would be a good sign.
The recent death-cross from earlier this month with the 50-day moving average falling below the 200-day moving average was a very bearish development. The 100-day moving average is also in a nasty decline and is showing continued weakness to the low $40’s if the $44 level fails to hold. The market has done well absorbing the blow and a continued recovery in oil stocks would be helpful for higher highs.
Dow component, Exxon Mobile (XOM), backed off its 200-day moving average and the $83 level last week with support at $81.50 and the 50/100-day moving averages holding. There is still risk to $80-$79.50 if $80.75 fails to hold this week. A close above $81.75-$82 would be slightly bullish but I don’t see an option trade until $83 clears, or shares fall below $80.
The Financial stocks pulled back last week with a mixed picture and stretch in some cases. The Financial Select Spider (ETF) traded down to $23.81 on Friday while holding its 100-day moving average by two pennies. Fresh support is at $23.75-$23.50 and the 50-day moving average with risk to $23 on a close below the latter. If shares can recover $24-$24.25 this week, there could be an opportunity to go long the index or individual stocks.
Shares of Bank of America (BAC) pulled back off the $24 level last week while falling below their 50/100-day moving averages. Both MA’s have flatlined but there is risk to $22.50-$22 if $22.75 fails to hold. The $22 level has held throughout the year, for the most part, and a close below this level would open up the possibility of going short or using put options. Resistance is at $23-$23.25 with a move above $23.50 a signal to go possibly long, or use call options.
The BAC July 23 calls (BAC170721C00023000, $0.55, down $0.10) can be targeted by bullish traders on a move above $23.25-$23.50. These options were active on Friday as over 5,500 contracts traded with just a two-cent spread. The BAC August 24 calls (BAC170818C00024000, $0.40, down $0.05) offer an extra month of time premium so they can be added to the Watch List, as well.
Bearish traders can target the BAC July 22.50 puts (BAC170721P00022500, $0.48, up $0.03) if shares fall below $22.75-$22.50 this this week. These options would double from current levels if shares fall below $21.50, technically, by July 21st, 2017. The BAC August 22 puts (BAC170818P00022000, $0.52, up $0.04) are also attractive and would return 100% if shares fall a nickel below $21, technically, by August 18th, 2017.
Another trade I’m targeted this week involves Intel (INTC) if shares fail to hold near-term support at $34. The chart below shows the 50/100-day moving averages in major downtrends with possible death-crosses forming on moves below the 200-day moving average. There is additional risk to $33.50-$33 and November lows on continued weakness and on a move below $34. Resistance is at $34.75-$35.
The gap lower last week came after AMD (AMD) announced the launch of its series of data center processors. Analysts were upbeat on the news and several mentioned the increased competitive threat they represent to Intel’s data center business. One analyst downgraded shares of INTC following the announcement to a Neutral rating that may have sparked additional selling pressure.
The INTC August 33 puts (INTC0818P00033000, $0.63, flat) traded in a range of 63-71 cents on Friday on volume over 6,200 contracts. These puts can be targeted by bearish traders if $34 fails to hold as a further backtest to $33-$32 could come when looking at the 2-year weekly chart.
Friday’s rebound in the Transports was encouraging as the Dow Jones Transportation Average ($TRAN) held support and the 9,250 level last week. Again, it is too early to say if a possible double-bottom has formed with additional resistance at 9,400-9,450, but it was a good sign. A close below 9,200-9,150 this summer would be a bearish development and would likely negate near-term record highs.
The time period between now and the start of 2Q earnings season could continue to create a tighter trading range with any moves above support or resistance leading to another breakdown or breakout. Financial stocks and the Transports will need to rebound following a slight setback and remain the key to higher highs with oil at 7-month lows.
I could have New Trades shortly after this morning’s open so stay locked-and-loaded.
Momentum Options Play List
Closed Momentum Options Trades for 2017: 38-15 (72%). 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.
Amicus Therapeutics (FOLD, $10.44, up $0.35)
FOLD July 10 calls (FOLD170721C00010000, $0.80, up $0.10)
Entry Price: $0.70 (6/22/2017)
Exit Target: $1.40
Stop Target: None
Action: Shares surged to a fresh 52-week peak on Friday after trading up to $10.48 into Friday’s close. Longer-term resistance at $10.50-$10.75 is firmly in play with a close above the latter leading to a possible run to $12. Rising support is at $10-$9.50.
TherapeuticsMD (TXMD, $5.71, down $0.02)
TXMD August 7.50 calls (TXMD170818C00007500, $0.50, flat)
Entry Price: $0.50 (6/22/2017)
Exit Target: $1.00
Stop Target: None
Action: Friday’s low tapped $5.53. Support is at $5.50 and the 100-day moving average. Near-term resistance is at $5.75-$6 and the 200-day moving average.
iPath S&P 500 VIX Futures (VXX, 12.53, down 0.13)
VXX August 14 calls (VXX170818C00014000, $0.80, down $0.05)
Entry Price: $1.20 (6/15/2017)
Exit Target: $2.40
Stop Target: None
Action: Support is at 12.50-12.25 with Friday’s low reaching 12.51. Resistance is at 12.75-13.