MomentumOptions.com Pre-Market Update for 7/10/2017
Bulls Get Clean Sweep on Strong Jobs Numbers/ Profit Alert (FOLD)
The bulls did enough on Friday to get the weekly win as the major indexes closed higher with Tech and the small-caps leading the way. The weekly gains were limited but the 1% pop following a great jobs report was enough to avoid a two-week losing streak. This week’s action should be more exciting with second quarter earnings season underway and a possible trend forming for a summer rally.
The Dow advanced 94 points, or 0.4%, to settle at 21,414 on Friday. The blue-chips held positive throughout the session while trading to a high of 21,425. Lower resistance at 21,500-21,600 held with the all-time high at 21,562. A run to 22,000 could come on another breakout. Support is at 21,300-21,250 with risk to 21,100-21,000 and the 50-day moving average on a move below the latter.
The S&P 500 climbed 15 points, or 0.6%, to end at 2,425. The index opened higher at 2,413 and just below the 50-day moving average while clearing upper resistance at 2,420-2,425 on the run to 2,427. Continued closes above this level keeps 2,440-2,450 in play with a shot at 2,500 on continued momentum. The lifetime high is north of 2,453. Support is at 2,410-2,400 with a close below the latter being a bearish development.
The Nasdaq jumped 63 points, or 1%, to close at 6,153. Tech started the session above the 6,100 level after opening at 6,111. The push to 6,165 fell just shy of clearing lower resistance at 6,175-6,200 and a flattening 50-day moving average. A move above the latter could spark some momentum for a run to 6,300-6,350 and fresh all-time highs. Support remains at 6,100-6,075 with a close below the latter a signal to go short for a possible drop to 6,000.
The Russell 2000 rallied 15 points, or 1.1%, to finish at 1,415. The small-caps opened a point higher at 1,401 while testing an intraday peak of 1,416. Lowered resistance at 1,415-1,420 held with a move above the the latter getting 1,430-1,440 and record highs back in the mix. Shaky support remains at 1,400-1,395 and the 50-day moving average. A close below 1,390 and the 100-day moving average would be a signal to possibly buy put options.
The S&P 500 Volatility Index ($VIX, 11.19, down 1.35) traded to a high of 12.57 and cleared upper resistance at 11.50-12.50 and the 200-day moving average before dropping 11%. The low reached 10.98 and the close below the 100-day moving average was slightly bullish. Support is at 10.75 and a flattening 50-day moving average. A move below 10.50-10.25 would be a better signal higher market highs are still in play.
The rotation out of Technology and momentum stocks from the start of early June could be trying to stabilize after May lows on the Nasdaq were being threatened. Of course, there is still possible weakness ahead if the index can’t clear and hold its 50-day moving average for several sessions and what I will be mainly watching this week.
While there are major companies reporting earnings throughout the week, the following weeks will be more action packed. Aside from PepsiCo (PEP) on Tuesday, the more important numbers will come from the Financial sector with four major companies announcing results.
Citigroup (C), JPMorgan Chase (JPM), PNC Financial Services (PNC), and Wells Fargo (WFC) will report ahead of Friday’s open and will likely set the stage for the session. The charts are mostly bullish for all for aforementioned stocks with C and JPM looking like the two gems of the group.
The C July 69 calls (C170721C00069000, $0.66, up $0.01) were very active on Friday as over 10,000 contracts exchanged hands. The calls traded in a range of 58-82 cents and would double from current levels if shares clear $70.32, technically, by July 21st.
The C August 70 calls (C170818C00070000, $0.90, up $0.01) would give a possible trade an extra month of time premium. These options traded over 4,600 contracts and would return 100% from current levels if shares clear $71.80, technically, by August 18th.
Both aforementioned C option trades would require a 4%-5% move from the stock at current levels, but possible if the Citigroup tops estimates while upping its outlook.
Meanwhile, JPM appears to be headed towards $100 after tapping a fresh 52-week high of $94.51 last week.
The JPM July 95 calls (JPM170721C00095000, $0.95, up $0.06) would double if shares clear $96.90, technically, by July 21st. There are weekly options available to trade on JPM and these call options expire in less than two weeks. The risk to the trade would be if shares pullback on less than stellar earnings and stay below $95 as the options would expire worthless.
The chip sector showed strength midweek with some follow through on Friday after sliding below the 50-day moving average to close out June. The Vectors Semiconductor ETF (SMH) held the backtest to the 100-day moving average with current support trying to hold at $82.50-$82. Resistance is at $83.50-$84 and the 50-day moving average with a move above the latter a bullish sign. RSI recently held the 30 level and the mid-April low. This may have formed a temporary double-bottom with RSI firmly in the low 40’s at current levels
The Spider S&P Semiconductor ETF (XSD) is in a similar trading pattern as SMH and cleared resistance at $62-$62.50 and the 50-day moving average on Friday’s 2% pop. Support is at $62-$61.50. RSI is at 49 after holding near the 40 level and longer-term support from early-November and mid-April lows around the 30 level.
There are a few names I like in the Chip space with Applied Materials (AMAT) setting up for a possible bullish trade. Shares just missed clearing resistance at $43.75 and the 50-day moving average on Friday. The recent backtest to $40.75-$40.50 and the 100-day moving average held with fresh support now at $43-$42.50 trying to hold.
The AMAT August 45 calls (AMAT170818C00045000, $1.30, up $0.45) can be targeted by bullish traders if shares can clear and hold $43.75-$44. These call options would double from current levels if shares clear $47.60, technically, by August 18th.
Intel (INTC) has rebounded nicely off support and the $33.50 level but is still in a bearish setup with a death-cross forming last week. The close of the 50-day moving average below the 200-day moving average was a bearish sign. I would like to see a continued run towards $34.50 and near-term resistance this week before possibly using August put options if this level holds.
The Transports are breaking out to fresh all-time highs with the Dow Jones Transportation Average ($TRAN) clearing the 9,700 level on Friday. Continued closes above this level would get 9,800-10,000 into the mix. Near-term and fresh support is at 9,600-9,500 with the latter representing December and January peaks. A mini golden cross has formed with the 50-day moving average clearing the 100-day moving average.
Continued strength in the Transports and Financials would be a very bullish sign. If the small-caps and Tech can continue to rebound, the market could be setting up for a run to fresh all-time highs and a possible summer rally this month. The catalyst will be earnings but we also have to keep our guard up with geopolitical events that could also heighten in the coming weeks and months.
From desk to press, futures look like this: Dow (+6); S&P 500 (+3); Nasdaq 100 (+8).
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.
Bank of America (BAC, $24.83, up $0.12)
BAC August 25 calls (BAC170818C00025000, $0.78, up $0.06)
Entry Price: $0.75 (7/3/2017)
Exit Target: $1.50
Stop Target: None
Action: Lower resistance at $25-$25.25 held on Friday’s high. The 52-week peak is at $25.80. Support is at $24.75-$24.50.
AT&T (T, $36.98, down $0.20)
T August 37 puts (T170818P00037000, $0.80, up $0.05)
Entry Price: $0.78 (6/29/2017)
Exit Target: $1.60
Stop Target: None
Action: Friday’s low of $36.82 held upper support at $36.75-$36.50. A move below the latter gets $36-$35.50 in play. Resistance is at $37.25-$37.50. The 50-day moving average is in a nasty downtrend after falling below the 200-day moving average to form a death cross. This signaled lower lows and the yield on the stock is now above 5%. There could be value investors watching this development with major support at $35.50-$35 from the November 2016 lows. A continued backtest to $35.50 by mid-August would be enough to get these options to $1.50 in-the-money.
Amicus Therapeutics (FOLD, $10.44, down $0.10)
FOLD July 10 calls (FOLD170721C00010000, $0.75, down $0.15)
Entry Price: $0.70 (6/22/2017)
Exit Target: $1.40
Stop Target: 73 cents (Stop Limit)
Action: The Stop Limit tripped on Friday after trading down to 70 cents. While disappointed, we can now roll into August call options on a move back above $10.75.
TherapeuticsMD (TXMD, $5.01, up $0.41)
TXMD August 7.50 calls (TXMD170818C00007500, $0.40, up $0.10)
Entry Price: $0.50 (6/22/2017)
Exit Target: $1.00
Stop Target: None
Action: Lower resistance at $5-$5.25 was cleared on Friday’s run to $5.19. A move above $5.50 and the 100-day moving average would be a bullish development. Support is at $4.75 and the 50-day moving average with risk to $4.50-$4.25 on another close below the latter.
iPath S&P 500 VIX Futures (VXX, 13.08, down 0.49)
VXX August 14 calls (VXX170818C00014000, $0.90, down $0.30)
Entry Price: $1.20 (6/15/2017)
Exit Target: $2.40
Stop Target: None
Action: Support is at 13-12.75. Resistance is at 13.50 and the 50-day moving average followed by 13.75-14.