MomentumOptions.com Pre-Market Update for 8/21/2017
Bears Keep Momentum
The market finished slightly lower on Friday with the Energy and Utilities sectors showing strength while Consumer Discretionary and Healthcare led the decliners. Another shakeup in the White House caused some midday volatility after news Steve Bannon is out. Overall, is was another losing week for the Dow and S&P 500, their second-straight, with losses of less than 1%. The Nasdaq fell 0.6% to extend its losing streak to fourth-straight.
The Dow fell 76 points, or 0.4%, to close at 21,674. The blue-chips tested a low of 21,641 during the first half of action with upper support at 21,600-21,550 and the 50-day moving average holding. There is risk to 21,400-21,350 on a move below the latter. Near-term resistance at 21,750-21,800 held on the midday rebound to 21,793.
The S&P 500 slipped 4 points, or 0.2%, to settle at 2,425. The index traded to a low of 2,420 intraday with support at 2,425-2,415 and the 100-day moving average holding. A move below the latter could lead to a further backtest to 2,400-2,390 on a move below the latter. Resistance at 2,445-2,450 and the 50-day moving average held on the run to 2,440 afterwards.
The Nasdaq dipped 5 points, or 0.1%, to end at 6,216. Tech reached a morning low of 6,193 to breach lower support at 6,225-6,200. There is additional help at 6,150-6,100 and the 100-day moving average on continued weakness. Lower resistance at 6,250-6,300 held on the bounce to 6,254 but a level that failed to hold.
The Russell 2000 declined a point, or 0.1%, to finish at 1,357. The small-caps made a backtest to 1,349 at the start of trading with support at 1,350-1,345. A move below the latter gets 1,340-1,335 and the late March lows in play. Resistance is at 1,370-1,375 and the 200-day moving average.
The S&P 500 Volatility Index ($VIX, 14.26, down 1.29) fell 8% after peaking at 16.04 shortly after the open. Resistance at 15-17.50 was split with a close above the latter a bearish development. Lower support at 14.50-14 was tripped following the intraday low of 13.32. Continued closes below 13.50 are needed to get volatility back under control by the bulls.
Gold made another attempt to clear and hold the $1,300 level on Friday. Continued closes above this level would be a very bullish development for a possible breakout towards $1,350-$1,400 at some point. Current support is at $1,280-$1,275 with a move below $1,270 likely leading to another backtest to $1,260-$1,255 and the 50/100-day moving averages.
The Spider Gold Shares (GLD) is in the same technical pattern with continued closes above $123-$123.25 a bullish signal. Continued closes above the latter could lead to a run towards $125-$127.50 over the near-term. Support is at $121.50-$121 on a move below $122.
If Gold does make another move above $1,300 and GLD clears $123.25, the GLD September 125 calls (GLD170915C00125000, $0.65, down $0.20) and the GLD October 127 calls (GLD171020C00127000, $0.95, down $0.20) can be targeted by bullish traders. I have them on my Watch List, as well.
The iShares Semiconductor ETF (SOXX) failed resistance at $146.50-$147 and a downward sloping 50-day moving average on Friday after closing back below this level on Thursday. There is risk to $143-$142 and the 100-day moving average on additional weakness with a move below the latter being a bearish development.
The Spider S&P Retail ETF (XRT) traded to a fresh 52-week low of $37.95 on Friday. There is multi-year support at $36-$35.50 on continued weakness. The major-moving averages are still in a downtrend with fresh resistance at $38.50-$39.
The XRT September 37 puts (XRT170915P00037000, $0.50, down $0.05) were active on Friday with over 5,500 trading hands. Open interest is above 34,000 contracts and can be targeted by bearish traders if XRT shares fall below $37.75.
The Utilities Select Sector Spider (XLU) made a run to $54.76 and a fresh 52-week peak on Friday. A move above resistance at $54.75-$55 could lead to a triple-top breakout towards $56-$57.50. Support is at $54-$53.75.
The XLU September 54 calls (XRT170915C00054000, $1.00, up $0.25) gained 33% on Friday on volume north of 25,000 contracts. These options can be used by bullish traders expecting further gains and would double from current levels if XLU clears $56, technically, by September 15th, 2017.
The percentage of Nasdaq 100 stocks trading above the 50-day moving average is just below 40% and levels last seen in early July. The late July low reached the 35%-33% area. Continued selling pressure could lower this number to 30%-25% and levels last seen in October and November 2016. Continued closes above the 40% level could lead to a short-term rebound.
It remains to be seen if the current weakness represents a buying opportunity as the whipsaw action is signaling possible lower lows. With the portfolio light, this creates a tremendous opportunity to add new trades but we still need to be very careful given the current environment.
The aforementioned trades are my top ideas heading into the week but my Watch List has another 15-20 candidates that include index option trades, as well. If I take any action, I will send out a Trade Alert, in what could be a busy week so stay locked-and-loaded.
Momentum Options Play List
Closed Momentum Options Trades for 2017: 44-19 (70%). 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.
TherapeuticsMD (TXMD, $6.01, down $0.26)
TXMD December 7.50 calls (TXMD171215C00007500, $0.85, down $0.10)
Entry Price: $0.95 (8/17/2017)
Exit Target: $1.90
Stop Target: None
Action: Upper support at $6-$5.75 held on Friday’s low. Resistance is at $6.50-$6.75.
Intel (INTC, $35.01, down $0.16)
INTC October 37 calls (INTC171020C00037000, $0.34, down $0.04)
Entry Price: $0.53 (8/15/2017)
Exit Target: $1.10
Stop Target: None
Action: Support is at $35-$34.75 and a downward sloping 50-day moving average. Resistance is at $35.25-$35.50 and the 100/200-day moving averages. If shares fall below $34.50, I might exit the trade to save the remaining premium.
TiVo (TIVO, $18.10, flat)
TIVO October 20 calls (TIVO171020C00020000, $0.55, down $0.05)
Entry Price: $0.70 (8/8/2017)
Exit Target: $1.40
Stop Target: None
Action: Friday’s low reached $17.95. Support is at $18-$17.75. Resistance is at $18.50-$18.75 and the 50/100-day moving averages.