MomentumOptions.com Pre-Market for 1/16/2018
Bulls Push Another Round of Record Highs
The market traded higher on Friday and ahead of the holiday weekend to set another round of record highs as 4Q earnings earnings season began.
The Dow rose 0.9% after testing an intraday high of 25,810 while gaining 2% over the week. The S&P 500 advanced 0.7% after closing a point off its late day run to 2,787 to book a 1.6% gain for the week. It was the second-straight up week for both the Dow and the S&P 500, as well as their seventh positive week in the past eight.
The Nasdaq rose 0.7% after trading to an all-time peak of 7,265 and was up 1.7% over the past week, its second consecutive weekly advance. The Russell 2000 climbed 0.3% after coming within 2 points of clearing the 1,600 level. For the week, the small-caps rallied 2%, its biggest weekly advance since September.
Consumer Discretionary and Energy led sector gains, and were up 1.3% and 1% respectively. Real Estate and Utilities were the only sector laggards, falling 0.7% and 0.6%.
Sectors for the week that outperformed were Energy and Industrials (3.3%), Consumer Discretionary (3.2%), and Financials (2.9%). Real Estate and Utilities sank 3.4% and 2.1% while Consumer Staples fell 0.5% and were the under-performers sector for the week.
The VelocityShares Daily Inverse VIX (ZIV) tested a fifth-straight all-time high of 94.42 with upper resistance at 94.50-95 holding. Support is at 93.50-93 with a close below 92-91.75 signaling a possible near-term market top. RSI is pushing February 2017 resistance at 90 and continues to signal overbought levels.
The S&P 500 Volatility Index ($VIX, 10.15, up 0.28) closed higher on Friday after testing 10.31. Support at 10.25-10.50 and the 50-day moving average into the closing bell. A close above 11-11.50 and the 200-day moving average would be a bearish development and would likely signal upcoming market weakness. Support is at 10-9.50. RSI has been holding 50 and appears likely to test 55-60.
The Russell 2000 ETF (IWM) traded to an all-time high of $158.86 on Friday after breaking out of a tight trading range between $154-$155 to start the New Year. Fresh resistance is now at $159-$160. Support is at $158-$157.50 with backup help at $156-$155.50.
RSI is cleared November resistance at 70 with fresh hurdles at 80-85 and September and early October highs. A close back below 70-65 would likely signal a short-term top.
The Technology Select Sector Spiders (XLK) traded to an all-time high of $66.90 with lower resistance at $66.75-$67 holding into the closing bell. Continued closes above the latter could lead to a run towards $68.50-$70. Support is at $66.25-$65.75 with a move below the latter being a slightly bearish development.
RSI is approaching early January and mid to late-November resistance at 70-72 with continued closes above this level being slightly bullish for a possible run towards 80.
Bitcoin Investment Trust (GBTC) ended at $1,970.00, up $261.99 on Friday. More importantly, the stock seeks to mirror the price of bitcoin, and announced a 91-for-1 stock split of bitcoin. This will drastically reduce the price of a current $1,970, making GBTC more accessible to retail investors for around $21.64 at current levels. The split takes place on January 26th.
This week will be the first real week of earnings season, with four more major weeks to come. By the end of next week a little over 7.5% of S&P 500 companies will have reported, representing over 12.6% of the index weight. The week after will see an additional 19% of the components having reported, representing over 22% of index weight in that week alone.
While I do think there is still a little more upside to the market’s current rally, a pullback appears to be in the cards at some point in late January/ early February. Another 1% move would trigger round numbers of Dow 26,000; S&P 2,800; Nasdaq 7,300; and Russell 1,600 – with stretch.
February is always a tricky month to trade and is the weakest link during a historic and normally bullish November thru April time period for the market. The charts are signaling oversold levels on a number of key indicators and any pullback will represent a longer-term buying opportunity.
There could also be the opportunity to use put options on a short-term basis, especially with index and ETF‘s (exchange-traded funds) options. The clues to go short will be how VIX and ZIV react over the next week or two. However, it is important to remember 2017 pullbacks were relatively quick with extreme volatility before an eventual uptrend resumed.
I have set initial Stop Limits for FLEX and TWTR. This will guarantee we get off to a quick 5-1 start for January with a big triple-digit win already in the books.
I also have a few trades planned for this week possibly as early as this morning, so stay locked-and-loaded. Remember, if you haven’t signed up for text alerts, please email me at Rick@MomentumOptionsTrading.com with your digits.
Momentum Options Play List
Closed Momentum Options Trades for 2018: 2-1 (67%). 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.
Flex (FLEX, $19.14, up $0.38)
FLEX February 19 calls (FLEX180216C00019000, $0.72, up $0.23)
Entry Price: $0.45 (1/10/2018)
Exit Target: $1.00
Stop Target: 55 cents (Stop Limit)
Action: Set an initial Stop Limit at 55 cents to start protecting profits.
Fresh resistance is at $19.25-$19.50 on Friday’s run to $19.28. A push past $20 appears to be in the mix and would get these calls options to at least $1 in-the-money. Rising support is at $19-$18.75.
Twitter (TWTR, $25.41, up $1.06)
TWTR February 26 calls (TWTR180216C00026000, $1.60, up $0.50)
Entry Price: $1.10 (1/5/2018)
Exit Target: $2.20
Stop Target: $1.25 (Stop Limit)
Action: Set an initial Stop Limit at $1.25 to start protecting profits.
Fresh resistance is at $25.75-$26 following Friday’s surge to $25.85 and fresh 52-week peak. Rising support is at $25-$24.75.
Sony (SNE, $50.03, down $0.25)
SNE February 48 calls (SNE180216C00048000, $3.20, down $0.10)
Entry Price: $1.05 (1/3/2018)
Exit Target: $3.50 (closed half at $3.50 on 1/12/2018)
Return: 219% ($3.35 avg.)
Stop Target: $2.45, raise to $2.70 (Stop Limit)
Action: Raise the Stop Limit from $2.45 to $2.70 on the other half of the trade.
Resistance is at $50.50-$50.75 following Friday’s opening spurt to $50.82. Support is at $49.75-$49.50 with a move below the latter signaling a short-term top.