Pre-Market Update for 11/23/2018

Rebound Rally Unimpressive as Blue-Chips Slip

8:00am (EST)

The market showed strength for the majority of the session with some late day selling pressure resulting in a mixed finish. A report that White House trade advisor Peter Navarro would not be attending a Trump-Xi meeting helped fuel the rebound following 2 days of heavy selling pressure.

The news could be interpreted as a more hopeful omen on the trade front ahead of the G20 meetings in a couple of weeks. However, volatility remains slightly elevated after near-term support levels held ahead of Thursday’s holiday and Friday’s shortened session.

The Russell 2000 rallied 1.3% after trading to an intraday high of 1,499. Fresh resistance at 1,490-1,500 held with continued closes above the latter signaling a possible near-term bottom.

The Nasdaq rose 0.9% with the morning peak tapping 7,029. Resistance at 7,000-7,050 was split with both levels holding into the closing bell.

The S&P 500 was higher by 0.3% following the intraday push to 2,670. Prior resistance at 2,675-2,700 held with the close below 2,650 being a slightly bearish signal for Friday.

The Dow dipped a point, or 0.0%, despite testing a session high of 24,669. Lower resistance at 24,600-24,800 was breached but a level that held into the closing bell.

Energy led sector strength after rising 1.6%. Communication Services and Consumer Discretionary were up 1.2% and 1.1%, respectively.

Utilities paced sector laggards after sinking 1.5% while Consumer Staples fell 0.8%.

The S&P 500 Volatility Index ($VIX) traded lower throughout the session while bottoming at 20.11. Upper support at 20-19.50 held with a close below the latter being a slightly bullish signal. Resistance remains at 22-22.50.

Trading graph

The Russell 3000 Index ($RUA) had an inside day, meaning a higher high or lower low wasn’t made from the previous session. Wednesday’s rebound to 1,574 failed near-term and lower resistance at 1,580-1,590. Continued closes above 1,600 would be a more bullish development and signal a possible short-term bottom.

Fresh support is at 1,550-1,540. A close below the latter would be a continued bearish development with risk towards 1,520-1,500 and April/ February lows.

RSI is back in a slight uptrend with resistance at 40-45. Continued closes above 50 would be a more bullish development. Support is at 35 with a move below this level signaling additional weakness.

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The Materials Select Sector (XLB) showed strength after making a run to $54.41. Prior resistance at $54.50-$54.75 held with more important hurdles at $55.50 and the 50-day moving average.

Support is at $53.50-$53.25. A close below $53 would signal additional selling pressure.

RSI is pushing resistance at 50. Continued closes above this level would signal additional strength for a possible run towards 55-60 and the monthly peak. Support is at 45-40.

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I have adjusted the Stop Limit on IMAX as shares bounced back on Wednesday.

Momentum Options Play List

Closed Momentum Options Trades for 2018: 44-17 (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 “Stops” entered to close any trades or “Limit 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 Daily updates.

Imax (IMAX, $18.98, up $0.81)

IMAX January 18 puts (IMAX190118P00018000, $0.70, down $0.40)

Entry Price: $0.55 (11/15/2018)

Exit Target: $2

Return: 27%

Stop Target: 80 cents, lower to 55 cents (Stop Limit)

Action: Lower the Stop Limit from 80 cents to 55 cents.

The stop limit at 80 cents didn’t trigger as shares rebounded to test a high of $19.11. Fresh resistance at $19-$19.25 held. Support at $18.50-$18.25.

A death cross is close to forming with the 50-day moving average on track to fall below the 200-day moving average. This is typically a bearish signal for lower lows.

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Starbucks (SBUX, $66.77, down $0.41)

SBUX January 60 puts (SBUX190118P00060000, $0.50, down $0.05)

Entry Price: $0.60 (11/15/2018)

Exit Target: $1.20

Return: -17%

Stop Target: None

Action: Shares tested a low of $66.75 with support at $67-$66.50 getting split. Resistance remains at $67.50-$68 with the options slipping a nickel on Wednesday’s pop to $67.98.

Trading graph

Spiders S&P Homebuilders ETF (XHB, $34.42, up $0.46)

XHB December 32 puts (XHB181221P00032000, $0.40, down $0.10)

Entry Price: $0.60 (11/15/2018)

Exit Target: $1.20

Return: -33%

Stop Target: None

Action: Fresh resistance is at $34.75-$35 following the run to $34.73. Support is at $34-$33.75.

Trading graph