MomentumOptions.com Pre-Market Update for 9/10/2019
Small-Caps Shining, Blue-Chips Maintain Momentum
The market opened with slight gains on Monday after Treasury Secretary Steven Mnuchin said he takes it as a sign of good faith by China that officials will restart trade talks in early October and that his objective is getting a good deal for American workers and companies.
Mnuchin also reiterated President Trump is willing to continue with tariffs on Chinese goods if there’s no deal while adding he didn’t see signs of a U.S. recession. The slight momentum faded in the afternoon as the major indexes held a tight range into the close before settling slightly mixed with the small-caps showing strength.
The Russell 2000 rallied 1.3% after holding positive territory throughout the session while tapping a morning high of 1,526. Lower resistance at 1,515-1,530 and the 200-day moving average was cleared and held for the time in 3 sessions with a close above the latter and the 50-day moving average signaling strength towards 1,545-1,560.
The Dow edged up 0.1% to extend its winning streak to 4-straight sessions following the intraday push to 26,900. Near-term and lower resistance at 26,800-27,000 was cleared for the 3rd-straight session and held with a close above the latter keeping 27,250-27,500 and all-time highs in play.
The Nasdaq gave back 0.2% after stalling at 8,131 and failing near-term resistance at 8,150 on the open. Current and upper support at 8,050-8,000 and the 50-day moving back held on the pullback to 8,052 with risk towards 7,900-7,850 on a close below the 8,000 level.
The S&P 500 slipped just a quarter-point, or 0.01%, to snap a 3-session winning streak after trading in a 20-point range. Lower resistance at 3,000-3,025 held on the 1st half high of 2,989 with a close below 2,950 and the 50-day moving average signaling near-term caution.
Energy and Financials were sector standouts after surging 2% and 1.5%, respectively. Consumer Discretionary were up 0.4% while Communications Services and Industrials rounded out the winners after advancing 0.3%.
Healthcare stumbled 0.9% to pace sector weakness while Technology and Real Estate were down 0.8%.
In economic news, Baker Hughes reported the international rig count for August was 1,138, down 24 from the 1,162 counted in July, and up 130 from the 1,008 counted in August 2018. The international offshore rig count for August was 244, down 11 from the 255 counted in July, and up 32 from the 212 counted last August. The average U.S. rig count for August was 926, down 29 from the 955 counted in July, and down 124 from the 1,050 counted in August 2018.
TD Ameritrade IMX Level for August came in at 4.62.
Consumer Credit surged $23.3 billion in July, much stronger than forecasts of $16.1 billion, after increasing to $13.8 billion in June and representing the biggest increase since November 2017. Nonrevolving credit rose $13.3 billion following June’s $14.0 billion gain. Revolving credit rebounded $10 billion, recovering from the $200 million decline previously, and was the largest increase going back to November 2107 as well.
The iShares 20+ Year Treasury Bond ETF (TLT) was lower for the 2nd time in 3 sessions after sinking to a low of $143.19 ahead of the closing bell. Prior and upper support at $143.50-$143 was breached but held. A close below the $142.50 level would be a slightly bearish development with risk towards $141-$140.50.
Lowered resistance at $144-$144.50
The S&P 500 Volatility Index ($VIX) snapped a 3-session slide after testing an intraday high of 16.13. Lowered resistance at 16-16.50 was breached but held with a close above the latter and the 50-day moving average opening up risk towards 17-17.50 and the 200-day moving average.
Major support remains at 15 with a close below this level getting 14-13.50 in focus.
RSI has turned up with resistance at 45. A move above this level would be a slightly bearish signal for the market with upside potential towards 50-55. Support is at 40.
The Russell 2000 ETF (IWM) was up for the 3rd time in 4 sessions after trading to an intraday high of $152.24. Lower resistance at $152-$152.50 and the 50-day moving average was cleared with both levels holding. A close above $153 would be an ongoing bullish signal for a possible retest towards $154.50-$155 and prior support from late July.
Current and near-term support is at $150.50-$150. A close below the latter and the 200-day moving average would be a slightly bearish signal with risk towards $148-$147.50. This would fill-in last week’s gap higher and breakout above these levels.
RSI is in an uptrend with resistance at 55-60. A close above 60, and a level that has been holding since April, would be a bullish signal for a run towards 65-70 and early February peaks. Support is at 50-45.
The Consumer Discretionary Select Spiders (XLY) extended its winning streak to 4-straight sessions after tapping a session high of $123.66. Prior and lower resistance from mid-July at $123.50-$124 was cleared but held. A close above the latter would be an ongoing bullish signal for a blue-sky breakout towards $125-$127.50, depending on momentum. The current all-time high from mid-July is at $124.60.
Current support is at $122.50-$122. A move below $121.50 would signal a near-term top with a likely retest towards $120.50-$120 and the 50-day moving average.
RSI remains in a uptrend with resistance at 65-70. A move above the latter would be a bullish signal for additional strength towards the 75 area and mid-July highs. Support is at 60-55. A move below 50 reopens risk towards 45-40 with the latter serving as the mid-August low.
We got some super sweet pin action with AT&T yesterday as shares surged 10% past $38 but failed to hold $37. In any event, I have raised the Stop Limit to further protect profits, along with the Stop Limit for PFE.
I was hoping to see continued strength into the 2nd half of Monday’s action and decided to wait adding new positions. However, I believe all-time market highs will be triggered at some point this month, or next, and I’m still looking to add 2-3 new trades this week and as early as this morning. Stay locked-and-loaded throughout the session in case I take action.
Momentum Options Play List
Closed Momentum Options Trades for 2019: 29-11 (73%). 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.
AT&T (T, $36.79, up $0.54)
T October 36 calls (T191018C00036000, $1.25, up $0.40)
Entry Price: $0.65 (8/22/2019)
Exit Target: $1.30, raise to $2.50
Stop Target: 65 cents, raise to $1.05 (Stop Limit)
Action: Raise the Exit Target from $1.30 to $2.50. The high yesterday was $2.38! Raise the Stop Limit from 65 cents to $1.05.
Shares surged to another fresh 52-week peak high of $38.14 with new and lower resistance at $38-$38.25 getting breached but holding. Rising support is at $36.50-$36.25.
Pfizer (PFE, $36.83, up $0.33)
PFE December 37 calls (PFE191220C00037000, $1.55, up $0.20)
Entry Price: $0.85 (8/16/2019)
Exit Target: $1.70
Stop Target: $1.15, raise to $1.30 (Stop Limit)
Action: Raise the Stop Limit from $1.15 to $1.30 to further protect profits.
Lower resistance at $36.75-$37 was recovered with shares tapping a high of $36.84. Rising support is at $36.50-$36.25.
MGM Resorts International (MGM, $28.40, up $0.23)
MGM October 30 calls (MGM191018C00030000, $0.45, up $0.05)
Entry Price: $0.95 (8/13/2019)
Exit Target: $1.90
Stop Target: 10 cents (Stop Limit)
Action: Lower resistance at $28.50-$28.75 and the 50-day moving average was cleared but held following the run to $28.82. Rising support is at $28.25-$28.
Viavi Solutions (VIAV, $13.93, down $0.18)
VIAV September 15 calls (VIAV190920C00015000, $0.10, flat)
Entry Price: $0.65 (7/15/2019)
Exit Target: $1.30
Stop Target: None
Action: Upper support at $14-$13.75 and the 50-day moving average failed to hold on Monday’s pullback to $13.84. Resistance remains at $14.25-$14.50. If shares failed to clear and hold $14 today, we will likely exit as these options expire next Friday.
Cypress Semiconductor (CY, $23.19, up $0.04)
CY September 17 calls (CY190920C00017000, $6.05, flat)
Entry Price: $0.75 (5/16/2019)
Exit Target: $6.75 (Limit Order) (closed half at $1.70 on 5/29)
Stop Target: $5 (Stop Limit)
Action: Continue to hold.
Infineon (IFNNY) will acquire Cypress for $23.85 per share in cash. Cypress expects to continue its quarterly cash dividend payments until the transaction closes and these options have an intrinsic value of $6.85. We will continue to keep the trade open but have set a Stop Limit in place for protection.