MomentumOptions.com Pre-Market Update for 10/22/2019

Bulls Show Strength Ahead of Busy Week for 3Q Earnings

8:00am (EST)

The market got off to a good start on Monday after China’s Vice Premier Liu He made some positive comments over the weekend about substantial progress made with the U.S. phase-one trade deal. President Trump also confirmed a potential trade deal with China is coming along well, after mentioning earlier this month he would like a deal signed by the middle of next month.

The overall market gains come ahead of the busiest week for the 3Q earnings season with the major indexes once again pushing near-term resistance levels. The continued strength in the Financials, and Transports, were a bullish signal as the former accounts for nearly 20% of the small-cap index.

The Russell 2000 showed the most strength after surging 1% and tapping an intraday high of 1,557. Prior and lower resistance from early September at 1,550-1,565 was cleared and held with a close above the latter being a bullish signal for a run towards 1,575-1,590.

The Nasdaq jumped 0.9% following the intraday run to 8,164. Prior and key resistance at 8,150 was cleared and held with more important hurdles at 8,200-8,250 and the mid-September high at 8,243. 

The S&P 500 rose 0.7% after trading to an afternoon peak of 3,007. The close above lower resistance at the 3,000 level was a bullish signal and keeps upper resistance at 3,025 and the record peak at 3,027 in play.

The Dow added 0.2% while trading in a 105-point range and testing a session high of 26,852. Near-term and lower resistance at 26,800-27,000 was cleared and held with a close above the latter getting 27,200-27,400 and fresh all-time highs back in focus.

Energy and Financials were the strongest sectors after soaring 1.8% and 1.4%, respectively, while Technology gained 1.1%. Materials and Healthcare were the only sector laggards after slipping 0.3% and 0.1%.

The iShares 20+ Year Treasury Bond ETF (TLT) fell out of a mini trading range following the intraday tumble to $138.23. Prior and upper support from mid-September at $138.50-$138 was breached but held. A close below the latter would be an ongoing bearish signal with additional risk towards $137-$136.50 and the September low at $136.54.

Lowered resistance is at $139.50-$140.

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The S&P 500 Volatility Index ($VIX) traded in a tight range before settling lower after testing an first half high of 14.63. Resistance at 14.50-15 was challenged but held for the 5th-straight session. A close above the latter reopens upside risk towards 15.50-16 and the 200-day moving average.

Near-term support remains at 14-13.50.

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The Invesco QQQ Trust (QQQ) is mired in a 7-session trading range despite trading to an intraday high $193.52. Lower resistance at $193-$193.50 was breached but held. Continued closes above the $194 level would be a more bullish development with upside potential towards $195.50-$196 and fresh all-time highs.

Current support is at $192-$191.50. A move below the latter would be a slightly bearish signal for a retest towards $191-$190.50. The Friday-Monday lows from mid-month are at $190.72 and $190.65 with a close below the $190 level likely confirming risk towards $189-$188.50 and the 50-day moving average.

RSI is in a slight uptrend with resistance at 60 and the monthly peak. A close above the latter would be a bullish signal for additional strength towards 65-70 and July highs. Support is at 55-50.

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The Real Estate Select Sector Spider (XLRE) extended its winning streak to 3-straight sessions after tapping a 52-week and all-time high of $40.21. Fresh and lower resistance at $40-$40.25 was cleared and held with blue-sky territory towards $41-$41.50 on continued strength.

Rising support is at $39.75-$39.50 with a close back below the latter signaling a possible near-term top.

RSI has cleared lower resistance at 65-70. Continued closes above the latter would signaling additional strength towards 75 and the June peak. Current support is at 60 with a move below this level signaling weakness towards 55-50.

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I have set a Stop Limit for our current T trade and raised the Stop Limit on LLNW. 

Momentum Options Play List

Closed Momentum Options Trades for 2019: 35-11 (76%). 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.

Viavi Solutions (VIAV, $15.06, up $0.23)

VIAV December 16 calls (VIAV191220C00016000, $0.50, up $0.05)

Entry Price: $0.50 (10/21/2019)

Exit Target: $1.00

Return: 0%

Stop Target: None

VIAV January 16 calls (VIAV200117C00016000, $0.65, up $0.05)

Entry Price: $0.65 (10/21/2019)

Exit Target: $1.30

Return: 0%

Stop Target: None

Action: Lower resistance at $15-$15.25 was cleared and held on Monday’s ride to $15.19 and fresh 52-week high. Rising support is at $14.75-$14.50.

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iShares MSCI Emerging Markets Fund (EEM, $42.36, up $0.38)

EEM November 43 calls (EEM191115C00043000, $0.35, up $0.05)

Entry Price: $0.35 (10/17/2019)

Exit Target: 0.70

Return: 0%

Stop Target: None

Action: Lower resistance at $42.25-$42.50 was cleared and held on Monday’s run to $42.37. Support is at $42-$41.75.

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AT&T (T, $38.23, down $0.24)

T November 39 calls (T191115C00039000, $0.75, down $0.15)

Entry Price: $0.65 (10/15/2019)

Exit Target: $1.30

Return: 17%

Stop Target: 65 cents (Stop Limit)

Action: Set a Stop Limit at 65 cents to avoid a loss. If there is continued weakness, which I don’t think will be the case, we can sit on the sidelines for a better reentry point.

Upper support at $38.25-$38 failed to hold on the backtest to $38.19. Resistance is at $38.50-$38.75.

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Mylan (MYL, $18.15, down $0.18)

MYL November 20 calls (MYL191115C00020000, $0.50, down $0.10)

Entry Price: $0.80 (10/15/2019)

Exit Target: $1.60

Return: -38%

Stop Target: None

Action: Yesterday’s low reached $18.11 with prior and upper support at $18.25-$18 failing to hold. A close below the latter would be a slightly bearish signal and signal a possible early exit. Resistance is at $18.50-$18.75.

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Limelight Networks (LLNW, $4.11, up $0.24)

LLNW January 3 calls (LLNW200117C00003000, $1.20, up $0.20)

Entry Price: $0.60 (9/11/2019)

Exit Target: $1.50-$2

Return: 100%

Stop Target: 75 cents, raise to 95 cents (Stop Limit)

Action: Raise the Stop Limit from 75 cents to 95 cents. 

Fresh and lower resistance at $4.15-$4.25 was challenged but held with Monday’s high tapping $4.14. A close above the latter gets the 52-week high at $4.50 in play. Rising support is at $4-$3.90.

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