MomentumOptions.com Pre-Market Update for 10/23/2019

Brexit Woes Weight on Market

8:00am (EST)

The market was choppy throughout Tuesday’s action following mostly better-than-expected earnings and mixed economic news. Late day events on Brexit weighed on the major indexes as the on again, off again, vote remains in flux. 

The mixed finish was a throwaway session as near-term support and resistance levels held. Volatility stayed relatively clam before a spike to session highs into the closing bell with near-term resistance holding. 

The Russell 2000 was up for the 2nd-straight sessions after adding 0.1% and testing an intraday high of 1,557. Lower resistance at 1,560-1,575 was challenged but held with a close above the latter getting 1,585-1,600 back in play.

The Dow dipped 0.2% despite trading to an intraday higher high of 26,946. Near-term and upper support at 26,750-26,500 held on the opening drop to 26,782 with a close below the latter and the 50-day moving average signaling a possible retest towards 26,250-26,000 and the 200-day moving average.

The S&P 500 fell 0.4% after trading in a 19-point range while testing and closing on the session low of 2,995. Shaky and upper support at 3,000-2,975 was breached and failed to hold with a close below the latter reopening risk towards 2,950 and the 50-day moving average.

The Nasdaq gave back 0.7% following the late session backtest to 8,101. Upper support at 8,100-8,050 held by a point with backup help at 8,000-7,950 and the 50-day moving average on a close below the latter.

Energy and Industrials were the best performing sectors after rising 1.3% and 0.8%, respectively, while Utilities advanced 0.4%. Technology and Communication Services were the leading laggards after falling 1.4% and 1%.

In economic news, Existing Home Sales declined 2.2% to 5,380,000 in September, worse than forecasts of 5,440,000. Weakness was in the single family sales index which slid 2.6%, while the condo/coop component rose 1.7%, following respective gains of 1.4% and 1.7% in August. The months’ supply of homes edged up to 4.1 from 4. The median sales price declined to $272,100 after falling to $278,900, previously. On a 12-month basis, prices are up 5.9% year-over-year.

Richmond Fed Manufacturing Index rebounded 17 points to 8 in October, versus expectations of -9, and September’s print. The employment sub-index climbed to 13 from 3 while new order volume jumped to 7 from -14. Prices paid slowed to a 2.4% pace from 2.68% previously, with prices received sliding to 1.71% from 2.59%. The 6-month shipment index rose to 24 from 15. The future employment index improved to 20 from 16, with new order volume at 33 from 22. Prices paid rose to 2.33% from 2.1% and prices received at 1.38% from 1.42%.

U.S. Chain Store Sales rebounded 3.1% last week, nearly recovering the prior week’s 3.4% drop. This helped boost the 12-month pace to a 2.7% year-over-year rate versus 1.6% previously. Nearly all of the retail segments increased, led by strong sales at electronic stores, while the only component that was weak came from the wholesale clubs. 

The iShares 20+ Year Treasury Bond ETF (TLT) rebounded from the prior session plunge after trading to a high of $139.53. Lowered resistance at $139.50-$140 was cleared but held with continued closes above the $141 level being a more bullish signal of a near-term bottom.

Support is at $139-$138.50. A close below the latter would signal additional weakness towards $137-$136.50.

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The S&P 500 Volatility Index ($VIX) stay compressed for much of the session before the late day pop to 14.61. Lower resistance at 14.50-15 was challenged but a level held for the 6th-straight session, albeit by a thread.

Near-term and upper support at 14-13.50 was breached but held with the intraday low tapping 13.80. A close below 13.50, and a level that has held since late July, would be a confirming signal for higher market highs with fresh support levels at 13-12.50.

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The Russell 2000 ETF (IWM) mirrored the previous session with the intraday high reaching $155.05. Upper resistance from mid-September at $154.50-$155 was cleared but held on the close below the former. The latter represents key support from late September with continued closes above the $155 level getting $156.50-$157 back in focus.

Current but unestablished and shaky support is at $154-$153.50. A close below the latter would be a slightly bearish signal with backtest potential towards $152-$151.50 and the 200-day moving average.

RSI has leveled out with resistance at 60-65. A move above the latter and the September peak would signal additional strength towards 70-75 and February highs. Support is at 55-50.

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The Spider Gold Shares (GLD) has been in an 8-session trading range with Tuesday’s midday low reaching $139.72. Crucial and upper support at $139.50-$139 easily held with a close below the latter reopening risk towards the $138 area.

Resistance is at $140.50-$141 with more important hurdles at $141.50-$142 and the 50-day moving average.

RSI is showing signs of curling higher with resistance at 50. There is upside potential towards 55-60 on a move back above the 50 level with the latter representing the September high. Support is at 45-40. A close below the latter and the monthly low would be a bearish development for additional weakness towards 35-30 and the lows from May.

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Today’s earnings:

Before the open: Anthem (ANTM), Blackstone (BX), Boeing (BA), Boston Scientific (BSX), Caterpillar (CAT), Eli Lilly (LLY), FirstCash (FCFS), General Dynamics (GD), Hilton Worldwide (HLT), Nasdaq (NDAQ), Owens Corning (OC), Popular (BPOP), Rollins (ROL), Silicon Laboratories (SLAB), Travelzoo (TZOO), Waste Management (WM), Winnebago (WGO)

After the close: Align Technologies (ALGN), Banner (BANR), CoreLogic (CLGX), eBay (EBAY), F5 Networks (FFIV), Great Lakes (GL), Ingevity (NGVT), Knoll (KNL), Lam Research (LRCX), Las Vegas Sands (LVS), MVI Homes (MHO), Microsoft (MSFT), NextGen Healthcare (NXGN), O’Reilly (ORLY), PayPal (PYPL), QCR Holdings (QCRH), Rocky Brands (RCKY), ServiceNow (NOW), Tesla (TSLA), Valmont Industries (VMI), Xilinx (XLNX)

I like EBAY, PYPL and LVS as possible earnings trades but I need to look at the charts and do some homework before deciding on calls or puts. Stay lock-and-loaded throughout the session in case I take action ahead of the closing bell.

We sent a Text Alert and email for yesterday’s Profit Alerts for LLNW and T, like we normally do, but had some issues with the first half of the update. We have been super slammed this month with new subscribers so please email me if you did not get the text. (Rick@MomentumOptionsTrading.com)

Sometimes, we get landlines instead of cell phone numbers when you initially signup so please let me know if your number needs updated so my support team can correct any issues. In the subject line, please type in Text Alerts.

Momentum Options Play List

Closed Momentum Options Trades for 2019: 36-11 (77%). 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, $15.19, up $0.13)

VIAV December 16 calls (VIAV191220C00016000, $0.55, up $0.05)

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

Exit Target: $1.00

Return: 10%

Stop Target: None

VIAV January 16 calls (VIAV200117C00016000, $0.70, up $0.05)

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

Exit Target: $1.30

Return: 9%

Stop Target: None

Action: Shares tested another 52-week peak of $15.26 with fresh and lower resistance at $15.25-$15.50 getting tripped but holding. Rising support is at $15-$14.75. 

Earnings are due out October 30th and the company has topped expectations the past 4 quarters by 6 cents, 2 cents , and twice by a penny. This has been one of my favorite stocks for 2019 and remains that way headed into 2020.

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iShares MSCI Emerging Markets Fund (EEM, $42.39, up $0.03)

EEM November 43 calls (EEM191115C00043000, $0.35, flat)

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

Exit Target: 0.70

Return: 0%

Stop Target: None

Action: Fresh and lower resistance at $42.50-$42.75 was cleared but held on Tuesday’s trip to $42.53. Rising support is at $42.25-$42.

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Mylan (MYL, $18.31, up $0.16)

MYL November 20 calls (MYL191115C00020000, $0.50, flat)

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

Exit Target: $1.60

Return: -38%

Stop Target: None

Action: Yesterday’s rebound was good to see with the high reaching $18.47. Lower resistance at $18.50-$18.75 was challenged but held. Support remains at $18.25-$18. 

Earnings are scheduled to be released in early November.

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Limelight Networks (LLNW, $4.39, up $0.28)

LLNW January 3 calls (LLNW200117C00003000, $1.40, up $0.20)

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

Exit Target: $1.50-$2 (closed 1/3 @ $1.40 on 10/22)

Return: 133%

Stop Target: $1.10 (Stop Limit)

Action: We closed a third of the trade at $1.40 yesterday with the calls peaking at $1.45.

Fresh and lower resistance at $4.40-$4.50 was cleared  but held by a penny with yesterday’s peak at $4.41. A close above the latter and the 52-week high gets $4.65-$4.75 in focus. Rising support is at $4.20-$4.10 with a close below $4 signaling a near-term top.

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