MomentumOptions.com Pre-Market Update for 11/26/2019

Nasdaq, S&P 500 Tap Fresh Record Highs

8:00am (EST)

The marketstarted the shortened week in rally mode following more reports a phase one trade deal with China is on the verge of happening. Specifically, China said over the weekend that it plans to raise penalties on intellectual property violations.

Better-than-expected economic news and M&A activity also helped sentiment with the major indexes pushing prior resistance levels and fresh all-time highs. The action in the small-caps was a bonus package. Meanwhile, volatility settled at a monthly low to confirm a possible run at continued record highs for the overall market.

The Russell 2000 zoomed 2.1% while tapping a fresh 52-week peak just south of 1,624. Fresh and lower resistance at 1,615-1,625 was recovered with a close above the latter getting 1,635-1,650 back in the mix.

The Nasdaq advanced 1.3% after testing an all-time high of 8,633 into the closing bell. New and lower resistance at 8,600-8,650 was cleared and held with a move above the latter signaling possible momentum towards 8,700-8,750.

The S&P 500 was higher by 0.8% following the late day run and close at 3,133 and new record high. Prior resistance at 3,125 was cleared and held with continued closes above this level keeping 3,150-3,175 in play. 

The Dow also added 0.7% with the intraday high reaching 28,068. Key resistance at 28,000 was cleared and held with continued closes above this level and the all-time high at 28,090 getting 28,250-28,500 in focus.

Technology and Healthcare showed the most sector strength with gains of 1.4% and 1.1%, respectively. Utilities and Real Estate were down 0.4% and 0.1%, respectively, and were the only sector laggards.

Chicago Fed National Activity Index slipped -0.26 points to -0.71, after dropping -0.68 points to -0.45 in September. The August index was revised to 0.23 from 0.15, while July was bumped to -0.40 from -0.41. The 3-month moving average dipped to -0.31 from a revised -0.21 in September, while August was nudged up to -0.02 from -0.06. According to the report, 58 of the 85 components that make up the index made negative contributions, while 27 made positive contributions. 

Dallas Fed Manufacturing Survey rose 3.8 points to -1.3 in November, topping forecasts for a print of -2.5, after tumbling -6.6 points to -5.1 in October. The employment component dropped to 0.9 from 11, with wages at 21.1 from 22.2. New orders improved to -3 from -4.2. The prices paid index fell to 17.8 from 22.8 previously, while prices received declined to 1.9 from 4.8. The 6-month general business activity index rose to 7.3 from 2.4, with the future employment index dipping to 20.6 from 23, while new orders slipped to 28.7 from 34.3, and capex tumbled to 9.8 from 22.9.

The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 2nd-straight session and the 5th time in 6 after testing a high of $140.53. Prior and lower resistance from last week and late October at $140.50-$141 was cleared but held. A close above the latter would be an ongoing bullish signal for strength towards $142-$142.50.

Rising support is at $140-$139.50 and the 50-day moving average.

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Volatility Index

The S&P 500 Volatility Index ($VIX) tested a 3rd-straight lower high of 12.59 on the open with lower resistance at 13-13.50 holding.

The drop to 11.73 afterwards cleared prior and upper support at 12-11.50. The close below the former gets 11.50-11 and the late July low at 11.69 back in focus. The 52-week low is at 11.03.

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Market Analysis

The Spiders Dow Jones Industrial Average ETF (DIA) was up for the 2nd-straight session with the session high reaching $280.81. Current and lower resistance at $280.50-$281 was cleared and held. A close above the latter and last Tuesday’s all-time peak at $280.84 would be an ongoing bullish development with near-term momentum towards $282.50-$283.

Near-term support is at $279.50-$279 with backup help at $277.50-$277. A close below the $277 level and last week’s low of $276.72 would signal a possible topping process with additional risk towards the $275 level.

RSI is back in an uptrend after clearing resistance at 70. Continued closes above this level would signal additional strength and a possible push towards 75-80 with the latter representing the monthly peak. Support is at 65-60.

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Sector 

The iShares PHLX Semiconductor ETF (SOXX) snapped a 5-session slide after trading to a high of $235.42. Prior and lower resistance throughout the first half of the month at $235-$235.50 was recovered. A close above the $236 level would signal continued strength and a possible retest towards $238.50-$240 and fresh all-time highs.

Current but shaky support is at $235-$234.50 with backup help at $232.50-$232. A close below the $232 level would be a renewed bearish signal for a backtest towards $230-$229.50.

RSI is back in an uptrend after clearing and holding key resistance at 60 and prior support from late October. Continued closes above this level would signal additional strength towards 65-70 with the latter representing the monthly top. Current support is at 55-50 with the latter level holding since late October.

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Today’s earnings announcements:

Before the open: Abercrombie & Fitch (ANF), Analog Devices (ADI), Best Buy (BBY), Burlington Stores (BURL), Cracker Barrel Old Country Store (CBRL), DICK’S Sporting Goods (DKS), Dollar Tree Stores (DLTR), Eaton Vance (EV), Hormel Foods (HRL), Itamar Medical (ITMR), Luby’s (LUB), Momo (MOMO), Tech Data (TECD), Titan Machinery (TITN)

After the close: Autodesk (ADSK), Box (BOX), Central Garden & Pet (CENT), Dell Technologies (DELL), Guess (GES), HP (HPQ), Keysight Technologies (KEYS), Veeva Systems (VEEV), VMware (VMW)

I have updated our latest PFE position so let’s go check the action.

Momentum Options Play List

Closed Momentum Options Trades for 2019: 44-12 (79%). 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.

Pfizer (PFE, $38.68, up $0.35)

PFE January 40 calls (PFE200117C00040000, $0.44, up $0.06)

Entry Price: $0.40 (11/25/2019)

Exit Target: $0.80

Return: 10%

Stop Target: None

Action: The calls opened at 39 cents so we got great fills in the opening minutes ahead of the midday crowd. Volume was heavy with over 8,000 contracts exchanging hands.

Shares tapped a high of $38.88 during the 2nd half of action with prior and lower resistance at $38.75-$39 getting cleared but holding. I wanted to get into this trade because a close above $39-$39.25  and the 200-day moving average could lead to a retest towards $40.50-$41 and the prior gap lower from late July. Rising support is at $38.50-$38. 

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Viava Solutions (VIAV, $15.29, up $0.37)

VIAV January 16 calls (VIAV200117C00016000, $0.35, up $0.05)

Entry Price: $0.70 (11/7/2019)

Exit Target: $1.40

Return: -50%

Stop Target: None

Action: Shares snapped a 5-session losing streak following Monday’s rebound to $15.40. Lowered resistance at $15.25-$15.50 was cleared and held. Support at $15-$14.75 and the 50-day moving average . 

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Limelight Networks (LLNW, $4.37, up $0.16)

LLNW January 3 calls (LLNW200117C00003000, $1.40, up $0.05)

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

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

Return: 127%

Stop Target: $1.20 (Stop Limit)

Action: Lower resistance at $4.40-$4.50 was cleared but held on Monday’s pop to $4.41. Support is at $4.30-$4.20.

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