MomentumOptions.com Pre-Market Update for 1/14/2020
Bulls Rebound, Push Another Round of Fresh Record Highs
The market rebounded on Monday as Wall Street prepares for the upcoming 4Q earnings season. The Financial sector will be in focus throughout the week with a number of companies reporting and their stock at, or near, 52-week peaks.
Economic news was light while volatility stayed in a tight range. Reports that the Trump administration will reportedly lift the currency manipulator designation for China, helped sentiment, as the two countries are finally set to sign the Phase One trade deal midweek.
The Nasdaq jumped 1% with the afternoon and new all-time high reaching 9,274. Fresh and lower resistance at 9,250-9,300 was cleared and held with a close above the latter signaling upside potential towards 9,350-9,400.
The Russell 2000 was higher by 0.7% after closing on its session high of 1,669. Near-term and lower resistance at 1,665-1,680 was cleared and held for the first time in 4 sessions with the late December 52-week high at 1,681.
The S&P 500 also gained 0.7% after closing on the session peak of 3,288 and fresh record high. Current and lower resistance at 3,275-3,300 was cleared and held with a close above the latter signaling a possible run towards 3,325-3,350.
The Dow nudged up 0.3% with the intraday high reaching 28,909. Current and lower resistance at 28,900-29,000 was cleared and held with a move above the latter signaling additional strength towards 29,200-29,400.
Materials and Technology were sector standouts after rallying 1.3% while Real Estate rose 1.2%. Healthcare was the only sector laggard after falling 0.4%.
The iShares 20+ Year Treasury Bond ETF (TLT) had its 2-session winning streak snapped following the intraday pullback to $137.39. Current and upper support at $138-$137.50 and the 50-day moving average were breached but held. A close below the latter would signal additional weakness with risk towards $136.50-$136.
Current resistance remains at $138.50-$139. A close above $139.50-$140 would be a more bullish signal of a near-term bottom.
The S&P 500 Volatility Index ($VIX) fell for the 5th time in 6 sessions after closing on the session low of 12.32. Near-term and upper support at 12-11.50 easily held on the close below the 12.50 level.
Lowered resistance is at 12.75-13.25. A close above 13.50, and a level that has held for 3-straight sessions, would signal a possible retest towards 14.50-15 and the 200-day moving average.
The iShares Russell 1000 (IWF) was higher for the 3rd time in 4 sessions with after settling at the session and all-time high of $182.08. Near-term and lower resistance at $182-$182.50 was cleared and held. A close above the latter would be an ongoing bullish signal with upside potential towards $183.50-$185 over the near-term.
Current and rising support is at $181.50-$181. A close below the $180 level would signal a possible near-term top with additional risk towards $178-$177.50.
RSI is back in an uptrend after clearing key resistance at 75. Continued closes above this level keeps 80 and the monthly peak in play but overbought conditions from January 2018, as well. Key support is at 70 and a level that has been holding since mid-December. A close below 70 would signal additional weakness towards 65-60.
The Health Care Select Sector Spider (XLV) had its 3-session winning streak snapped following the late day pullback to $102.08. Near-term and upper support is at $102.50-$102 was breached and failed to hold. A close below the latter would likely signal a possible near-term top with additional selling pressure towards $101-$100.50.
Current resistance is at $103-$103.50 with last Friday’s all-time high at $103.33. Continued closes above the latter would be a renewed bullish signal with upside potential towards $104.50-$105.
RSI is back in a slight downtrend with key support at 60 and the monthly low. This level has also been holding since mid-October with a close below 60 signaling additional weakness towards 55-50. Resistance is at 70.
We got some sweet pin action yesterday so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 2-0 (100%). 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.
Virgin Galactic (SPCE, $13.90, up $1.07)
SPCE March 14 calls (SPCE200320C00014000, $1.50, up $0.70)
Entry Price: $0.65 (1/10/2020)
Exit Target: $2 (closed 1/3 on 1/13/2020 at $1.60)
Stop Target: $1.30 (Stop Limit)
Action: We closed a third of the trade at $1.60 yesterday with the options peaking at $1.75. I mentioned last week shares could make a quick trip to $14-$15 but overbought levels. As you can see on the chart, RSI has cleared 80 with the early October peak at 85.
Shares surged to a fresh 52-week peak of $14.11 on Monday with new and lower resistance at $14-$14.25 getting cleared but holding. Continued closes above the latter could lead to a run towards $14.75-$15. Rising support is at $13.50-$13.25.
Viavi Solutions (VIAV, $15.20, up $0.08)
VIAV March 16 calls (VIAV200320C00016000, $0.55, flat)
Entry Price: $0.70 (1/8/2020)
Exit Target: $1.40
Stop Target: None
Action: Shares tested a high of $15.35 with lower resistance at $15.25-$15.50 and the 50-day moving average getting breached but holding. Support remains at $15-$14.75.
Dropbox (DBX, $17.86, up $0.04)
DBX April 20 calls (DBX200417C00020000, $0.70, flat)
Entry Price: $0.90 (1/6/2020)
Exit Target: $1.80
Stop Target: None
Action: Monday’s top reached $18.04 with lower resistance at $18-$18.25 getting cleared but holding. Support is at $17.75-$17.50.
Pfizer (PFE, $39.41, down $0.08)
PFE March 40 calls (PFE200320C00040000, $0.80, down $0.05)
Entry Price: $0.75 (1/2/2020)
Exit Target: $1.50
Stop Target: None
Action: Shares tested a low $39.21 with upper support at $39.25-$39 getting breached but holding. Resistance is at $39.50-$39.75.
Limelight Networks (LLNW, $4.56, up $0.04)
LLNW January 3 calls (LLNW200117C00003000, $1.55, up $0.05)
Entry Price: $0.60 (9/11/2019)
Exit Target: $1.50-$2 (closed 1/3 @ $1.40 on 10/22)
Stop Target: $1.40 (Stop Limit)
Action: Shares traded to a high of $4.65 with lower resistance from late November at $4.60-$4.70 getting breached but holding. Rising support is at $4.50-$4.40.
If we are stopped out at $1.40 the overall return will be 133%.