MomentumOptions.com Pre-Market Update for 1/22/2020

Market Cools After 5-session Hot Streak/ Profit Alert (PFE)

8:00am (EST)

The market settled lower to start the shortened holiday week following concerns about the spread of a new coronavirus in China. The declines were modest with the S&P and Tech actually showing intraday strength before slightly low closes. However, the action in the small-caps remain a slight concern along with the rise in volatility as overbought market conditions remain in play. 

The Russell 2000 was down for the 2nd-straight session after plummeting 1.1% with the low reaching 1,684. Upper support at 1,685-1,670 was breached but held by nearly a point with backup help at 1,665-1,650.

The Dow had its 5-session winning streaked halted after giving back 0.5% while tapping a low of 29,146. Upper support at 29,200-29,000 was breached and failed to hold by 4 points with a close below the latter being a bearish development.

The S&P 500 fell 0.3% with the afternoon low reaching 3,316. Current and upper support at 3,325-3,300 was breached and failed to hold with risk towards 3,275-3,250 on a move below the latter.

The Nasdaq slipped 0.2% after trading in a 47-point range while bottoming at 9,350. Key and upper support at 9,350-9,300 was challenged but held with a close below the latter signaling a possible near-term peak.

Real Estate and Utilities led sector strength after rising 1% and 0.9%, respectively. Energy was the worst performing sector after tumbling 1.4% while Industrials and Materials lagged 1.1%.

The iShares 20+ Year Treasury Bond ETF (TLT) snapped a 2-session slide after trading to a high of $139.65. Prior and lower resistance is at $139.50-$140 was cleared but held. Continued closes above the $140.50 would be a more bullish signal of a near-term bottom with upside potential towards $141-$141.50 and early December levels.

New support is at $139-$138.50. A close below $138 and the 50-day moving average would signal a false breakout with additional risk towards $137.50-$137.

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The S&P 500 Volatility Index ($VIX) was up for the 1st time in 3 sessions after tagging an 2nd half high of 13.33. Prior resistance at 13-13.50 and the 50-day moving average was split but levels that held. A close above the latter would be a bearish development for the market with additional risk towards 14.50-15.

Near-term support has moved up to 12.50-12.

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The Spider Small-Cap 600 ETF (SLY) was down for the 2nd-straight session following the intraday backtest to $73.01. Current and upper support at $73-$72.50 was challenged but held. A close below the latter would be a bearish development with backtest potential towards $71.50-$71 and the 50-day moving average.

Current and lowered resistance is at $73.50-$74. A close above the latter and last Friday’s 52-week high of $74.23 would be a renewed bullish signal. A close above $74.50 would signal upside potential towards $76-$76.50 and lifetime highs from August 2018.

RSI is in a downtrend with key support at 60 holding. A close below this level would signal additional risk towards 55-50 with the latter representing the monthly low. Resistance is at 65-70 with the latter representing the monthly and late December high.

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The Communication Services Select Sector Spider (XLC) had its 3-session winning streak snapped despite testing a fresh all-time high of $56.73. Uncharted and lower resistance at $56.75-$57.25 was challenged but held.

The intraday pullback to $56.34 breached but held current and upper support at $56.50-$56. A close below the $55.50 level would signal a near-term top with additional risk towards the $55-$54.50 area.

RSI is back in a slight downtrend with support at 75-70. close below the latter would be a bearish signal for additional weakness towards 60-55 with the latter representing the December low. Resistance is at 80. A close above this level would signal a possible pop towards 80-85 with the latter representing the April high.

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After the close, shares of Netflix (NFLX) were 2% higher and pushing $346 after the company smashed earnings estimates of $1.30 versus 53 cents a share. Revenue at $5.47 billion versus $5.45 billion. This should help the Tech sector but I will still like a slow drift back towards the 50-day MA’s for the major indexes.

Momentum Options Play List

Closed Momentum Options Trades for 2020: 6-0 (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.

AT&T (T, $38.52, up $0.14)

T March 40 calls (T200320C00040000, $0.55, up $0.05)

Entry Price: $0.50 (1/17/2020)

Exit Target: $1.40

Return: 10%

Stop Target: None

Action: Yesterday’s high tapped $38.64 with lower resistance at $38.50-$38.75 getting cleared and holding. Support remains at $38.25-$38 and the 50-day moving average. 

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Dropbox (DBX, $17.64, down $0.38)

DBX April 20 calls (DBX200417C00020000, $0.60, down $0.15)

Entry Price: $0.90 (1/6/2020)

Exit Target: $1.80

Return: -33%

Stop Target: None

Action: Prior and lower support at $17.75-$17.50 was breached and failed to hold with Tuesday’s low tapping $17.52. Lowered resistance is at $18-$18.25 and the 50-day moving average 

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Pfizer (PFE, $40.34, down $0.17)

PFE March 40 calls (PFE200320C00040000, $1.10, down $0.15)

Entry Price: $0.75 (1/2/2020)

Exit Target: $1.50

Return: 47%

Stop Target: $1.10 (Stop Limit)

Action: The Stop Limit At $1.10 tripped on the stock’s pullback to $40.19.

While disappointed by the action, we will look for a reentry point this week, or next, and as long as the $40 level holds.

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