MomentumOptions.com Pre-Market Update for 2/5/2020
Bulls Stay Strong, Recover Prior Support Levels
The market showed continued strength on Tuesday after trading to higher highs while recovering prior and key support levels prior to last Friday’s selloff. Mixed earnings from the Tech sector didn’t deter Wall Street from buying the dip that was created last week due to fears about the spread of the deadly coronavirus.
The number of infected individuals has now climbed to over 20,000, but the outbreak remains nearly entirely contained within China, at least for the time being. Volatility eased but remains slightly elevated until it recovers a few more levels of prior support.
The Nasdaq zoomed 2.1% after trading to a fresh intraday and all-time high of 9,485. Blue-sky and lower resistance at 9,450-9,500 was cleared and held with a move above the latter signaling momentum towards 9,600-9,650.
The S&P 500 soared 1.5% with the midday high reaching 3,306. Near-term and key resistance at 3,300-3,325 was cleared but held with a close above the latter and the all-time high at 3,337 signaling a run towards 3,350-3,375.
The Russell 2000 also rose 1.5% following the 2nd-half run to 1,661. Near-term and lower resistance at 1,650-1,665 and the 50-day moving average was cleared and held with additional hurdles at 1,670-1,685 on a close above the latter.
The Dow was higher by 1.4% after testing an afternoon high of 28,904. Prior and lower resistance at 28,800-29,000 was cleared and held with continued closes above the latter getting 29,200-29,400 and lifetime highs back in play.
Technology and Industrials led sector strength after jumping 2.6% and 1.9%, respectively while Healthcare, Materials and Consumer Discretionary were all higher by 1.8%. Utilities sank 1% and were the only sector laggard.
In economic news, Chain Store Sales rose 0.7%, following a 1.5% bounce to end January. The 12-month sales pace picked up, more than doubling to a 3.1% year-over-year clip versus 0.9% previously.
Factory orders rebounded 1.8% in December versus November’s -1.2% decline, while topping expectations for a rise of 1.3%. Transportation orders climbed 7.9 %. Excluding transportation, orders were up 0.6% from 0.2% previously. Nondefense capital goods orders excluding aircraft dropped -0.8% from an unchanged November print. Shipments increased 0.5%. Nondefense capital goods shipments excluding aircraft declined -0.3% from the prior -0.4% drop. Inventories were up 0.5% versus 0.3% previously. The inventory-shipment ratio held at 1.40 for the 4th-straight month after rising from 1.39 in August.
Consumer Confidence jumped 2.4 points to 59.8 in January, a 16-year high. The 6-month index surged 5.9 points to 57, a 2 year high, and is just shy of the 57.5 from last February which was a 13-year peak. The personal finances index dipped 0.2 ticks to 64.4, and is just south of the record high of 66.7 from October 2018. The index on federal economic policies also rose 1.5 points to 57.9, the best since June 2002.
The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 2nd-straight session after testing an intraday low of $143.05. Near-term and upper support at $143-$142.50 was challenged but held. A close below the latter would signal additional weakness towards $142-$141.50.
Lowered resistance is at $144-$144.50.
RSI remains in a downtrend with upper support at 60 holding. A close below this level could signal additional weakness towards 55-50 with the latter holding since mid-January. Resistance is at 65-70.
The S&P 500 Volatility Index ($VIX) extended its losing streak to 2-straight with the session low reaching 15.63. Current and upper support at 15.50-15 and the 200-day moving average was challenged but held. A close below the latter would be an ongoing bullish signal with additional recovery levels at 14-13.50 and the 50-day moving average.
Lowered resistance is at 16.50-17. A close back above the 17.50 level would be a bearish development with additional upside potential towards 19.50-20.
The Spider S&P 500 ETF (SPY) was up for the 2nd-straight session and for the 3rd time in 4 with the midday peak reaching $330.01. Near-term and lower resistance at $330-$330.50 was kissed but held. A close above the latter would be a bullish development for a retest towards $332-$332.50.
New support is at $328-$327.50 with backup help at $325.50-$325.
RSI is in an uptrend after clearing and holding key resistance at 55. Continued close above this level would be a bullish signal for additional strength towards 60-65. Support is at 50-45. A close below the latter and last Friday’s low reopens weakness towards 40-35 and levels from the first half of October.
The Dow Jones Transportation Average ($TRAN) extended its winning streak to 2-straight sessions after tapping a late day high of 10,818. Near-term and lower resistance at 10,800-10,900 was cleared but held. Continued closes above the latter and the 50-day moving average would be an ongoing bullish development for a retest towards 11,000-11,100.
Current support is at 10,700-10,600 and the 200-day moving average.
RSI is in an uptrend with lower resistance at 45-50 getting cleared and holding. Continued closes above the latter would signal additional strength towards 55-60 and mid-January highs. Support is at 40-35.
Tesla (TSLA) shares continued their parabolic run, adding another 13.7%, after one of its longer-term investors said the company should reach $1 trillion in sales within 10 years while becoming one of the largest companies in the world. With an RSI in the 90’s, shares have become extremely overbought but the ride has been breathtaking to say the least.
I have updated our current positions so let’s go check the tape. I could also have another New Trade today so stay locked-and-loaded.
Special Notice: We updated our Text Alerts last night so you should have received a message a little after 8pm (EST) last night. If you did NOT get this, please email me at Rick@MomentumOptionsTrading.com with Text Alerts in the subject line along with the number you wish to receive them. Sometimes, subscribers put their landlines when signing up so I wanted to be certain everyone is updated.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 7-1 (88%). 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, 37.63, up $0.67)
T March 38 calls (T200320C00038000, $0.70, up $0.20)
Entry Price: $0.55 (2/4/2020)
Exit Target: $1.10
Stop Target: 59 cents (Stop Limit)
Action: Given the current volatility, set a Stop Limit at 59 cents to protect initial profits and to avoid a loss.
Shares traded to a high of $37.74 yesterday with prior and lower resistance at $37.75-$38 getting challenged and holding. New support is at $37.25-$37.
Bed Bath & Beyond (BBBY, $15.34, up $0.45)
BBBY April 12 puts (BBBY0417P00012000, $0.50, down $0.10)
Entry Price: $0.55 (1/30/2020)
Exit Target: $1.10
Stop Target: None
Action: Shares traded to a high of $15.54 with prior and lower resistance at $15.50-$15.75 and the 50-day moving average getting breached but holding. New support is at $15.25-$15.
Cisco Systems (CSCO, $47.62, up $1.09)
CSCO March 52.50 calls (CSCO200320C00052500, $0.25, up $0.05)
Entry Price: $0.55 (1/22/2020)
Exit Target: $1.10
Stop Target: None
Action: Lower resistance at $47.50-$47.75 was cleared and held on the run to $46.83. Rising support is at $47.25-$47.
Dropbox (DBX, $17.10, up $0.19)
DBX April 20 calls (DBX200417C00020000, $0.40, up $0.05)
Entry Price: $0.90 (1/6/2020)
Exit Target: $1.80
Stop Target: None
Action: Lower resistance at $17.25-$17.50 was breached but held on Tuesday’s trip to $17.33. Support is at $17-$16.75.