MomentumOptions.com Pre-Market Update for 3/24/2020
Bears Push New 2020 Lows
The market was choppy throughout Monday’s session after the Fed announced new emergency liquidity measures, which briefly resulted in a sharp rebound off the opening lows. However, efforts to get a fiscal stimulus bill passed over the weekend weighed on sentiment as Democrats warned the measure was not enough to help workers and was too focused on bailing out companies.
Treasury Secretary Steven Mnuchin said that Democrats and Republicans are nearly in agreement on a stimulus package but there was no official announcement ahead of the closing bell. The major indexes tested fresh intraday lows for the year with Tech taking the least amount of damage.
The Dow declined 3% after trading to a fresh 52-week low of 18,213. Upper support from November 2016 at 18,250-18,000 was clipped but held with a close below the latter signaling additional risk towards 17,750-17,500.
The S&P 500 fell 2.9% with the afternoon pullback to 2,191 and fresh 52-week low. Upper support from November 2016, as well, at 2,200-2,175 was breached but held with a close below the latter leading to further weakness towards 2,150-2,100.
The Russell 2000 was off 1.1% with the session low reaching 966 and a level that was tested last Wednesday. Longer-term and upper support from January 2016 at 980-960 was tripped but held with a close below the latter signaling additional weakness towards 950-930.
The Nasdaq gave back 0.3% following the intraday backtest of 6,631 and new 52-week low. Prior and upper support from January 2019 at 6,650-6,600 was breached but held with a close below the latter getting 6,550-6,500 back in focus.
Communication Services and Consumer Discretionary were the only sectors that showed strength after rising 0.5% and 0.2%, respectively. Energy was the weakest sector after sinking 6.8% while Financials and Real Estate were down 5.8% and 5.6%, respectively.
In economic news, Chicago Fed National Activity Index rose 49 points to 0.16 in February, topping forecasts for a print of -0.50. The 3-month moving average fell to -0.21 from -0.11. Of the 85 indicators, 44 made positive contributions and and 41 made negative contributions.
The iShares 20+ Year Treasury Bond ETF (TLT) extended its winning streak to 3-straight sessions after testing a 2nd half high of $166.69. Prior and lower resistance from mid-month at $166.50-$167 was cleared but failed to hold. A close back above the latter would signal ongoing strength towards $168-$168.50.
Current and rising support is at $165.50-$165 followed by $163-$162.50.
The S&P 500 Volatility Index ($VIX) fell for the 3rd-straight session despite testing an opening high of 76.74. Current and lower resistance is at 75-80 was breached but held. A close above the latter would signal a retest towards 85 with the all-time high from August 2008 at 90.
Near-term and upper support at 60-55 held on the late day fade to 60.46 with additional recovery levels at 50-45.
The iShares Russell 1000 (IWF) fell for the 3rd time in 4 sessions following the intraday pullback to $128.23 and fresh 52-week low. Prior and upper support from January 2019 at $128.50-$128 was breached but held. A close below the $127.50 level would be an ongoing bearish signal with retest potential towards $125.50-$125.
Near-term and lowered resistance is at $132.50-$133 with additional hurdles at $134.50-$135.
RSI is back in a downtrend with key support at 30 holding. A close below this level would signal additional weakness and a retest towards 25-20 with the latter representing the late February low. Resistance is at 35-40.
The Consumer Staples Select Spiders (XLP) extended its losing streak to 4-straight sessions following the intraday plunge to $47.66 and new 52-week low. Prior and upper support from December 2018 at $48-$47.50 was breached but held. A close below the latter would signal additional downside risk towards $46.50-$46.
New and lowered resistance is at $49.50-$50 followed by $50.50-$51.
RSI remains in a downtrend with upper support at 35-30 getting tripped and failing to hold. There is risk towards 25-20 on a move below 30 and oversold levels from late last month. Key resistance is at 40.
Shares of AT&T (T, $26.45, down $2.00) continue to drop like a rock and a stock that made us tremendous profits this year and last year. The dividend yield is north of 7% although in this environment nothing is a given. Some companies have already begun slashing payments, or even cancelling dividends, but the chart remains extremely bearish.
An analyst downgrade on the stock was the main catalyst for the nearly 6% drop on Monday. The longer-term weekly chart is signaling a continued backtest towards the $25 area and the low from December 2018.
I would love to see the $25 level come into play today, and hold, with a close above the $26 level. If so, I could open a longer-term call option as shares are extremely oversold with RSI plunging below 25 on Monday’s spanking. If I take action, I will send out an email and a Text Alert.
The action in the VIX is giving hope of a near-term bottom despite fresh lows being triggered yesterday. Another slightly bullish signal, was the 966 print on the small-caps that may (or may not) have signaled a “double-bottom”. I still think the VIX needs to test 90 before a “true” bottom is reached but a near-term rebound is due with oversold levels coming back into play.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 13-3 (81%). 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.
Limelight Networks (LLNW, $4.81, up $0.44)
LLNW June 5 calls (LLNW200619C00005000, $0.75, up $0.10)
Entry Price: $0.50 (3/18/2020)
Exit Target: $1.00
Stop Target: None
Action: Monday’s peak reached $4.87 with lower resistance at $4.80-$4.90 getting cleared and holding. A close above $5 would be a really bullish signal for a retest towards $5.25-$5.50. Current and rising support is at $4.60-$4.50.
Rambus (RMBS, $9.65, down $0.14)
RMBS April 15 calls (RMBS200417C00015000, $0.15, down $0.05)
Entry Price: $0.45 (3/2/2020)
Exit Target: $0.90
Stop Target: None
Action: Upper support at $9.75-$9.50 was breached and failed to hold on Monday’s fade to $9.32. Resistance remains at $10-$10.25.