MomentumOptions.com Pre-Market Update for 4/8/2020
Bulls Drop the Ball
The market showed some solid follow thru on Tuesday’s open to push fresh resistance and prior support levels from mid-March. Continued hopes that the spread of the coronavirus may be easing lifted sentiment as governments have begun discussing exit strategies from the lockdowns and border closures.
The major indexes closed well off their morning highs with the final hour of trading and the mostly lower closes a big disappointment. Volatility also ticked higher after trading in a tighter range for the 2nd-straight session.
The Dow dipped 0.1% after trading to a 1st half high of 23,617 while failing to hold the 23,000 level into the closing bell. Mid-March and lower resistance at 23,500-23,750 was breached but held with a move above the latter signaling additional strength towards 24,000-24,500.
The S&P 500 slipped 0.2% following the morning push to 2,756. Prior and lower resistance from early March at 2,750-2,775 was cleared but failed to hold with a close above the latter getting 2,800-2,850 back in play.
The Nasdaq was lower by 0.3% with the intraday peak reaching 8,146. Lower resistance at 8,100-8,150 was tripped but held with a close above the latter leading to a retest towards the 8,250 level.
The Russell 2000 edged up a half-point, or 0.03%, after tapping a high of 1,190 shortly after the open. Upper resistance at 1,175-1,190 was cleared by nearly a point with both levels holding into the close.
Materials led sector strength after rising 2.7% while Energy and Consumer Discretionary added 2.1% and 1.5%, respectively. Utilities and Consumer Staples were the weakest sectors after falling 1.3% and 1.2%. respectively.
The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 2nd-straight session after tumbling to an intraday low of $163.71. Late March and upper support at $164-$163.50 was breached but held. A close below the latter would signal additional weakness towards $162.50-$162.
Lowered resistance is at $167-$167.50 followed by $168-$168.50.
The S&P 500 Volatility Index ($VIX) snapped a 3-session slide after trading in a tight range and tapping a high of 47.51. Lower resistance at 47.50-50 was cleared but held. A close above the latter would be a slightly bearish signal for a retest towards 55-60.
Current support is at 45-42.50 with more important recovery levels at 39-38.50 and the 50-day moving average.
The Russell 2000 ETF (IWM) gapped higher for the 2nd-straight session after testing a 1st half high of $118.64. Key resistance at $118.50-$118 was cleared but held with more important hurdles at $119.50-$120. A close above the $120 level could lead to a quick retest towards the $125 area and the prior gap lower from early March.
Near-term support is at $112.50-$112. A close below the latter would signal a false breakout attempt with additional backtest potential towards $110.50-$110.
RSI is showing signs of leveling off with lower resistance at 45-50 holding. Continued closes above the latter would be a bullish signal for additional strength towards 55-60 with the latter representing the February peak. Support is at 40-35.
The Financial Select Sector Spiders (XLF) extended its winning streak to 2-straight sessions after trading to an opening high of $22.22. Lower resistance at $22-$22.25 was cleared but held with additional hurdles at $22.75-$23. Continued closes above the latter would signal a return trip towards $24 and a level that has been holding since early March.
Current support is at $21-$20.75. A close below $20.50 would signal a false breakout with backup help $20-$19.75.
RSI is trying to hold a slight uptrend with key resistance at 50. A move above this level would signal continued strength towards 55-60 and the latter also representing the February top. Support is at 45-40 with the latter holding since mid-March.
The action into yesterday’s close will likely carry over into today’s open with futures down at the time of this writing. A closer look at Tech shows the QQQ’s actually clearing its 200-day moving average but a level that held.
The rest of the week could be tentative with the market closed on Friday and 1Q earnings starting next week. The good news is we have some sweet returns in the portfolio with Stop Limits to protect profits. Even better, the portfolio is light so we can add new positions once the fireworks start after a long holiday weekend.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 14-4 (78%). 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.
Boston Scientific (BSX, $33.69, up $0.81)
BSX May 35 calls (BSX200515C00035000, $1.50, up $0.50)
Entry Price: $0.75 (4/6/2020)
Exit Target: $1.50, raise to $2.50 (Limit Order on half)
Stop Target: $1.00 (Stop Limit)
Action: Raise the Exit Target from $1.50 to $2.50 with a Limit Order on half. Yesterday’s high tagged $2.20. Set an initial Stop Limit at $1.00 to start protecting profits.
Shares zoomed to a high of $35.72 on the open with early March and lower resistance at $35.50-$35.75 getting cleared but holding. Rising support is at $33.50-$33.25.
Dropbox (DBX, $17.70, down $0.36)
DBX May 20 calls (DBX200515C00020000, $0.70, down $0.35)
Entry Price: $1.05 (4/6/2020)
Exit Target: $2.10
Stop Target: None
Action: Tuesday’s low tapped of $17.32 with current and upper support at $17.50-$17.25 getting breached but holding. Lowered resistance is at $18-$18.25 and the 50-day moving average.
Limelight Networks (LLNW, $5.61, down $0.28)
LLNW June 5 calls (LLNW200619C00005000, $1.20, down $0.30)
Entry Price: $0.50 (3/18/2020)
Exit Target: $2
Stop Target: $1.05 (Stop Limit)
Action: Shares kissed a low of $5.54 with upper support at $5.50-$5.25 getting challenged but holding. Resistance remains at $5.75-$6.