MomentumOptions.com Pre-Market Update for 4/9/2020
Bulls Hold Gains After Bernie Bows Out
The market showed strength for a 3rd-straight session while holding onto the majority of its gains following increased optimism over the flattening of the coronavirus curve. Dr. Fauci indicated there could be a turnaround in the fight against the pandemic after this week.
Bernie Sanders withdrawal from the presidential campaign was also seen as a slight positive for the market versus his socialist agenda while the cheapening in the Treasury 10-year note also lifted sentiment.
The Russell 2000 surged 4.6% with the intraday high hitting 1,197. Lower resistance at 1,185-1,200 was cleared and held with a move above the latter signaling a retest towards 1,215-1,225.
The Dow gained 3.4% with the midday peak reaching 23,513. Current and lower resistance at 23,250-23,500 was cleared and held with a close above the latter signaling momemtum towards 23,750-24,000.
The S&P 500 was also up 3.4% following the afternoon run to 2,760. Prior and lower resistance at 2,725-2,750 was breached and held with a move above the latter getting 2,775-2,800 in focus.
The Nasdaq rose 2.6% after reaching a 2nd half high of 8,114. Lower resistance at 8,050-8,100 was recovered with a close above the latter leading to a retest towards the 8,250 level.
Real Estate and Energy led sector strength after rising 2.7% and x while Utilities and Materials were up 2.1% and 1.5%, respectively. There was no sector weakness.
MBA Mortgage Applications dropped -17.9% last week, erasing the prior week’s 15.3% bounce. The index is still up 44.7% year-over-year, though the rate of increase has been slowing and compares to 67.3% previously. The purchase index declined -12.2%, the 4th consecutive weekly drop. The refi index tumbled -19.4% after the prior 25.5% jump, and is up 143.5% year-over-year. The 30-year mortgage rate edged up to 3.49% from the historic 3.47% low previously, and compares to a 4.40% a year ago. The 5-year ARM rose to 3.39% from 3.35% and was at 3.78% last year.
Chicago Fed Charles Evans is expecting a big, negative number for Q2, as well as a big rise in the unemployment rate, up to about 20%. However, he’s also hoping for a recovery in the second half of the year, depending on the course of the virus and the public health response.
Nevertheless, even under the best case scenario the U.S. and global economy will be less prosperous coming out of the crisis, Evans said. He added, the new support measures from the Fed have been beyond the normal remit.
The iShares 20+ Year Treasury Bond ETF (TLT) extended its losing streak to 3-straight sessions after trading to an intraday low of $164.13. Current and upper support at $164.50-$164 was breached but held. A close below the latter would signal additional risk towards $162.50-$162.
Resistance remains at $167-$167.50 followed by $168-$168.50.
The S&P 500 Volatility Index ($VIX) was down for the 4th time in 5 sessions following the late day pullback to 42.53. Near-term and upper support at 42.50-40 was challenged but held. A close below the latter would be an ongoing bullish development with additional recovery levels at 39-38.50 and the 50-day moving average.
Lowered resistance at 45-47.50. A close above the 50 level would be a slightly bearish development for the market with retest potential towards 55-60.
The S&P 400 Mid Cap Index ($MID) extended its winning streak to 3-straight with the session high tapping 1,541. Early March and lower resistance at 1,525-1,550 was cleared and held. Continued closes above the latter would signal additional strength towards 1,575-1,600.
Current and rising support is at 1,500-1,475. A close below the 1,450 level would signal a possible near-term top with backtest potential towards 1,425-1,400.
RSI remains in an uptrend after clearing key resistance at 50. Continued closes above this level would signal additional strength towards 55-60 with the latter representing the February peak. Support is at 45-40 on a move back below 50.
The Industrials Select Sector Spider (XLI) rebounded after testing an intraday high of $62.62. Near-term and lower resistance at $62.50-$63 was cleared but held. Continued closes above the latter would be a bullish signal for a run towards $64.50-$65.
Rising support is at $62-$61.50. A close below the latter would be a slightly bearish signal with additional risk towards $60-$59.50.
RSI is also in a slight uptrend after clearing key resistance at 50. Continued closes above this level keeps upside strength towards 55-60 in play. Support is at 45-40.
I have made further adjustments to our BSX trade so let’s go check the tape.
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, $35.13, up $1.44)
BSX May 35 calls (BSX200515C00035000, $2.40, up $0.85)
Entry Price: $0.75 (4/6/2020)
Exit Target: $2.50, raise to $3.50 (Limit Order on half)
Stop Target: $1.00, raise to $1.90 (Stop Limit)
Action: Raise the Limit Order from $2.50 to $3.50 on half the position. Raise the Stop Limit at $1.00 to $1.90 to further protect profits.
Shares zoomed to a high of $35.70 with lower resistance at $35.50-$35.75 getting cleared but holding for the 2nd-straight session. Rising support is at $34.50-$34.25.
Dropbox (DBX, $18.29, up $0.59)
DBX May 20 calls (DBX200515C00020000, $0.90, up $0.20)
Entry Price: $1.05 (4/6/2020)
Exit Target: $2.10
Stop Target: None
Action: Lower resistance at $18.50-$18.75 was cleared but held with Wednesday’s high tapping $18.54. Support is at $18-$17.75 and the 50-day moving average.
Limelight Networks (LLNW, $5.52, down $0.09)
LLNW June 5 calls (LLNW200619C00005000, $1.20, flat)
Entry Price: $0.50 (3/18/2020)
Exit Target: $2
Stop Target: $1.05 (Stop Limit)
Action: Shares tested a low of $5.48 with upper support at $5.50-$5.25 getting stretched but holding. Resistance remains at $5.75-$6.