MomentumOptions.com Pre-Market Update for 4/14/2020

Tech Trades Higher While Small-Caps Languish/ Profit Alert (BSX)

8:00am (EST)

The market took a slight step back on Monday as Wall Street prepares for the upcoming 1Q earnings season with the Financial sector taking center stage throughout the week. Meanwhile, President Trump said the he, not state governors, will be the one to make the call about when states begin to reopen.

The major indexes finished well off their lows as the final hour rebound pushed Tech into positive territory. The small-caps languished while volatility ticked higher but continues to hold a key level of resistance.

The Russell 2000 tumbled 2.8% following the midday pullback to 1,200. Current and upper support at 1,200-1,185 was kissed but held with a move below the latter reopening risk towards 1,175-1,160.

The Dow was down 1.4% after testing an intraday low of 23,095. Near-term and upper support at 23,250-23,000 was breached but held with a close below the latter signaling additional weakness towards 22,750-22,500.

The S&P 500 fell 1% with the intraday low tapping 2,721. Current and upper support at 2,750-2,725 was breached but held with a close below the 2,700 level keeping downside risk towards 2,675-2,650 in focus.

The Nasdaq climbed 0.5% despite the 1st half backtest to 8,035. Near-term and upper support at 8,050-8,000 was tripped but held with a move below the latter signaling additional weakness towards 7,950-7,900.

Technology and Communication Services were the only sectors that showed strength after rising 0.2%. Real Estate was the worst performing sector after tanking 4.6% while Financials and Utilities were lower by 3.6% and 3.2%, respectively. 

Minneapolis Fed Neel Kashkari said without an effective therapy, or a vaccine for the novel coronavirus, the U.S. economy could face 18 months of rolling shutdowns as the outbreak recedes and flares up again. Kashkari warned that this could be a long hard road that we have ahead of us until we get either to an effective therapy or a vaccine. He added it is hard for him to see a V-shaped recovery under this scenario.

Fed Vice chairman, Richard Clarida, reiterated the Fed will keep rates near zero until the economy is back on track. He’s confident that once the economy recovers, the Fed can unwind the unprecedented supportive steps. He said the Fed has the tools to keep the economy out of deflation and added the Fed had to respond aggressively to the exogenous shock from the coronavirus.

Cleveland Fed chief Loretta Mester said the Fed has more firepower to bring to bear, if needed, and that the central bank was likely not done in seeking ways to keep credit flowing in the economy. She said the Fed is always looking for things where if we have a tool to be able to do it, and if we think it’s needed, we’re going to do it.

The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 4th-time in 5 sessions after testing a late day low of $163.88. Current and upper support at $164-$163.50 was breached and failed to hold. A move below the latter would signal a breakdown out of the current 4-session trading range with additional risk towards $162.50-$162.

Near-term  and lower resistance remains at $164.50-$165. A close above the latter would be a bullish development for a retest towards $167-$167.50. 

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The S&P 500 Volatility Index ($VIX) extended its losing streak to 3-straight sessions despite the morning pop to 45.04. Lower resistance at 45-47.50 was cleared but held. A close back above the 50 level would be a bearish signal for the market with additional upside risk towards 55-60.

Near-term support is 41-40.50. A close below the 40 level and the 50-day moving average would be an ongoing bullish development with additional backtest potential towards 37.50-35.

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The Spiders Dow Jones Industrial Average ETF (DIA) had its 4-session winning streak snapped following the intraday pullback to $230.96. Current and upper support at $231-$230.50 was breached but held. A close below the $230 level would be a slightly bearish development with retest potential towards $227.50-$225. 

Lowered resistance is at $234.50-$235. Continued closes above the latter would signal a retest towards $237-$237.50.

RSI is back in a slight downtrend with key support at 50 holding. There is risk towards 45-40 on a close back below this level with the latter holding since late March. Resistance is at 55. Continued closes above this level would signal additional strength towards 60-65 with the latter representing the mid-February peak.

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The Technology Select Sector Spiders (XLK) extended its winning streak to 3-straight sessions and was up for the 4th time in 5 after trading to a high of $85.51 ahead of the closing bell. Near-term and lower resistance at $85.50-$86 was cleared but held with more important hurdles at $87.50-$88 and a downward sloping 50-day moving average.

Near-term support remains at $84-$83.50 on the 3rd-straight close above the 200-day moving average. A drop below the latter would be a slightly bearish signal with additional downside risk towards $82.50-$82.

RSI has leveled out with lower resistance at 55-60 holding. Continued closes above the 60 level would signal additional momentum towards 65-70 with the latter representing the February peak. Key support is at 50 with downside risk towards 45-40 on a move below this level.

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I have a Profit Alert for BSX and could have New Trades today. Stay locked-and-loaded in case I take action. 

Momentum Options Play List

Closed Momentum Options Trades for 2020: 15-4 (79%). 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, $35.21, down $1.62)

BSX May 35 calls (BSX200515C00035000, $2.20, down $1.05)

Entry Price: $0.75 (4/6/2020)

Exit Target: $4.50 (closed half at $3.15 on 4/9/20)

Return: 298%

Stop Target: $2.80 (Stop Limit)

Action: The Stop Limit at $2.80 tripped on yesterday’s pullback in the stock.  I will keep BSX on my Watch List for a possible reentry point.

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Dropbox (DBX, $18.53, up $0.47)

DBX May 20 calls (DBX200515C00020000, $0.80, up $0.05)

Entry Price: $1.05 (4/6/2020)

Exit Target: $2.10

Return: -23%

Stop Target: None

Action: Monday’s high reached $18.60 with lower resistance and the 50-day moving average at $18.50-$18.75 getting recovered. Support is at $18.25-$18.

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Limelight Networks (LLNW, $5.87, up $0.15)

LLNW June 5 calls (LLNW200619C00005000, $1.20, flat)

Entry Price: $0.50 (3/18/2020)

Exit Target: $2

Return: 140%

Stop Target: $1.05 (Stop Limit)

Action: Shares tested a high of $5.91 with lower resistance at $5.75-$6 getting cleared and holding. Support remains at $5.50-$5.25.

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