MomentumOptions.com Pre-Market Update for 4/15/2020
Tech Up 4-Straight Sessions
The market rebounded on Tuesday as more evidence that the lockdowns have been effective in flattening the curve of the coronavirus, despite some lockdowns being extended into May here at home and in Europe. The gains pushed the major indexes to their highest levels since early March with Tech officially exiting bear market territory.
The 1Q earnings season got off to a shaky start but was overlooked as Wall Street focused more on future quarters and the possibility of the economy getting restarted sooner rather than later. Volatility also tumbled to its lowest level early March after recovering a key level of support.
The Nasdaq jumped 4% after trading to a late day high of 8,531 while closing back above its 50/200-day moving averages. Current and lower resistance at 8,500-8,550 was cleared and held with a close above the latter signaling additional momentum towards 8,600-8,650.
The S&P 500 soared 3.1% with the intraday high reaching at 2,851. Lower resistance at 2,825-2,850 was recovered with more important hurdles at 2,875-2,900 and the 50-day moving average.
The Dow was higher by 2.4% following the intraday push to 24,040. Near-term and lower resistance at 24,000-24,250 was tripped but held with a move above the latter getting 24,500-24,750 and the 50-day moving average in focus.
The Russell 2000 rose 2.1% after trading to a morning high of 1,251. Prior and lower resistance at 1,235-1,250 was breached and held with a close above the latter signaling additional strength towards 1,260-1,275.
Consumer Staples and Technology were the strongest sectors after rallying 4.3% and 4.2%, respectively, while Consumer Discretionary soared 3.9%. Energy was the only sector laggard after falling 0.5%.
In economic news, Import prices dropped -2.3% in March with Export prices declining -1.6%. This follows February data where import prices slid -0.7% and export prices were down -1.1%. On a 12-month basis, import prices are contracting at a -4.1% year-over-year rate versus -1.3% previously. Export prices are down -3.6% year-over-year compared to the -1.3% clip in February. For import prices, petroleum plunged -27.4% following February’s -8.8% drop. Excluding petroleum, import prices dipped -0.1% from 0.2%. For export prices, agricultural costs declined -1.4% from -2.7%. Excluding ag, prices were down -1.5% from -1.1%. Industrial supplies prices dropped -4.6% from -3.4%.
Redbook reported chain store sales tanked -8.3% in the first two week’s of April versus the 0.9% gain previously. Sales are down -2% year-over-year over the same period versus 7%. Most of the weakness is virus related as the report noted shoppers purchased less Easter merchandise because of the coronavirus and social distancing measures. There’s also been increased reluctance to buy big ticket items and discretionary goods, with the focus instead on buying essential goods including cleaning, groceries, and basic consumables.
Chain Store Sales dropped -5.6% last week, after the prior week’s -6.8% decline. The 12-month pace collapsed to a -22.2% rate of contraction versus -16%, previously.
Atlanta Fed Raphael Bostic said policy is most effective if analysts go big while saying these unprecedented times require dramatic action. He is optimistic that the recovery will be much more robust than from a usual recession, especially given the response from the Fed and Congress.
Chicago Fed Charles Evans expects a recovery to begin in the 2nd half of the year, that could be delayed by the virus. He said more resources will likely be needed while the global economy will be less prosperous coming out ot the crisis than going in.
Evans believes inflationary pressures to be low because of the downturn, and remains more worried over too low inflation than too high. He also expects the Fed’s large and growing balance sheet will shrink on its own as the various programs have self-liquidating features.
The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 2nd-straight session and for the 5th time in 6 session despite trading to an midday high of $164.74. Current resistance at $164.50-$165 was split but held. A close above the latter would be a slightly bullish development for a retest towards $167-$167.50.
Key support at $163.50 held on the fade to $163.48 afterwards. A close below this level would signal a breakdown out of the current trading range with additional risk towards $162.50-$162.
The S&P 500 Volatility Index ($VIX) extended its losing streak to 4-straight and was down for the 7th time in 8 sessions following the intraday pullback to 37.31. Fresh and upper support at 38-37.50 was cleared and held on the close back below the 50-day moving average – the first since mid-February. A move below the latter would signal a retest towards 36.50-36 with the late March low at 36.24.
Lowered resistance is now at 39.50-40. A close back above the 41 level would be a slightly bearish signal with upside potential towards 42.50-45.
The Spider S&P 500 ETF (SPY) was up for the 5th time in 6 sessions after rebounding to test a late day high of $284.90. Early March and lower resistance at $284.50-$285 was cleared but held. A close above the latter would signal additional strength towards $287.50-$288 and the 50-day moving average.
Rising support is at $280.50-$280. A close back below the latter would reopen downside risk towards $277.50-$275.
RSI is back in a slight uptrend with key resistance at 60. A move above this level would signal additional strength towards 65-70 with the latter representing the mid-February peak. Support is at 55-50.
The Real Estate Select Sector Spider (XLRE) was also up for the 5th time in 6 sessions with the intraday high reaching $35.19. Prior and lower resistance at $35-$35.25 was recovered. A close above the $35.50 level and the 50-day moving average would be a more bullish development with additional hurdles at $37-$37.50 and the 200-day moving average.
Current support remains at $34.50-$34.25 with backup help at $34-$33.75.
RSI is in an uptrend after recovering lower resistance at 55-60. A move above the latter would signal additional momentum towards 65-70. Key support is at the 50 level.
We got some super sweet pin action with our LLNW position so please note the adjustments I have made to lock-in another triple-digit winner.
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.
AT&T (T, $31.13, up $0.94)
T June 32 calls (T200619C00032000, $1.35, up $0.28)
Entry Price: $1.25 (4/14/2020)
Exit Target: $2.50
Stop Target: 65 cents
Action: Shares traded to a late day high of $31.16 with near-term and lower resistance at $31-$31.25 getting cleared and holding. Rising support is at $30.75-$30.50.
Dropbox (DBX, $19.00, up $0.47)
DBX May 20 calls (DBX200515C00020000, $0.95, up $0.15)
Entry Price: $1.05 (4/6/2020)
Exit Target: $2.10
Stop Target: None
Action: Tuesday’s peak reached $19.08 with fresh and lower resistance at $19-$19.25 getting cleared and holding. Rising support is at $18.75-$18.50 and the 50-day moving average.
Limelight Networks (LLNW, $6.41 up $0.55)
LLNW June 5 calls (LLNW200619C00005000, $1.90, up $0.70)
Entry Price: $0.50 (3/18/2020)
Exit Target: $2, raise to $3
Stop Target: $1.05, raise to $1.50 (Stop Limit)
Action: Raise the Exit Target from $2 to $3. Raise the Stop Limit from $1.05 to $1.50 to further protect profits.
Shares zoomed to a fresh 52-week peak of $6.55 with new and lower resistance at $6.50-$6.75 getting cleared and holding. Rising support is at $6.25-$6.