MomentumOptions.com Pre-Market Update for 4/23/2020
Bulls Snaps 2-Session Slide/ Profit Alert (LLNW)
The market snapped a 2-session slide after the Senate agreed to a $500 billion coronavirus Phase 3.5 relief bill that will replenish the small business rescue program known as the Paycheck Protection Program (PPP).
The bill should be approved by the House on Thursday with the funds providing hospitals with another $75 billion while implementing a nationwide virus testing program to facilitate reopening the economy.
The Nasdaq rallied 2.8% with the session high reaching of 8,537. Near-term and lower resistance at 8,500-8,500 was recovered on the close back above the 50/200-day moving averages.
The S&P 500 was up 2.3% after trading to an intraday high tapping 2,815. Key resistance at 2,800 was cleared but held by less than a point with a move above the latter signaling a retest towards 2,825-2,850 and the 50-day moving average.
The Dow gained 2% following the afternoon run to 23,613. Near-term and lower resistance at 23,500-23,750 was cleared but held with a move above the latter getting 24,000-24,250 and the 50-day moving average back in focus.
The Russell 2000 rose 1.4% after trading to an opening high of 1,213. Current and lower resistance at 1,200-1,215 was recovered with a close above the latter signaling additional strength towards 1,225-1,240.
Technology and Energy were the strongest sectors after rallying 3.9% and 3.6%, respectively, while Utilities soared 2.9%. There were no sector laggards.
In economic news, MBA Mortgage Applications dipped -0.3% after bouncing 7.3% in the prior week. The index is up 70% year-over-year versus 59.1% previously. Strength on the week was in the purchase index which rose 2.1%, breaking a string of five consecutive weekly declines. The refi index fell -0.8% after jumping 10.1% in the prior week. The 30-year mortgage index was steady at 3.45%, and was at 4.46% a year ago. The 5-year ARM fell to 3.29%, versus 3.34% previously, and was at 3.92% a year ago.
FHFA House Price Index increased 0.7% to 287 in February, topping forecasts for a rise of 0.4%, after rising 0.5% to 284.9 in January. The index is up 5.7% year-over-year compared to February 2019. All nine census divisions posted gains on the month, led by the Mid Atlantic (1.2%), the East North Central (1%) and the Mountain region (1%). The 12-month changes were also all positive, ranging from an 8.1% year-over-year pace in the Mountain division to 4.2% in the West South Central. The report noted little, if any impact from COVID-19, thus far.
The iShares 20+ Year Treasury Bond ETF (TLT) was down for the first time in 3 sessions following the intraday plunge to $168.71. Current and upper support at $169-$168.50 was breached but held. A close below the latter would signal additional weakness towards $167.50-$167.
Lowered resistance is at $170-$170.50 followed by $171.50-$172.
The S&P 500 Volatility Index ($VIX) had its 2-session winning streak snapped following the late day pullback to 41.41. Prior and upper support at 42-41.50 was recovered with a close below the 40 level being a more bullish signal for the market.
Lowered resistance is at 42.50-43 followed by 44-44.50 and the 50-day moving average.
The Spider Small-Cap 600 ETF (SLY) showed strength for the first time in 3 sessions after testing a high of $50.38. Current and lower resistance at $50-$50.50 was cleared but held with additional hurdles at $52-$52.50.
Near-term support is at $49-$48.50. A close back below the $48 level would be a bearish signal with additional pullback potential towards $47-$46.50.
RSI is back in a slight uptrend with key resistance at 50. A move above this level would be a bullish signal for additional strength towards 55-60 with the latter representing the mid-February top. Support is at 45-40.
The Spiders S&P Homebuilders ETF (XHB) rebounded after 2 down days with the intraday high tapping $31.71. Lower resistance at $31.50-$31.75 was cleared but held. A close above the $32 level would signal additional upside towards $32.75-$33.
Current but shaky support is at $31.25-$31. A close below the latter would signal additional weakness towards $30.25-$30.
RSI is trying to curl higher with key resistance at 50. A move above this level would signal a run towards 55-60 and prior peaks from February. Support is at 45-40.
I have updated our latest trade, GLD, and I want to take half profits in LLNW today. Also, I could have another new trade this afternoon so stay locked-and-loaded.
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.
Spider Gold Shares (GLD, $161.41, up $2.81)
GLD May 170 calls (GLD200515C00170000, $1.70, up $0.50)
Entry Price: $1.55 (4/22/2020)
Exit Target: $3.10
Stop Target: 75 cents
Action: Yesterday’s peak reached $161.74 with prior and lower resistance at $161.50-$162 getting recovered. A close above the $162.50 level would signal a possible retest towards $164-$164.50 with last week’s peak at $164.42. Fresh support is at $160.50-$160.
AT&T (T, $29.47, down $0.40)
T June 32 calls (T200619C00032000, $0.65, down $0.35)
Entry Price: $1.25 (4/14/2020)
Exit Target: $2.50
Stop Target: 65 cents, lower to 40 cents (Stop Limit)
Action: Set a Stop Limit at 40 cents to protect the remaining premium.
Shares held up well despite an earnings and revenue miss. However, after a spike to $30.90 on the open, the fade to $29.31 was a bummer. A close below $29 will likely signal additional selling pressure and trip the Stop Limit.
Dropbox (DBX, $19.97, up $0.31)
DBX May 20 calls (DBX200515C00020000, $1.40, up $0.05)
Entry Price: $1.05 (4/6/2020)
Exit Target: $2.10
Stop Target: $1.20 (Stop Limit)
Action: Lower resistance at $20-$20.25 was cleared but held on the push to $20.17. A close above the latter would be a renewed bullish signal for additional momentum towards $20.75-$21. Rising support at $19.75-$19.50.
Limelight Networks (LLNW, $6.00, up $0.09)
LLNW June 5 calls (LLNW200619C00005000, $1.70, up $0.10)
Entry Price: $0.50 (3/18/2020)
Exit Target: $3
Stop Target: $1.50 (Stop Limit)
Action: Close half the trade today for at least $1.50 or better.
Earnings are due out after the closing bell today, and while I think the company will beat estimates, I don’t want to lose a triple-digit profit in case they don’t. By closing half the position, we will make at least 100% return if the options should implode and shares fall back below $5.
I have said shares could push $8 on a stellar report but $7 could be the ceiling today. These are June calls so there is still plenty of time premium left.
Lower resistance at $6.25-$6.50 was challenged but held on the opening pop to $6.15. Support remains at $6-$5.75.