MomentumOptions.com Pre-Market Update for 4/24/2020
Final Hour Selling Pressure Cools Momentum/ Profit Alert (LLNW)
The market showed continued strength on Thursday following a better-than-expected initial jobless claims number. The number of Americans still filing for unemployment remains at lofty levels but the reopening of more states helped eased some of the worry.
The opening gains held throughout much of the morning before midday and final hour selling pressure prevented the major indexes from overcoming the weekly losses thus far. The mixed close was a slightly bearish signal although volatility settled in the red for the 2nd-straight session and is close to last week’s monthly lows.
The Russell 2000 rallied 1% with the opening high hitting 1,232. Lower resistance at 1,220-1,235 was cleared but held with a move above the latter signaling additional strength towards 1,250-1,265.
The Dow gained 0.2% after trading to a morning peak of 23,885. Current and lower resistance at 23,750-24,000 was breached but held with a close above the latter signaling momemtum towards 24,000-24,250 and the 50-day moving average.
The S&P 500 slipped just over a point, or 0.05%, following the intraday trip to 2,844. Prior and lower resistance at 2,825-2,850 and the 50-day moving average were breached but levels that held with a move above the latter getting 2,875-2,900 in focus.
The Nasdaq was down less than a point, 0.01%, despite tapping a 1st half high of 8,635. Lower resistance at 8,600-8,650 was tripped but held with a close above the latter and Monday’s monthly peak at 8,684 leading to a retest towards the 8,700-8,750 area.
Energy easily led sector strength after zooming 3.2% while Industrials were higher by 0.8%. Utilities and Real Estate paced sector weakness after giving back 1.7% and 1.1%, respectively.
In economic news, Initial Jobless Claims dropped -810,000 to 4,427,000, versus forecasts of 5,000,000, and follows the -1,378,000 decline to 5,237,000 in the prior week. The 4-week moving average rose to 5,786,500 from 5,506,500. Continuing claims rose 4,064,000 to 15,976,000 after the 4,466,000 jump to 11,912,000 previously. The insured unemployment rate rose to 11% versus 8.2%.
April Markit manufacturing index dropped 11.6 points to 36.9 in the preliminary print, which was the lowest reading since March 2009, after falling -2.2 points to 48.5 in March. Output fell to 29.4 from 46.5 previously and is a historic low. The services index declined 12.8 points to 27 following the -9.6 point tumble to 39.8 and 3rd-straight month in contraction. The composite was down 13.5 points to 27.4, a record low, after dropping -8.7 points to 40.9 in March.
New Home Sales plummeted -15.4% in March to a 627,000 pace, following the -4.6% February decline to 741,000. Sales were down in all four regions. The months’ supply climbed to 6.4 from 5.2 with 333,000 homes for sale versus 324,000 previously. The median sales price slipped -2.6% to $321,400 after bouncing 0.4% to $330,100. Prices are up 3.5% year-over-year versus the prior 2.9% pace.
Kansas City Fed Manufacturing Index for April checked in at -30 versus forecasts of -33.
The iShares 20+ Year Treasury Bond ETF (TLT) rebounded after trading to an intraday high of $170.93. Current and lower resistance at $170.50-$171 was cleared but held. A move above the latter would signal additional strength towards $172-$172.50.
Support is at $169.50-$169 followed by $168-$167.50.
The S&P 500 Volatility Index ($VIX) was down for the 2nd-straight session after trading to an intraday low of 39.06. Upper support at 39.50-39 was breached but held. A move below the latter would signal a retest towards 37.50-37 with last week’s monthly low at 37.31 and the late March low at 36.24.
Lowered resistance is at 42-42.50 followed by 44.50-45 and the 50-day moving average.
The Spiders Dow Jones Industrial Average ETF (DIA) was up for the 2nd-straight session following the intraday push to $238.92. Lower resistance at $238.50-$239 was cleared but held. Continued closes above the $240.50 level and the 50-day moving average would be a more bullish signal for a possible retest towards $242-$242.50 with the monthly peak at $242.66.
Current support is at $234.50-$234 with a close below the latter reopening downside risk towards $232.50-$230.
RSI has leveled out with key resistance at 55 holding. Continued closes above this level would signal additional strength towards 60-65 with the latter representing the mid-February peak. Support is at 50 and a level that has been holding the past couple of weeks. There is weakness towards 45-40 with the latter representing the monthly low if 50 fails to hold.
The iShares PHLX Semiconductor ETF (SOXX) was down for the 3rd time in 4 sessions despite tagging a midday high of $230.67. Near-term and lower resistance at $230.50-$231 was cleared but held with additional hurdles at $234-$234.50. Continued closes above the latter and the monthly peak at $234.13 would signal a possible run towards $237-$237.50.
The fade to $225.23 afterwards held shaky support at $225. A close below this level would likely signal another backtest towards $224-$221 and the 200/50-day moving averages.
RSI is showing signs of rolling after after failing to hold key resistance at 55. Continued closes above this level would signal additional strength towards 60 and the February peak. Support is at 50-45 with the latter representing the monthly low.
I have updated our current trades so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 16-4 (80%). 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, $163.34, up $1.61)
GLD May 170 calls (GLD200515C00170000, $2.00, up $0.30)
Entry Price: $1.55 (4/22/2020)
Exit Target: $3.10
Stop Target: 75 cents, raise to $1.60 (Stop Limit)
Action: Raise the Stop Target from 75 cents to $1.50 and make it a Stop Limit to start protecting profits and to avoid a loss.
Thursday’s high tapped $163.60 with prior and lower resistance at $163.50-$164 getting cleared but holding. A close above the $164.50 level would signal a possible breakout towards $166-$167.50 and fresh 52-week peaks. Current support is at $162.50-$162.
AT&T (T, $29.50, up $0.03)
T June 32 calls (T200619C00032000, $0.65, flat)
Entry Price: $1.25 (4/14/2020)
Exit Target: $2.50
Stop Target: 40 cents (Stop Limit)
Action: Lower resistance at $30-$30.25 was tripped but held with a close above the latter getting $30.75-$31 back in focus. Support is at $29.25-$29.
Dropbox (DBX, $19.83, down $0.14)
DBX May 20 calls (DBX200515C00020000, $1.40, flat)
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 with Thursday’s high tapping $20.15. A close above the latter would be a renewed bullish signal for additional momentum towards $20.75-$21. Support remains at $19.75-$19.50.
Limelight Networks (LLNW, $5.81, down $0.19)
LLNW June 5 calls (LLNW200619C00005000, $1.50, down $0.15)
Entry Price: $0.50 (3/18/2020)
Exit Target: $3 (closed half at $1.70, half at $1.50 on 4/23)
Stop Target: $1.50 (Stop Limit)
Action: I wanted to close half the trade yesterday given the volatility heading into earnings. The Stop Limit at $1.50 also triggered on the pullback to $5.78.