MomentumOptions.com Pre-Market Update for 6/10/2020

Nasdaq Tags 10,000

8:00am (EST)

The market opened lower to start Tuesday’s action following mixed economic news while showing weakness throughout the session. However, Technology stocks rebounded off the morning lows, helping the Nasdaq push positive territory and a 3rd-straight record high.

The mixed session comes ahead of an update from the Fed on Wednesday afternoon with Wall Street expecting no change in interest rates. Volatility stayed elevated for the 2nd-straight session but was able to hold a key level of resistance.

The Nasdaq extended its winning streak to 3-straight sessions after adding 0.3% while trading to an intraday high of 10,002. New and lower resistance at 10,000-10,100 was cleared but held with a move above the latter signaling additional strength towards 10,250-10,350.

The Russell 2000 fell 1.9% after testing a low of 1,496. Fresh and upper support at 1,500-1,485 was breached but held with a close below the latter getting 1,475-1,460 back in focus.

The S&P 500 was down 0.8% with the intraday low reaching 3,193. Near-term and upper support at 3,200-3,175 was breached but held with a close below the latter signaling additional downside risk towards 3,150-3,125.

The Dow had its 6-session winning streak snapped after falling 1.1% with the morning low tapping 27,151. New and upper support at 27,250-27,000 was breached but held with a close below the latter reopening a further backtest towards 26,750-26,500.

Technology was the only sector that showed strength for after rising 0.5%. Energy led sector laggards after giving back 3.8% while Industrials and Financials were down 2.5% and 2.1%, respectively.

NFIB Small Business Optimism Index rebounded 3.5 points to 94.4 in May, recovering from the -5.7% drop in April to 90.9, and the -7.8% dive to 96.4 in March. Eight of the 10 components posted gains, including plans to hire, increased capex, and expectations for a better economy. Expectations for future sales bounced to -24% from -42%, where the latter was a record low.

Weekly chain store sales climbed 4.4% following the -3.1% drop in the prior week. The rate of contraction slowed to -12.6% from -15.1% previously, and compares to -17.1% from the previous week. 

Redbook reported retail sales dropped -3.2% after falling -1.4% in the five weeks of May. On a 12-month basis, sales are down -9.7% year-over-year, slumping at a faster pace than the -7.5% pace previously. Sales are expected to be down -6.4% year-over-year compared to June 2019, and down -0.4% versus last month. However, the report noted there’s been some pick up in seasonal merchandise as more states reopen and the weather heats up.

Jolts reported job openings fell another -965,000 to 5,046,000 in April after dropping -993,000 to 6,011,000 in March. Expectations were for a print of 5,750,000. The job openings rate dipped to 3.7% from 3.8%. Hirings slumped -1,587,000 to 3,524,000 following April’s -753,000 slide to 5,111,000. The rate dove to 2.7% versus 3.4% previously. Quitters dropped -1,003,000 to 1,786,000 following the -647,000 slide to 2,789,000 previously. The rate fell to 1.4% following the decline to 1.8% in March. One good sign was the -3,773,000 decline in layoffs to 7,716,000 after surging 9,643,000 to 11,489,000 in March. The rate slid to 5.9% from 7.6%.

Wholesale Sales for April plunged 16.9% and inventories rose 0.3% following respective declines of -5.1% and -1%. The drop in sales was a record dive, basically doubling the prior record of -8.7% from November 2008. The inventory-sales ratio climbed to 1.65 after rising to 1.36 in March.

The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 2nd-straight session after trading to an opening high of $159.64. New and lower resistance at $159.50-$160 was cleared but held. A close above the latter would be a slightly bullish signal for a retest towards $162-$162.50.

Near-term support is at $158-$157 followed by $156-$155.50.

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The S&P 500 Volatility Index ($VIX) was also higher for the 2nd-straight session after trading to a second half peak of 27.70. Lower resistance at 27.50-28 was cleared and held. A close above the latter would signal additional strength towards 29.50-30.

Rising support is at 26.50-26 followed by 24.50-24 and the 200-day moving average.

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The Spiders Dow Jones Industrial Average ETF (DIA) was down for the first time in 7 sessions following the backtest to $272.13. Fresh and upper support at $272.50-$272 was breached but held with a close below the latter signaling ongoing weakness towards $270.50-$270.

Lowered resistance is at $274-$274.50 followed by $275.50-$276.

RSI has weakened after with key support at 70 holding. A close below this level would signal additional downside risk towards 65-60. Resistance is at 75.

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The Health Care Select Sector Spider (XLV) had its 2-session winning streak snapped following the pullback to $102.72. Near-term support at $103-$102.50 was tripped and failed to hold. A close below the latter would be a bearish signal with additional selling pressure towards $101.50-$101.

Current resistance is at $103.50-$104. A close above the latter would be a bullish signal for a run towards $104.50-$105 with the January all-time high at $105.08.

RSI is is back in a downtrend with upper support at 55-50 holding. A close below the latter would be a bearish signal with additional risk towards 45-40. Resistance is at 60-65 with the latter holding since April.

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I have updated our current trades so let’s go check the tape.

Momentum Options Play List

Closed Momentum Options Trades for 2020: 20-6 (77%). 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.

Dropbox (DBX, $21.93, down $0.61)

DBX July 25 calls (DBX200717C00025000, $0.30, down $0.15)

Entry Price: $0.55 (6/4/2020)

Exit Target: $1.10

Return: -44%

Stop Target: None

Action: Upper support at $22-$21.75 was breached and failed to hold with Tuesday’s low tapping $21.77. Lowered resistance is at $22.25-$22.50.

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Tilray (TLRY, $10.13, down $0.31)

TLRY September 11 calls (TLRY200918C00011000, $1.25, down $0.05)

Entry Price: $1.00 (6/3/2020)

Exit Target: $2.00

Return: 25%

Stop Target: 50 cents

Action: Tuesday’s low kissed $9.91 with upper support at $10-$9.75 getting breached but ho.ding. Resistance is at $10.25-$10.50.

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Freeport McMoRan (FCX, $11.27, up $0.02)

FCX June 10 calls (FCX200619C00010000, $1.35, flat)

Entry Price: $0.40 (5/19/2020)

Exit Target: $1.60 (closed half at $1.20 on 6/5/2020)

Return: 218%

Stop Target: $1.20 (Stop Limit)

Action: Tuesday’s peak reached $11.32 with fresh and lower resistance at $11.30-$11.40 getting breached but holding. New support is at $11.20-$11.10.

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Limelight Networks (LLNW, $5.49, up $0.03)

LLNW June 5 calls (LLNW200619C00005000, $0.60, flat)

Entry Price: $0.60 (5/6/2020)

Exit Target: $1.20 

Return: 0%

Stop Target: None

Action: Shares traded to a high of $5.52 with lower resistance at $5.50-$5.60 getting cleared but holding. Support is at $5.40-$5.30.

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