MomentumOptions.com Pre-Market Update for 6/16/2020
Bulls Get 2nd-Straight Win Despite Opening Selloff
The market opened Monday’s session on the south side after the bears regained short-term momentum following last week’s selloff. The tentiveness came on light economic news and ongoing concerns over the rising number in coronavirus cases.
Specifically, New York Governor Cuomo threatened to reverse the reopening in parts of the state that are not enforcing or following virus safety rules while a number of other states are considering alternative plans, as well.
Despite the worries, Tech and the small-caps rebounded to show some midday strength with the other major joining in after the Fed said it would buy individual corporate bonds.
The Russell 2000 rallied 2.3% with the afternoon peak reaching 1,425. Near-term and lower resistance at 1,425-1,440 was cleared but held with a move above the latter signaling additional strength towards 1,450-1,465.
The Nasdaq rose 1.4% after reaching a 2nd half high of 9,756. Lower resistance at 9,700-9,800 was recovered with a close above the latter getting 9,900-10,000 back in focus.
The S&P 500 advanced 0.8% following the late day push to 3,079. Near-term and lower resistance at 3,075-3,100 was cleared but held for the 2nd-straight session with a close above the latter signaling additional upside towards 3,125-3,150.
The Dow was higher by 0.6% after trading in a 1,048-point range while topping out at 25,891. Current and lower resistance at 25,750-26,000 was cleared and held with a move above the latter signaling additional momentum towards 26,250-26,500.
Communication Services and Financials paced sector stength after soaring 1.6% and 1.4%, respectively, while Real Estate jumped 1.3%. There were no sector laggards.
In economic news, theEmpire State Manufacturing Survey jumped 48.3 points to -0.2 in June, much better than forecasts for a reading of -30, after rising 29.7 points to -48.5 in May. The employment component improved to -3.5 from May’s -6.1 print. The workweek increased to -12 from -21.6. New orders surged to -0.6 from -42.4. Prices paid climbed to 16.9 from 4.1, with prices received at -0.6 from -7.4. The 6-month index nearly doubled to 56.5 from 29.1, and is up from 7 in April and 1.2 in March. The future employment gauge was up to 19 from 10.4, with new orders at 52.9 from 35, while price paid were 25.6 from 20.3, with prices received at 7.5 from 2.
The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 5th time in 6 sessions after testing an intraday high of $164.22. Current and lower resistance at $164-$164.50 was cleared but held. A close above the latter and the 50-day moving average would be a more bullish signal for additional strength towards $165.50-$166.
Near-term support is at $162-$161.50 followed by $160.50-$160.
The S&P 500 Volatility Index ($VIX) fell for the 2nd-straight session despite tagging a fresh monthly high of 44.44. Mid-April and lower resistance at 44-44.50 was breached but held for the 2nd-straight session. A close above the 45 level would be a bearish development with additional upside risk towards 47.50-50.
The afternoon fade to 34.28 breached and held upper support at 34.50-34. A close below the latter and the 50-day moving average would be a more bullish development for the market that volatility is easing.
The Wilshire 5000 Composite Index ($WLSH) showed strength for the 2nd-straight session despite tapping an opening low of 30,180. Current and upper support at 30,250-30,000 was breached but held on the 2nd-straight close above the 200-day moving average. A move below the 30,000 level would be a renewed bearish signal with backtest potential 29,750-29,500 and the 50-day moving average.
Lower resistance at 31,250-31,500 was recovered on the rebound to 31,412 afterwards. A close above the latter would be a slightly bullish signal for a retest towards 31,750-32,000.
RSI is back in a slight uptrend after holding key support at 50 and a level has been holding since early April. A close below 50 would signal additional weakness towards 45-40. Lower resistance at 55-60 held on the late day strength and close just below this level.
The Energy Select Sector Spider (XLE) extended its winning streak to 2-straight despite the 1st half fade to $37.70. Upper support at $37.50-$37 was challenged but held. A close below the latter and the 50-day moving average would be a fresh sell signal with additional weakness towards $35.50-$35.
Near-term and lower resistance at $40-$40.50 was cleared but held on the late day bounce to $40.35. A close above the latter would be a bullish signal for a retest towards $41.50-$42.
RSI is back in an uptrend with lower resistance at 50-55 getting cleared and holding into the closing bell. A close above the latter would signal additional strength towards 60-65. Support is at 45-40.
The action in the VIX teased us but I do have a few trades I like so stay patient. On that note, I have updated our current trades so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 21-6 (78%). 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, $21.52, up $0.49)
DBX July 25 calls (DBX200717C00025000, $0.20, up $0.05)
Entry Price: $0.55 (6/4/2020)
Exit Target: $1.10
Stop Target: None
Action: Shares tested a high of $21.59 with lower resistance at $21.50-$21.75 getting cleared and holding. Support is at $21.25-$21 and the 50-day moving average.
Tilray (TLRY, $8.44, up $0.02)
TLRY September 11 calls (TLRY200918C00011000, $0.90, flat)
Entry Price: $1.00 (6/3/2020)
Exit Target: $2.00
Stop Target: 50 cents
Action: Shares traded up to $8.60 with lower resistance at $8.75-$9 getting challenged but holding. Current support is at $8.25-$8 and the 50-day moving average.
Limelight Networks (LLNW, $5.15, up $0.04)
LLNW June 5 calls (LLNW200619C00005000, $0.20, flat)
Entry Price: $0.60 (5/6/2020)
Exit Target: 80 cents (Limit Order)
Stop Target: None
Action: Lower resistance at $5.20-$5.30 was challenged but held with Monday’s peak reaching $5.19. Support remains at $5.10-$5.