MomentumOptions.com Pre-Market Update for 6/17/2020

Bulls Stay Strong with 3rd-Straight Win

8:00am (EST)

The market settled higher for the 3rd-straight session following strong economic news and reports of a $1 trillion infrastructure stimulus plan that would go towards building bridges and roads, along with 5G networks and improving internet services in rural areas of the country. 

The small-caps led the way higher for the 3rd day in-a-row and helped the major indexes push prior resistance levels from last week. Volatility settled below a key level of support and is signaling lower lows on continued market strength.

The Russell 2000 surged 2.3% following the opening run to 1,473. Near-term and lower resistance from earlier this month at 1,465-1,480 was breached but held with a close above the latter getting 1,485-1,500 back in play.

The Dow rose 2% after testing a 1st half high of 26,611. Lower resistance at 26,500-26,750 was pierced but held with a move above the latter setting up another run towards 27,00-27,250. 

The S&P 500 was higher by 1.9% with the morning peak reaching 3,152. Prior and lower resistance at 3,150-3,175 was breached but held with a close above the latter signaling additional strength towards 3,200-3,225.

The Nasdaq rallied 1.8% after tapping an intraday high of 9,963. Current and lower resistance at 9,950-10,050 was cleared but held with a move above the latter and last week’s all-time high of 10,086 signaling momentum towards 10,100-10,200.

Energy and Healthcare led sector stength after jumping 2.9% and 2.5%, respectively, while Consumer Discretionary, Technology and Materials all advanced 2.1%. There were no sector laggards for the 2nd-straight session.

In economic news, Retail Inventories rebounded a record 17.7% in May, versus forecasts of 8%, with sales excluding autos jumping 12.4%. This comes after April’s revised declines of -14.7% and -15.2%, respectively. Compared to last year, the contraction rate slowed to -7.7%, with the ex-auto rate at -8.1%, versus double-digit rates rates of declines previously. Sales excluding autos, gas, and building materials, were higher by 12.9%, recovering most of the prior -15.4% drubbing. Gains were broad-based with clothing a big mover on the month after sales zoomed 188%, versus -75.2% previously. Vehicle sales increased 44.1% from -12.3% while furniture sales snapped back 89.7% from -48.4%. Gas station sales were up 12.8% versus -24.4%. Food, beverage sales edged up 2% after declining -12.8% in April. Electronics increased 50.5% from -43.2%.

Industrial Production rebounded 1.4% in May, below expectations for a rise of 2.9%, following a downwardly revised -12.5% in April, and represented a record decline. However, the bounce-back broke a string of two monthly declines and lifted capacity utilization up to 64.8% from 64%. Manufacturing production rose 3.8% versus -15.5% following a 120.8% surge in vehicles and parts. This follows a record -76.5% April plunge. Excluding vehicles and parts, manufacturing was up 2% from -11.9% previously. On the downside, Machinery production declined further, falling -0.3% from -5.6%> Computers and electronics manufacturing slipped -0.3% from -5.6%. Utility production dropped -2.3% from a prior 0.1% gain, while mining fell to -6.8% from -6.1%.

Business Inventories fell -1.3% in April, matching expectations, with sales plumetting -14.4%. This follows declines of -0.3% in March inventories, and -5.2% in sales. The inventory-sales ratio rose to 1.67 from 1.45.

NAHB Housing Market Index bounced a record 21 points to 58 in June, versus forecasts for a print of 44, after rising 7 points to 37 in May. Amazingly, the index has now recouped much of the -42 point free fall to 30 in April. The index hit a relative high of 76 in December. All components improved. The single family sales index increased to 63 from 42. The future index climbed to 68 from 46. The index of prospective buyer traffic more than doubled to 43 from 21.

Fed Chairman Powell’s didn’t say anything new, or surprising, in his testimony to the Senate Banking Committee. He stressed he was very confident in a full economic recovery but added it will take time and will depend on the coronavirus. He also said there is a lot of uncertainty over the recovery but don’t count out the U.S. economy. 

Powell continued to state the Fed’s actions have been to fully support the economy and additionally more monetary and fiscal support will probably be needed. He said the ballooning balance sheet or inflation are not really worrisome. He reiterated that the Fed isn’t even thinking about thinking of raising rates until 2022, and that negative rates aren’t in the offing, while policymakers continue to study yield curve control.

The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 2nd time in 3 sessions following the intraday tumble to $158.70. Prior and upper support from the start of the month at $159-$158.50 was tripped but held. A close below the $157.50 level could have gap down potential towards the $155-$152.50 area with the monthly low $153.16.

Lowered resistance is at $161.50-$162. A close above the $162.50 would signal a possible false breakdown with more important hurdles at $164-$164.50 and the 50-day moving average.

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The S&P 500 Volatility Index ($VIX) extended its losing streak to 3-straight sessions after tapping an intraday low of 31.73 shortly after the open. New and upper support at 32-31.50 was breached but held on the close back below the 50-day moving average.

The intraday pop to 37.45 challenged undefined and lower resistance at 37.50-38 but levels that held. A close above the 40 level would be a renewed bearish development with retest potential towards 42.50-45.

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The Invesco QQQ Trust (QQQ) extended its winning streak to 3-straight sessions with the morning peak reaching $244.39. Prior and lower resistance at $244.50-$245 was challenged but held. A close above the latter would be an ongoing bullish signal for additional upside towards $247.50-$248 with the recent all-time peak at $247.82.

Rising support is at $242-$241.50. A close below the $240 level would signal a possible near-term peak with further backtest potential towards the $235-$232.50 area.

RSI remains in an uptrend with lower resistance at 65-70 back in play. A move above the latter would signal additional strength towards 75-80 and the highs from February/ January and earlier this month. Support is at 60-55.

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The Communication Services Select Sector Spider (XLC) was also up for the 3rd-straight session with the intraday high reaching $56.11. Prior and lower resistance from early last week at $56-$56.50 was cleared but held. A close above the latter and last Thursday’s peak at $56.80 would be a bullish signal for a fresh breakout towards $58-$58.50 with the all-time high from January at $57.75.

A golden cross has formed with the 50-day moving average crossing above the 200-day moving average. This is typically a bullish signal for higher highs down the road.

Rising support is at $55-$54.50. A move below the $53 level would signal a near-term top with additional weakness towards $52.50-$52.

RSI is showing signs of leveling out after recovering key resistance at 60. Continued closes above this level would signal strength towards the 65-70 zone. Support is at 55-50.

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Not a “penny stock“ fan. But this gem was in the news so I had to digest the action. Shares were at 60 cents on my mini vacation last week. Back to $1.75 today, zoomed to $2 a few sessions ago. Sell half, go buy one with the profits.

Non-lethal guns that could revolutionize / help the Police. 

https://byrna.com

Always watch your money no matter where or what your are doing.

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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: 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.

AT&T (T, $30.78, up $0.28)

T July 32 calls (T200717C00032000, $0.57, up $0.06) 

Entry Price: $0.67 (6/16/2020)

Exit Target: $1.35

Return: -13%

Stop Target: None

Action: Shares tapped an opening high of $31.47 before lingering the rest of the session. Resistance at $31.25-$31.50. Fresh support is at $30.75-$30.50. 

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Dropbox (DBX, $22.05, up $1.03)

DBX July 25 calls (DBX200717C00025000, $0.40, up $0.20)

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

Exit Target: $1.10

Return: -27%

Stop Target: None

Action: We got some nice pin action yesterday as shares zoomed to a high of $22.67 with late May and lower resistance at $22.50-$22.75 getting recovered. Fresh support is at $22.25-$22.

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Tilray (TLRY, $8.23, down $0.21)

TLRY September 11 calls (TLRY200918C00011000, $0.70, down $0.30)

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

Exit Target: $2.00

Return: -30%

Stop Target: 50 cents

Action: Upper support at $8.25-$8 and the 50-day moving average was breached and failed to hold on the backtest to $8.11. Lowered resistance is at $8.50-$8.75.

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Limelight Networks (LLNW, $5.08, down $0.07)

LLNW June 5 calls (LLNW200619C00005000, $0.10, down $0.10)

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

Exit Target: 80 cents (Limit Order) 

Return: -79%

Stop Target: None

Action: Tuesday’s low tapped $4.97 with upper support at $5-$4.90 getting breached but holding. Lowered resistance is at $5.10-$5.20. 

This trade will need an analyst upgrade or major news by Friday morning to have any shot at turning a profit. 

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