MomentumOptions.com Pre-Market Update for 6/19/2020

Nasdaq Up 5-Straight Sessions in Lackluster Action

8:00am (EST)

The market showed continued choppiness on Thursday following another round of mixed economic data and ongoing news about the rise in the number of coronavirus cases. The lackluster action has put the major indexes into 3-session trading ranges with the lower highs and lower lows keeping risk to the downside in play.

The Nasdaq added 0.3% to extend its winning streak to 5-straight sessions with the 1st half high reaching 9,959. Current and lower resistance at 9,950-10,050 was cleared but held for the 3rd-straight session with a close above the latter and the current all-time high at 10,086 signaling additional upside towards 10,100-10,200. 

The S&P 500 gained nearly 2 points, or 0.1%, following the intraday pullback to 3,093. Near-term and upper support at 3,100-3,075 was breached but held with a close below the latter signaling further backtest towards 3,050-3,025 and the 200-day moving average.

The Russell 2000 was up a half-point, or 0.04%, despite trading to an intraday low of 1,412. Current and upper support at 1,425-1,410 was breached but held for the 2nd-straight session with a move below the latter reopening downside risk towards 1,400-1,385.

The Dow dipped 0.2% with the morning low tapping 25,848. Near-term and upper support at 26,000-25,750 was tripped but held with a close below the latter signaling additional weakness towards 25,500-25,250.

Energy led sector strength after rising 1.2% while Technology and Consumer Staples were up 0.5%. Real Estate was the worst performing sector after giving back 1.5%. 

In economic news, Initial Jobless Claims declined -58,000 to 1,508,000, following the -331,000 drop to 1,566,000 previously, and the 11th consecutive weekly decline. Expectations were for a print of 1,220,000. The 4-week moving average slipped further to 1,773,500 from 2,008,000. Continuing claims declined -62,000 to 20,544,000 after falling -662,000 to 20,606,000 previously. 

Philadelphia Fed Business Outlook Survey surged 70.6 points to 27.5 in June, topping expectations for a negative reading of -22.7, and rising 13.5 points to -43.1 in May. Most of the components showed strength as employment improved to -4.3 from -15.3 in May, with the workweek at -6.5 from -7.1. New orders surged to 16.7 from -25.7 and compares to the record low of -70.9 in April. Prices paid increased to 11.1 from 3.2 while prices received jumped to 11 from -3.1. The 6-month business activity index climbed to 66.3 after edging up to 49.7 in May. The forward looking components showed employment at 29.6 from 16.2, new orders at 67.9 from 54.7, with prices paid at 44.3 from 21.2, and prices received at 28.9 from 15.6. The capex index was at 26.3 from 15.2.

Leading Indicators Index for May rose 2.8% to 99.8 after April’s -6.1% drop to 97.1. This represented the first monthly increase since January and brings the index back near triple-digits. The diffusion index climbed to 70 from 20. Seven of the ten indicators were made positive contributions, led by jobless claims at 1.9%, followed by building permits at 0.39%. The largest negative contribution came from ISM new orders at -0.48, followed by consumer expectations at -0.09%.

St. Louis Fed James Bullard said he is hopeful the worst of the economic crisis caused by the coronavirus pandemic may have passed in April, but the U.S. economy is not yet in the clear.

He definitely doesn’t think we’re out of the woods, Bullard said. He added we are still at a high, high risk level. Like any crisis, he believes you have to keep in mind that many things can happen – many twists and turns can occur.

The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 2nd-straight session after reaching an intraday peak of $162.48. Prior and lower resistance from last week at $162-$162.50 was cleared and held. A close above the latter would signal additional strength towards $164-$164.50 and the 50-day moving average.

Rising support is at $161-$160.50 followed by $159-$158.50.

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The S&P 500 Volatility Index ($VIX) extended its losing streak to 5-straight sessions with the afternoon low tapping 32.24. Near-term and upper support at 32.50-32 was recovered on the close back below the 50-day moving average. A move below 32 would signal additional downside weakness towards 30.50-30.

Lowered resistance is 33-33.50 followed by 34.50-35.

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The S&P 400 Mid Cap Index ($MID) was down for the 2nd-straight session after tagging a late day low of 1,779. Current support at 1,775-1,750 was challenged but held with backup help at 1,725-1,700.

Lowered resistance is at 1,800-1,825. Continued closes above the latter would be a bullish development for a retest towards 1,850-1,875 and the 200-day moving average.

RSI has leveled out with key support at 50 holding. A close below this level would signal additional weakness towards 45-40 and levels from early April. Resistance is at 55-60.

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The Materials Select Sector (XLB) rebounded after trading to an intraday high of $56.67. Current and lower resistance at $56.50-$57 was cleared but held. A close above the latter would be a bullish signal for a retest towards $57.50-$58.

Support is at $56-$55.50 and the 200-day moving average. A close below the latter would signal additional weakness towards $53-$52.50.

RSI has flatlined with key resistance at 55 holding. A close above this level would signal additional strength towards 60-65. Support is at 50-45.

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I have updated the current action 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, $30.35, up $0.09)

T July 32 calls (T200717C00032000, $0.34, down $0.05)

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

Exit Target: $1.35

Return: -51%

Stop Target: None

Action: Lower resistance at $30.50-$30.75 was challenged but held with Thursday’s peak reaching $30.41. Support remains at $30.25-$30.

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Dropbox (DBX, $23.00, up $0.29)

DBX July 25 calls (DBX200717C00025000, $0.50, up $0.05)

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

Exit Target: $1.10

Return: -10%

Stop Target: None

Action: Thursday’s peak reached $23.15 with late May and lower resistance at $23-$23.25 getting cleared and holding. Rising support is at $22.75-$22.50.

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Tilray (TLRY, $8.56, up $0.47)

TLRY September 11 calls (TLRY200918C00011000, $0.75, up $0.10)

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

Exit Target: $2.00

Return: -25%

Stop Target: 50 cents

Action: Lower resistance at $8.50-$8.75 was cleared and held following yesterday’s trip to $8.71. Support is at $8.25-$8 and the 50-day moving average.

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