MomentumOptions.com Pre-Market Update for 6/22/2020
Bulls Get Weekly Win Despite Friday’s Whipsaw Action
The market opened higher on Friday after China indicated it will increase purchases of U.S. agriculture products, soothing fears that trade frictions would pick-up between the two countries. The rally faded midday after the major indexes struggled at prior resistance levels before closing mostly lower.
Afternoon Fed speak and quadruple witching on options and futures added to the volatility as it closed back above a key level of resistance. However, the market finished the week in positive territory with the possibility of trading ranges developing ahead of the 2Q earnings season.
The Nasdaq bucked the trend to extend its winning streak to 6-straight after rising 3 points, or 0.03%, with the intraday peak reaching 10,053. Prior and lower resistance at 10,050-10,150 was breached but held with a move above the latter and the current all-time high at 10,086 signaling additional upside towards 10,250-10,350.
The Dow was down 0.8% following the late day pullback to 25,759. Near-term and upper support at 26,000-25,750 failed to hold with a drop below the latter keeping downside risk towards 25,500-25,250 in focus.
The Russell 2000 gave back 0.6% with the afternoon low reaching 1,409. New and upper support at 1,415-1,400 was tripped but held with a close below the latter being a bearish development with additional backtest potential towards 1,390-1,375.
The S&P 500 also fell 0.6% after tapping a 2nd half low of 3,083. Near-term and upper support at 3,100-3,075 was breached and failed to hold with a close below the latter signaling further weakness towards 3,050-3,025 and the 200-day moving average.
For the week, the Nasdaq soared 3.7% and the Russell 2000 jumped 2.2%. The S&P 500 gained 1.9% and the Dow was higher by 1%.
Healthcare was the only sector that showed strength after adding 1%. Utilities and Energy were the weakest sectors after falling 2.8% and 1.5%, respectively, while Industrials were lower by 1.2%.
Over the past 5 sessions, Technology (4.9%); Financial and Materials (4.4%); and Communication Services (3.8%) were the strongest sectors. There were no sector laggards.
The iShares 20+ Year Treasury Bond ETF (TLT) extended its winning streak to 3-straight sessions following the late day rebound to $162.50. Current and lower resistance at $162.50-$163 was tapped but held. A close above the latter would signal additional strength towards $164-$164.50 and the 50-day moving average.
Support is at $161.50-$160 followed by $159-$158.50.
RSI has leveled out with resistance at 55 and the monthly high. A close above this level would signal additional strength towards 60-65 and highs from April. Support is at 50-45.
The S&P 500 Volatility Index ($VIX) snapped a 5-session slide after closing on the session high of 35.12. Fresh and lower resistance is 35-35.50 was breached and held. There is risk towards 37.50-40 on a move above the 36.50 level.
New support is at 33.50-33 and the 50-day moving average
RSI is in an uptrend with lower resistance at 55-60 failing to hold. A close above the latter would signal a retest towards 65 and the monthly high. Key support remains at 50 with a close below this level being a more bullish signal for the market.
The Spider Small-Cap 600 ETF (SLY) fell for the 3rd-straight session after tagging an intraday low of $57.97. Prior support from mid-Month at $58-$57.50 was breached but held. A close below the latter would signal a additional weakness towards $56-$55.50 with last Monday and the monthly low at $55.73.
Lowered resistance is at $59-$59.50 followed by $60.50-$61.
RSI is in a downtrend with key support at 50 holding. A close below this level would signal additional weakness towards 45-40. Resistance is at 55-60.
The Financial Select Sector Spiders (XLF) extended its losing streak to 3-straight sessions despite trading to an opening high of $24.59. Current and lower resistance at $24.50-$24.75 was cleared but held. A move above the $25 level would be a more bullish signal of a near-term bottom.
The late day fade to $23.71 breached but held upper support at $23.75-$23.50. A close below the latter would likely signal a further backtest towards $23-$22.75 and the 50-day moving average.
RSI is in a slight downtrend with key support at 50 holding. A close below this level would signal additional weakness towards 45-40 with the latter representing the May low. Resistance is at 55-60.
The percentage of Nasdaq 100 stocks trading above the 50-day moving
closed at 90.29% on Friday, down 0.97%. Current and upper support at 90%-87.5% was breached but held. A close below the latter would signal a retest towards 85%-82.5%. Overbought levels remain in play with this reading staying above the 70% level since late April. Resistance is at 92.5%-95%.
The percentage of S&P 500 stocks trading above the 200-day moving average settled at 40%, down 1.38%. Upper support at 40%-37.5% was breached but held. A close below the latter would signal additional weakness towards 35%-32.5%. Current resistance is at 42.5%-45%.
The portfolio remains light as I have prepared us for this possible trading range. With the official start of summer, volume will start to dry up as the suit-and-ties get away for vacations. However, lighter volume can also cause more violent price swings.
The July options have 25 days before expiration and the September options have 88 days. I still like our current positions as long as near-term support levels hold tight. It feels like the market could start the week lower given Friday’s spike in the VIX.
The good news is the Dow and S&P 500 still look great on a technical outlook with the 50-day moving average and the 200-day moving average still on track to form golden crosses. This would join the Nasdaq’s current situation although the index still has some froth in it and remains a tad oversold.
I do have a possible trade I like as Gold could be on the verge of a breakout. The Spider Gold Shares (GLD, $164.03, up $1.79) trade options so we could do a short-term trade with July calls.
Friday’s peak reached $164.09 with prior and lower resistance at $164-$164.50 getting recovered. A move above the $165 level and mid-May’s all-time high at $164.96 could lead to a breakout towards $167.50-$168 over the near-term. New support is at $163.50-$163.
Stay locked-and-loaded in case I take action this morning.
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, $30.31, down $0.04)
T July 32 calls (T200717C00032000, $0.34, flat)
Entry Price: $0.67 (6/16/2020)
Exit Target: $1.35
Stop Target: None
Action: Upper resistance at $30.50-$30.75 was kissed but on Friday’s high but close back below the 50-day moving average. Support remains at $30.25-$30.
Dropbox (DBX, $23.30, up $0.30)
DBX July 25 calls (DBX200717C00025000, $0.55, up $0.05)
Entry Price: $0.55 (6/4/2020)
Exit Target: $1.10
Stop Target: None
Action: Friday’s high reached $23.40 with fresh and lower resistance at $23.25-$23.50 getting cleared and holding. Rising support is at $23-$22.75.
Tilray (TLRY, $8.30, down $0.26)
TLRY September 11 calls (TLRY200918C00011000, $0.70, down $0.05)
Entry Price: $1.00 (6/3/2020)
Exit Target: $2.00
Stop Target: 50 cents
Action: A mini trading range has formed with upper support at $8.25-$8 and the 50-day moving average getting breached but holding on Friday’s fade to $8.10. Resistance remains at $8.50-$8.75.