MomentumOptions.com Pre-Market Update for 7/21/2020
Nasdaq Stays Strong, Small-Caps Slack/ Profit Alert (WU)
The market was choppy on Monday’s opening following a number of positive developments concerning coronavirus vaccines and chatter of new stimulus measures. However, first half gains were somewhat limited as a number of states are still showing a rise in cases with the possibility of lockdowns coming back into play.
On the stimulus front, there is talk of a $1-$1.5 trillion package with the draft coming in on the high-end of that range. This was seen as a positive surprise as Wall Street believes its is highly unlikely that Republicans under-deliver given the deteriorating economic growth momentum. This led to a second half rally that stayed strong into the closing bell with the small-caps slacking after closing lower.
The Nasdaq was up for the 4th time in 5 sessions after surging 2.5% with the late day high tagging 10,783. Current and lower resistance at 10,700-10,800 was recovered with a move above the latter suggesting momentum towards 10,900-11,000 and new lifetime highs.
The S&P 500 was higher for the 2nd-straight session after soaring 0.8% while topping out at 3,258 ahead of the closing bell. Lower resistance at 3,250-3,275 was reclaimed with a close above the latter signal momentum towards 3,300-3,325.
The Dow snapped a 2-session slide after adding nearly 9 points, or 0.03%, with the afternoon peak reaching 26,765. Current and lower resistance at 26,750-27,000 was breached but held with a close above the latter signaling a retest towards 27,250-27,500 and prior levels from early June.
The Russell 2000 was down 0.4% after tapping a midday low of 1,461.
Upper support at 1,465-1,450 was tripped but held with a move below the latter and the 200-day moving average suggesting additional weakness towards 1,440-1,425.
Utilities paced sector strength after soaring 2.5% while Consumer Discretionary and Communication Services rallied 1.6% and 1.2% to round out the winners. Energy and Utilities were the weakest sectors after sinking 1.7% and 1.3%, respectively.
The iShares 20+ Year Treasury Bond ETF (TLT) zigzagged for the 5th-straight session to remain in a trading range with the intraday high reaching $167.62. Near-term and lower resistance at $167.50-$168 was cleared but held. A close above the latter would be a bullish signal for a possible breakout with strength towards the $169.50-$170 area.
Support remains at $167-$166.50 with backup help at $165.50-$165 and the lower end of the current trading range.
The S&P 500 Volatility Index ($VIX) fell for the 2nd-straight session and for the 4th time in 5 after trading to a fresh monthly low of 24.35. Prior and upper support at 24.50-24 was tripped and held. A close below the latter would signal additional weakness towards 23.50-23 with the June low at 23.54.
Lowered resistance is at 25-25.50 followed by 26.50-27 and the 200-day moving average. A close above the 27.50 level would be a cautious signal for the market with upside potential towards 29.50-30 and the 50-day moving average.
The Wilshire 5000 Composite Index ($WLSH) was up for the 4th time in 5 sessions with the intraday high tapping 33,279. Near-term and lower resistance from early June at 33,000-33,250 was recovered. Continued closes above the latter would be a bullish signal for a retest towards 33,500-33,750 and levels from early February.
Current support is at 32,750-32,500 on a move back below 33,000.
RSI is in a slight uptrend with key resistance from late May and earlier this month at 60 getting cleared and holding. A close above 65 would suggest additional strength towards 70-75 with the latter representing the early June peak. Support is at 55-50.
The Technology Select Sector Spiders (XLK) extended its winning streak to 2-straight with the intraday and fresh all-time high tapping $109.82. Current and lower resistance at $109.50-$110 was recovered. A close above the latter would signal additional momentum towards $112-$112.50.
Rising support is at $108.50-$108 followed by $107-$106.50.
RSI is in an uptrend with lower resistance at 65-70 getting reclaimed A close above the latter low would signal additional upside towards 75 and the early June peak. Support is at 60-55.
I could have a New Trade shortly after the open so stay locked-and-loaded.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 24-8 (75%). 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.
Viavi Solutions (VIAV, $13.44, down $0.06)
VIAV August 14 calls (VIAV200821C00014000, $0.60, down $0.05)
Entry Price: $0.60 (7/13/2020)
Exit Target: $1.20
Stop Target: None
Action: Lower resistance at $13.50-$13.75 and the 200-day moving average was cleared but held on the intraday run to $13.65. Upper support at $13.25-$13 held on the fade to $13.39 afterwards.
Western Union (WU, $21.90, down $0.09)
WU August 22 calls (WU200821C00022000, $0.90, down $0.15)
Entry Price: $0.70 (7/10/2020)
Exit Target: $1.40
Stop Target: 90 cents (Stop Limit)
Action: The Stop Limit at 90 cents tripped on the stock’s drop to $21.65.