MomentumOptions.com Pre-Market Update for 9/1/2020
Tech Stays Hot on 41st Record Close/ Profit Alert (BAC)
The market settled mostly lower on Monday and on the final trading day for August despite better-than-expected economic news and the official reshuffling of the Dow. Despite the pullback, the major indexes extended their monthly winning streak to 5-straight after recording the best August since 1984.
The Nasdaq rose 0.7% after tagging a late day and fresh all-time high of 11,829. Uncharted territory and lower resistance at 11,750-11,850 was cleared and held. A close above the latter would indicate additional momentum towards 11,900-12,000.
The S&P 500 had its 7-session winning session snapped after slipping 0.2% with the morning low reaching 3,493. Near-term and upper support at 3,500-3,475 was breached but held. A drop below the latter would signal a further backtest towards 3,450-3,425.
The Dow had its 3-session winning streak snapped after falling 0.8% with the intraday low tapping 28,363. New and upper support at 28,500-28,250 was tripped and failed to hold. A close below the latter would signal further downside risk towards 28,000-27,750.
The Russell 2000 closed on the session low 1,561 (-1%). Current and upper support at 1,565-1,550 was breached and failed to hold. A move below the latter would suggest additional weakness towards 1,540-1,525.
Technology and Utilities led sector strength after rising 0.3%. Energy and Materials were the leading laggards after falling 2.2% and 1.5%, respectively.
Dallas Fed Manufacturing Business Index jumped 11 points to 8 in August, versus forecasts for a print of -1, and follows the 3.1 point improvement to -3 in July. The employment component climbed to 10.6 from 3.1 after five months in contraction. The workweek nearly doubled from July’s 5.8 while wages increased to 15.2 from 9 last month. New orders rose to 9.8 from 6.9. Prices paid surged to 19.4 from 9.7 and prices received edged up to 0.9 from -1.5. The 6-month general business activity index improved to 20.4 from 10.6. The future employment index surged to 27.6 from 11.1, with new orders at 42.5 from 38.6, while prices paid dipped to 22.1 from 22.3, with prices received slipping to 7.8 from 10.9. The capex index increased to 13.0 from 11.6.
The iShares 20+ Year Treasury Bond ETF (TLT) snapped a 5-session losing streak after trading to a morning high of $163.25. Prior and lower resistance at $163-$163.50 was cleared but held. A close above the latter would signal additional strength towards $164.50-$165.
New support is at $161.50-$161. A close below the $160 level would be an renewed bearish signal with additional weakness towards $159-$158.50.
The S&P 500 Volatility Index ($VIX) tested an opening low of 21.77 before closing higher for the 3rd time in 4 sessions. Current and upper support at 22-21.50 was breached but held.
The bounce to 26.50 afterwards breached lower resistance at 26-26.50 and the 50-day moving average and levels that failed to hold. A close above the latter would signal additional upside risk towards 27.50-28 and the 200-day moving average.
The Spider S&P 500 ETF (SPY) had its 7-session winning streak snapped despite testing an intraday and all-time high of $351.30. Uncharted territory and lower resistance at $351-$351.50 was cleared but held. A close above the latter would indicate additional momentum towards the $352.50-$353 area.
Current and upper support at $349-$348.50 was challenged but held on the fade to $349.06 afterwards. A close below the $347.50 level would suggest a possible near-term top with additional backtest potential towards $345.50-$345.
RSI is back in a slight downtrend with upper support at 75-70 holding. Resistance is at 80-85 and overbought levels from January 2018.
The Financial Select Sector Spiders (XLF) fell for the first time in 3 sessions after closing on the session low of $25.06. Current and upper support at $25-$24.75 was challenged but held. A close below the latter would likely signal a further pullback towards $24.25-$24 and the 50-day moving average.
Lowered resistance is at $25.25-$25.50 and the 200-day moving average.
RSI is back in a downtrend with upper support at 55-50 holding. A close below the latter would signal weakness towards 45 and a level that has been holding since mid-June. Resistance is at 60-65.
I have updated our current trades, including a Profit Alert for BAC, and our 30th winning trade for 2020.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 30-9 (77%). 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.
Bank of America (BAC, $25.74, down $0.56)
BAC September 26 calls (BAC200918C00026000, $0.65, down $0.30)
Entry Price: $0.75 (8/25/2020)
Exit Target: $1.50
Stop Target: 78 cents (Stop Limit)
Action: The Stop Limit at 78 cents tripped on yesterday’s pullback to $25.69.
While disappointed the stock couldn’t keep momentum, we got out for a slight profit while avoiding a loss. The Financial sector remains a disappointment during the current bull market run but we can take another look at BAC if $25 holds on a further backtest, or on a move above $27.
Rambus (RMBS, $13.43, down $0.23)
RMBS November 13 puts (RMBS201120P00013000, $0.90, up $0.05)
Entry Price: $0.90 (8/21/2020)
Exit Target: $1.80
Stop Target: None
Action: Shares tested a low of $13.35 with upper support at $13.25-$13 holding. Resistance remains at $13.50-$13.75.
Consumer Staples Select Spiders (XLP, $65.58, down $0.19)
XLP September 65 calls (XLP200918C00065000, $1.20, down $0.05)
Entry Price: $0.85 (8/17/2020)
Exit Target: $1.70
Stop Target: None
Action: Monday’s low tapped $65.32 with upper support at $65.25-$64.75 getting challenged but holding. Resistance remains at $65.75-$66.25.
AT&T (T, $29.81, down $0.23)
T September 31 calls (T200918C00031000, $0.15, down $0.05)
Entry Price: $0.50 (8/10/2020)
Exit Target: $1.00
Stop Target: None
Action: Upper support at $29.75-$29.50 and the 50-day moving average held on yesterday’s fade to $29.80. Resistance remains at $30-$30.25 with shares in a 6-session trading range.