MomentumOptions.com Pre-Market Update for 9/22/2020

September Selloff Continues 

8:00am (EST)  

The market continued its September swoon on Monday as coronavirus case counts surged around the world along with the passing of Supreme Court Justice Ginsberg that has caused a heated debate on when the next Supreme Court should be picked. 

Negotiations on a new stimulus package that continues to remain in a stalemate and funding for the government also weighed on sentiment. The Financial sector was also in focus following news that claimed five banks defied money laundering crackdowns. 

The Russell 2000 ended at 1,485 (-3.4%) on the close back below the 50-day moving average with the intraday low tagging 1,470. Prior and upper support from late July at 1,475-1,460 was tripped but held. A fall below the latter would signal ongoing weakness towards 1,450-1,435.

The Dow traded to an intraday low of 26,715 before settling at 27,147 (-1.8%) and back below the 50-day moving average. Prior and upper support from early August at 26,750-26,500 was tripped but held. A close below the latter would indicate a further pullback towards 26,250-26,000 and the 200-day moving average.

The S&P 500 tapped an intraday low of 3,222 before finishing at 3,281 (-1.2%). Upper support from late July at 3,225-3,200 was breached but held. A close below the latter would suggest additional weakness towards 3,175-3,150.

The Nasdaq made a dramatic comeback after plunging to a low of 10,519 while closing at 10,778 (-0.1%). July and upper support at 10,600-10,500 was cracked but held. A move below the latter would signal a further pullback towards 10,300-10,200 and levels from late June.

The iShares 20+ Year Treasury Bond ETF (TLT) rebounded after trading to a first half high of $165.40. Near-term and lower resistance at $165-$165.50 was cleared but held. A close above $166 and the 50-day moving average would be a more bullish signal for a retest towards $167-$167.50.

Current and rising support at $164-$163.50 followed by $163-$162.50.

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The iPath S&P Vix Short-Term Futures (VIX) was up for the third time in four sessions after zooming to an intraday high of 31.18 while holding its 200-day moving average. Prior and lower resistance from earlier in the month at 31-31.50 was breached but held. A close above the latter would indicate additional strength towards 32.50-33. 

Rising support is at 27.50-27 followed by 25.50-25 and the 50-day moving average.

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The Spider Small-Cap 600 ETF (SLY) showed weakness for the third-straight session after testing an afternoon low of $59.08. Prior and upper support from mid-July at $59.50-$59 was breached but held. A close below the latter would be an ongoing bearish development with additional pullback potential towards $58-$57.50.

Lowered resistance is at $60-$60.50 followed by $61 and the 200-day moving average.

RSI (relative strength indicator) is in a downtrend with upper support at 35-30 failing to hold. A move below the latter would signal additional weakness towards 25-20 and levels from late February/ early March. Resistance is at 40.

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The Communication Services Select Sector SPDR (XLC) extended its losing streak to four-straight sessions after tapping a morning low of $57.06. Prior and upper support from late July at $57.50-$57 was tripped but held. A close below the latter keeps downside risk towards $56-$55.50 in focus. 

Lowered resistance is at $58-$58.50 with more important recovery hurdles at $59.50-$60 and the 50-day moving average.

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Monday’s lower stock market close was the first in three weeks, and the month, with a holiday the prior Monday. However, the Tuesday afterwards was lower. Lower Monday/ Friday closes tend to indicate cash is moving out of the market.

Mixed Monday/ Friday closes tend to signal trading ranges and what the major indexes fell into last week. 

In July and August, the higher Monday/ Friday closes confirmed cash was moving into the market and coincided on the run to record highs for the Nasdaq and S&P 500. 

Momentum Options Play List

Closed Momentum Options Trades for 2020: 32-10 (76%). 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.

Freeport McMoRan (FCX, $15.65, down $1.35)

FCX November 18 calls (FCX201120C00018000, $0.70, down $0.50)

Entry Price: $1.05 (9/16/2020)

Exit Target: $2.10

Return: 5%

Stop Target: $1.10 (Stop Limit)

Action: The Stop  Limit at $1.10 was triggered on yesterday’s pullback in the stock.

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AT&T (T, $28.63, down $0.30)

T October 28 puts (T201016P00028000, $0.60, up $0.16)

Entry Price: $0.55 (9/10/2020)

Exit Target: $1.10

Return: 10%

Stop Target: None

Action: Shares bottomed at $28.26 with upper support at $28.25-$28 getting breached but holding. Lowered resistance is at $28.75-$29. The options traded up to 76 cents.

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Rambus (RMBS, $13.45, down $0.26)

RMBS November 13 puts (RMBS201120P00013000, $0.80, up $0.10)

Entry Price: $0.90 (8/21/2020)

Exit Target: $1.80

Return: -11%

Stop Target: None

Action: Prior and upper support from earlier this month at $13.25-$13 was breached but held on the pullback to $13.18. Lowered resistance is at $13.75-$14 and the 200-day moving average.

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