MomentumOptions.com Pre-Market Update for 10/2/2020
S&P 500 Reclaims 50-day Moving Average/ Profit Alert (AMD)
The market showed continued momentum on Thursday’s open while rising for the fifth time over the past six sessions as a decline in unemployment claims and hope for more government stimulus spending fueled sentiment.
The major indexes looked strong until midday before weakening after Senator Chuck Schumer said the Republicans and House Speaker Nancy Pelosi remain far apart and don’t appear to be closing the gap on a relief package. The Dow and the S&P 500 briefly gave up their gains before settling modestly higher with Tech and the small-caps staing steady.
The Dow tested a morning peak of 28,041 while closing at 27,816 (+0.1%). Current and lower resistance at 28,000-28,250 was cleared but held for the second-straight session. A close above the latter would indicate additional strength towards 28,500-28,750.
The S&P 500 settled at 3,380 (+0.5%) following the intraday run to 3,397. Lower resistance from mid-September at 3,375-3,400 was recovered on the close back above the 50-day moving average. A move above the latter would suggest a retest towards 3,425-3,450.
The Nasdaq reached a late day peak of 11,344 before ending at 11,326 (+1.4%). Fresh and lower resistance at 11,300-11,400 was cleared and held. A pop above the latter would indicate ongoing strength towards the 11,500-11,600 area.
The Russell 2000 finished on the session high of 1,531 (+1.6%). Prior and lower resistance at 1,525-1,540 was breached and held. Continued closes above the latter and the 50-day moving average would be a bullish signal for another run towards 1,550-1,565. Below is a chart of the IWM.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the third-straight session after tapping an intraday high of 27.11. Resistance at 27-27.50 was breached but held for the fourth-straight session. A close above the latter gets 29-29.50 and the 200-day moving average back in play.
Support remains at 25.50-25 and the 50-day moving average.
The SPDR Gold Shares (NYSE: GLD) was up for the third time in four sessions after testing an intraday high of $179.50. Fresh and lower resistance at $179.50-$180 was tapped but held. A close above the latter would be a very bullish signal for a quick push towards $182.50-$183 and the 50-day moving average.
The $183 area served as key support in early September before a plunge below this level and the 50-day moving average in mid-September, or 9 trading sessions afterwards. Current support is at $178.50-$178.
RSI is approaching lower resistance at 50-55 with continued closes above these levels signal additional strength towards 60-65 and mid-August peaks. Support is at 45-40.
There are both weekly and monthly options for GLD with multiple near-term call options that can be used to take advantage of the possible run towards $182.50-$185. Although weekly options carry more bang for the buck, they can have wider bid/ask prices with less volume than monthly options.
The regular GLD October 182 calls (GLD201016C00182000, $1.25, up $0.35) jumped nearly 40% on Thursday following a previous close of 90 cents and the high tapping $1.53. These call options are still over $2 out-of-the-money and will expire worthless if GLD remains below $182 by closing on October 16th. This is where the risk lies.
If shares were to make a strong run towards $185 over the next two weeks, then these call options become worth $3 and what traders call in-the-money. The breakeven point, technically, is at $183.25 if you purchased these call options at current levels.
It would be prudent to see if shares can clear and hold the $180 level on Friday before possibly entering this trade. If not, option traders can continue to wait while looking out into November and December GLD call options to play the possible break above $180. However, the breakeven and profits points will need to be recalculated.
If I do decide to take action in GLD, today or next week, I will send out a Trade Alert. In the meantime, we got some super sweet action with our AMD position so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 33-10 (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.
Advanced Micro Devices (AMD, $84.86, up $2.87)
AMD November 90 calls (AMD201120C00090000, $5.80, up $1.15)
Entry Price: $3.60 (9/28/2020)
Exit Target: $7.20 (Limit Order on half at $5.40 triggered on 10/1)
Stop Target: $4.20, raise to $5.40 (Stop Limit)
Action: Raise the Stop Limit from $4.20 to $5.40 to further protect profits and to lock-in at least a minimum return of 50%.
The Limit Order to close half the trade at $5.40 was reached with the options peaking at $6.11. The Exit Target for the other half of the trade is at $7.20 with no Limit Order. We can adjust this on higher highs while remaining in the position.
Shares surged a high of $85.25 with prior and lower resistance at $85-$85.50 getting cleared but holding. Rising support is at $83-$82.50 followed by $80-$79.50 and the 50-day moving average.
General Motors (GM, $30.38, up $0.79)
GM January 35 calls (GM210115C00035000, $1.45, up $0.25)
Entry Price: $1.20 (9/28/2020)
Exit Target: $2.40
Stop Target: $1.20 (Stop Limit)
Action: Set an initial Stop Limit at $1.20 to start protecting profits and to avoid a loss.
Thursday’s peak reached $30.51 with prior and lower resistance at $30.50-$30.85 getting cleared but holding. Rising support is at $30-$29.75 and the 50-day moving average.
The company reported quarterly car sales for Q3 came in at 665,192 vehicles, down 10% year-over-year. Additionally, the Wall Street Journal reported that Goldman Sachs will acquire the GM’s credit card business for about $2.5 billion after having won a bidding war against Barclays.
Rambus (RMBS, $13.83, up $0.14)
RMBS November 13 puts (RMBS201120P00013000, $0.55, down $0.05)
Entry Price: $0.90 (8/21/2020)
Exit Target: $1.80
Stop Target: None
Action: Prior and lower resistance at $13.75-$14 was cleared and held on test to $13.91 yesterday. Support remains at $13.50-$13.25.