MomentumOptions.com Pre-Market Update for 10/16/2020

Bulls Rebound Off Opening Lows

8:00am (EST)

The stock market finished well off session lows but ended with losses for the third-straight session on Thursday, as rising coronavirus cases, especially in Europe, resulted in new restrictions on businesses and travel.

Also weighing on sentiment was a rise in weekly jobless claims and a lack of progress in Congress on another coronavirus stimulus package which is now unlikely until after the November 3rd elections. Earnings were mixed but came in mostly better-than-expected while volatility continues to give a neutral reading.

The Nasdaq tested an opening low of 11,559 before closing at 11,713 (-0.5%). Near-term and upper support at 11,600-11,500 was breached but held. A close below the latter would signal additional weakness towards 11,400-11,300.

The S&P 500 settled at 3,483 (-0.2%) following the intraday backtest to 3,440. Current and upper support at 3,450-3,425 was tripped but held. A close below the latter would suggest further downside risk towards 3,400-3,375 and the 50-day moving average.

The Dow traded a low of 28,181 while ending at 28,494 (-0.1%). New and upper support at 28,250-28,000 was tripped but held. A drop below the latter and the 50-day moving average would indicate a retest towards 27,750-27,500.

The Russell 2000 made a run to 1,641 before finishing at 1,638 (+1.1%). Current and lower resistance at 1,635-1,650 was recovered. A move above the latter would suggest further strength towards 1,660-1,675. 

In economic news, Initial Jobless Claims rose 53,000 to 898,000 following the -4,000 slide to 845,000 in the previous week. Expectations were for a print of 833,000. The 4-week moving average rose to 866,250 versus 858,250. was 857.0k). Continuing claims plunged -1,165k,000 to 10,018,000 after falling -796,000 to 11,183,000 in the prior week.

Import prices rose 0.3% in September and export prices increased 0.6%. The 12-month gauge posted a -1.1% year-over-year pace of contraction versus -1.4% previously, while export prices were -1.8% versus -2.7%.

Philadelphia Fed Business Outlook Survey surged 17.3 ticks to 32.3 in October, versus expectations of 14.5, after falling -2.2 points to 15 in September.

NY Empire State Manufacturing Survey fell -6.5 to 10.5 in October, disappointing expectations for a 16 print, after bouncing 13.3 points to 17 in September.

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) extended its winning streak to four-straight sessions with the intraday peak hitting 29.06. Prior and lower resistance at 29-29.50 was breached but held. A move above the latter would indicate a retest towards 30-30.50 and the 200-day moving average.

Rising support is at 26.50-26 followed by 25.75-25.25 and the 50-day moving average.

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The Wilshire 5000 Composite Index (NYSE: WLSH) fell for the third-straight with the morning low reaching 35,505. Current and upper support at 35,750-35,500 was breached but held. A close below the latter would indicate additional weakness towards 35,250-35,000.

Lowered resistance is at 36,000-36,250.

RSI has flatlined with key support at 60 holding. A close below this level would signal additional weakness towards 55-50 and levels from late September. Resistance is at 65-70.

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The Utilities Select Spider Fund (NYSE: XLU) extended its losing streak to three-straight sessions after testing an intraday low of $62.60. Near-term and upper support at $63-$62.50 was tripped but held. A close below the latter would signal a further backtest towards $62-$61.50.

Resistance is at $63.50-$64 with the monthly peak at $64.31.

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Yesterday’s rebound off the lows was encouraging but the VIX still remains the wild card. I will have a deeper write-up on Monday morning about this matter and would like to see how today’s closes goes before getting aggressive with new positions.

Momentum Options Play List

Closed Momentum Options Trades for 2020: 36-10 (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.

Freeport McMoRan (FCX, $17.21, up $0.27)

FCX November 18 calls (FCX201120C00018000, $0.90, up $0.10)

Entry Price: $0.95 (10/9/2020)

Exit Target: $1.90

Return: -5%

Stop Target: None 

Action: Lower resistance at $17-$17.25 was cleared and held on Thursday’s run to $17.27. Support is at $16.75-$16.50.

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Rambus (RMBS, $14.46, up $0.11)

RMBS November 13 puts (RMBS201120P00013000, $0.30, flat)

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

Exit Target: $1.80

Return: -67%

Stop Target: None 

Action: Shares traded to a high of $14.47 with lower resistance at $14.50-$14.75 getting challenged but holding. Support is at $14.25-$14 and the 200/50-day moving averages 

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