MomentumOptions.com Pre-Market Update for 10/20/2020

Market Choppiness Continues

8:00am (EST)

Wall Street showed opening gains to start the week but experienced late day selling pressure following heightened rhetoric over a coronavirus stimulus package. With a 48-hour deadline set by House Speaker Nancy Pelosi over the weekend that expires Tuesday, President Trump hit back by saying she doesn’t want to get a deal done before the election.

The major indexes closed near the session lows with the Nasdaq extending its losing streak to five-straight sessions. The losses have the 50-day moving averages within sight of the bears with volatility increasing for the sixth-straight session.

The Nasdaq traded an intraday low of 11,454 before finishing at 11,478 (-1.7%). Near-term and upper support at 11,500-11,400 failed to hold. A close below the latter would indicate additional weakness towards 11,300-11,200 and the 50-day moving average.

The S&P 500 closed at 3,426 (-1.6%) following the midday tumble to 3,419. Prior and upper support at 3,425-3,400 was tripped but held by a smidge. A close below the latter and the 50-day moving average would signal further downside risk towards 3,450-3,425.

The Dow tested a low of 28,139 while closing at 28,195 (-1.4%). Upper support at 28,250-28,000 failed to hold. A drop below the latter and the 50-day moving averag would suggest a retest towards 27,750-27,500.

The Russell 2000 settled a point off its session low at 1,612 (-1.2%). Current and upper support at 1,625-1,610 was breached and failed to hold. A move below the latter would indicate a further backtest towards 1,600-1,585.

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the sixth-straight session after testing a high of 29.69. Current and lower resistance at 29.50-30 was tripped but held. A move above the latter would suggest a retest towards 30.50-31 and the 200-day moving average.

Rising support is at 27.50-27 followed by 26-25.50 and the 50-day moving average.

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The S&P 400 Mid Cap Index (NYSE: MID) fell for the second-straight session despite tagging an opening and fresh monthly high of 2,103. Current and lower resistance at 2,000-2,025 was cleared but held. A close above the latter would indicate a run towards 2,075-2,100 with the late February all-time high at 2,109.

Upper support at 1,975-1,950 was breached and failed to hold on the tumble to 1,970 afterwards. A close below the latter would likely lead to a further backtest towards 1,925-1,900 and the 50-day moving average.

RSI (relative strength index) is back in a downtrend after failing to hold key support at 60. Continued closes below this level keeps downside weakness towards 55-50 in play. Resistance is at 65-70.

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The Financial Select Sector Spiders (XLF) fell for the first time in 3 sessions after tapping an intraday low of $24.80. Current and upper support at $24.75-$24.50 was breached and failed to hold on the close back below the 50-day moving average. A move below the latter and the 200-day moving average would indicate a further pullback towards $24.25-$24.

Resistance is at $25-$25.25. A close above $25.50 would be a more bullish development for a possible breakout towards the $26 level.

RSI is in a slight downtrend with key support at 50 failing to hold. Continued closes below this level would signal further weakness towards 45-40. Resistance is at 55-60.

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I have updated our current trades so let’s go check the action.

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.

MGM Resorts International (MGM, $20.80, down $0.44)

MGM November 23 calls (MGM201120C00023000, $0.85, down $0.10)

Entry Price: $0.95 (10/16/2020)

Exit Target: $1.90

Return: -10%

Stop Target: None 

Action: Monday’s low kissed $20.69 with upper support at $20.75-$20.50 failing to hold. Resistance is at $21.50-$21.75.

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Freeport McMoRan (FCX, $17.14, down $0.01)

FCX November 18 calls (FCX201120C00018000, $0.85, flat)

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

Exit Target: $1.90

Return: -10%

Stop Target: None 

Action: Yesterday’s fresh 52-week peaked reached $17.83 with the options kissing $1.11 before the lower close. Fresh and lower resistance at $17.75-$18 was cleared but held. Support is at $17-$16.75.

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Rambus (RMBS, $14.30, down $0.03)

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 tapped a low of $14.27 for the 2nd-straight session with upper support at $14.25-$14 getting challenged but holding. Resistance remains at $14.50-$14.75.

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