MomentumOptions.com Pre-Market Update for 10/21/2020

Market Stays Choppy as Stimulus Hopes Return

8:00am (EST)

Wall Street rebounded on Tuesday after showing strength throughout the session while keeping 8-session trading ranges intact. The rally came after House Speaker Pelosi downplayed an earlier deadline she’d set to conclude negotiations over a stimulus package. 

She met with Treasury Secretary Mnuchin in the final hour of trading but no news came by the closing bell. Earnings were mixed after IBM (IBM) reported a decline in revenue and did not issue any guidance while Proctor and Gamble (PG) topped revenue estimates.

The S&P 500 settled at 3,443 (+0.5%) following the intraday run to 3,476. Prior and lower resistance at 3,475-3,500 was cleared but held. A move above the latter would suggest a retest towards 3,500-3,525.

The Dow tested a midday peak of 28,575 while closing at 28,308 (+0.4%). Current and lower resistance at 28,500-28,750 was tripped but failed to hold. A close above the latter would indicate additional strength towards 29,000-29,250 and levels from February.

The Nasdaq reached an afternoon peak of 11,632 before ending at 11,515 (+0.3%). Lower resistance at 11,500-11,600 was cleared but held. A close above the latter would indicate ongoing strength towards 11,700-11,800.

The Russell 2000 finished at 1,617 (+0.3%) with the session high at 1,632. Prior and lower resistance at 1,620-1,635 was breached but held. A close above the latter would be a bullish signal for another run towards the 1,650 level.

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) extended its winning streak to seven-straight sessions with the morning high tapping 29.57. Lower resistance at 29.50-30 was cleared but held with backup help at 30.50-31 and the 200-day moving average.

Support is at support at 28-27.50 followed by 26-25.50 and the 50-day moving average.

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The Spider Small-Cap 600 ETF (NYSE: SLY) rebounded after testing a high of $66.06. Near-term and lower resistance at $66-$66.50 was cleared but held. A close above the latter and the monthly peak would be a renewed bullish signal for a retest towards $67.50-$68 and levels from mid-February.

Current support is at $65-$64.50 followed by $63.50-$63 and the 50-day moving average.

RSI (relative strength indicator) is back in a slight uptrend with key resistance at 60 holding. A move above this level would signal additional strength towards 65-70 with the latter representing the monthly and early August top. Support is at 55-50.

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The Industrials Select Sector SPDR Fund (NYSE: XLI) was up for the fourth time in five sessions after testing an intraday high of $82.04. Current and lower resistance at $82-$82.50 was cleared but held. A close above the latter would be a bullish signal for breakout potential towards $85-$85.50 with the all-time February peak at $85.33.

Support is at $80.50-$80. A drop below the $79.50 level would signal a possible near-term top with backtest potential towards $78.50-$78 and the 50-day moving average.

RSI is back in a slight uptrend after clearing and holding lower resistance at 60. Continued closes above this level would suggest ongoing strength towards 65-70. Support is at 55-50.

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I could have another New Trade today so stay locked-and-loaded.

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, $21.41, up $0.61)

MGM November 23 calls (MGM201120C00023000, $1.10, up $0.20)

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

Exit Target: $1.90

Return: 16%

Stop Target: None 

Action: Monday’s high reached $21.67 with lower resistance at $21.50-$21.75 getting cleared but holding. Support is at $20.75-$20.50.

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Freeport McMoRan (FCX, $17.61, up $0.47)

FCX November 18 calls (FCX201120C00018000, $1.05, up $0.15)

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

Exit Target: $1.90

Return: 10%

Stop Target: None 

Action: Shares surged to another new 52-week high of $17.87 on Tuesday. New and lower resistance at $17.75-$18 was cleared but held for the 2nd-straight session. Rising support is at $17.25-$17.

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Rambus (RMBS, $14.36, up $0.06)

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: Lower resistance at $14.50-$14.75 was challenged but held on the rebound to $14.42 yesterday. Support is at $14.25-$14.

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