MomentumOptions.com Pre-Market Update for 10/30/2020
Bulls Bounce Back but Still Struggling
8:00am (EST)
Wall Street closed recouped some of the losses from the Wednesday’s selloff, as shares of major tech companies rallied ahead of their quarterly numbers. Apple (AAPL), Amazon.com (AMZN), Alphabet (GOOGL) and Facebook (FB) and Twitter (TWTR) announced 3Q results after the close.
The gains were fueled by better-than-expected economic news, with Gross Domestic Product (GDP) surging 33.1%, and jobless claims improving. The rebound wasn’t enough to offset the weekly losses thus far with Friday’s action deciding how the month ends.
The Nasdaq tapped an afternoon high of 11,287 while closing at 11,185 (+1.6%). Prior and lower resistance at 11,200-11,300 was cleared but held. A close above the latter would indicate further upside towards 11,400-11,500.
The S&P 500 finished at 3,310 (+1.2%) with intraday high hitting 3,341. Lower resistance at 3,325-3,350 was breached but held. A move above the latter would suggest a retest towards 3,375-3,400.
The Russell 2000 tested a peak of 1,566 before settling at 1,561 (+1.2%). Longer-term and lower resistance at 1,550-1,565 was recovered. A close above the latter would signal another run towards 1,570-1,585.
The Dow tagged a high of 26,891 while going out at 26,659 (+0.5%). Fresh and lower resistance at 26,750-27,000 was cleared but held. A move above the latter would be an ongoing bullish development with additional strength towards 27,250-27,500.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) fell for the first time in four sessions despite tapping an opening high of 41.16. Current and upper resistance at 40.50-41 was stretched but held. A move above 41.50 would likely trigger a retest towards 42-44 with the June high at 44.44.
The fade to 35.63 afterwards held upper support at 35.50-35 with a more important recovery hurdle at the 34 level.
The Spider Small-Cap 600 ETF (NYSE: SLY) snapped a three-session slide after testing a high of $63.44. Fresh and lower resistance at $63-$63.50 was cleared and held. A close above the latter and the 50-day moving average would signal a possible near-term bottom with additional rebound potential towards $64.50-$65.
Current support is at $62-$61.50 followed by $60.50-$60 and the 200-day moving average.
RSI (relative strength indicator) is back in a slight uptrend with lower resistance at 45-50 getting cleared and holding. A move above the latter would signal additional strength towards 55-60. Crucial support is at 40.
The Consumer Discretionary Select SPDR Fund (NYSE: XLY) was up for the first time in four sessions with the intraday peak reaching $147.84. Lowered resistance at $147.50-$148 was tripped but held. A close above $148.50 and the 50-day moving average would signal ongoing strength towards $150-$150.50.
Current support is at $145-$144.50. A close below the latter would be a renewed bearish development with additional downside risk towards $143-$142.50.
RSI bounced higher with lower resistance at 40-45 getting cleared and holding. A close above the latter would suggest additional strength towards 50-55. Key support is at 40 and a level that has been holding since mid-September.
It will be important for the bulls to show continued strength and close the week on a strong note. If not, there could be continued volatility well into next week.
Momentum Options Play List
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AT&T (T, $26.76, up $0.26)
T December 28 calls (T201218C00028000, $0.55, up $0.09)
Entry Price: $0.55 (10/29/2020)
Exit Target: $1.10
Return: 0%
Stop Target: None
Action: Upper support at $26.50-$26.25 was breached but held on the opening pullback to $26.35. Resistance is at $26.75-$27.
Shares seem oversold with the dividend now at 7.85%. It is too early to say if a near-term double bottom has been formed but these options were “cheap” and gives us a bullish and bearish position heading into next Tuesday’s election.
Rambus (RMBS, $14.08, up $0.31)
RMBS November 13 puts (RMBS201120P00013000, $0.30, down $0.10)
Entry Price: $0.90 (8/21/2020)
Exit Target: $1.80
Return: -67%
Stop Target: None
Action: Lower resistance at $14-$14.25 was recovered on the bounce to $14.14. Support is at $13.75-$13.50 and the 50-day moving average.
