Pre-Market Update for 11/30/2020

Nasdaq Taps Second-Straight Record High/ New Trade (GO)

8:00am (EST)

The market closed higher on Friday shortened session with Tech setting another lifetime high. Economic news was light and earnings announcements weren’t a factor but heat back up in the coming week. Healthcare and Communication Services led sector strength and the broader market.

The Nasdaq tested a high of 12,236 before ending at 12,205 (+0.9%). Near-term and lower resistance at 12,200-12,300 was cleared and held. A close above the latter would indicate a possible breakout towards 12,400-12,500.

The Russell 2000 closed on its session peak 1,855 (+0.6%). Current and lower resistance at 1,850-1,870 was recovered. A close above the latter and the recent all-time high of 1,862 would indicate continued momentum towards 1,880-1,900. Below is a chart of the IWM.

The S&P 500 settled at 3,638 (+0.2%) after making a run to 3,644. Current and lower resistance at 3,650-3,675 was challenged but held. A close above the latter and the record high at 3,645 would suggest additional strength towards 3,700-3,725.

The Dow traded to a high of 30,015 before finishing at 29,910 (+0.1%). Lower resistance 30,000-30,250 was breached and held. A move above the latter and the all-time top at 30,116 would suggest continued upside towards 30,500-30,750.

For the week, the zoomed 4.1% and the Nasdaq soared nearly 3%. The Dow was higher by 2.2% and the S&P 500 was up 2.3%.

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) extended its losing streak to four-straight sessions after tagging an opening and fresh multi-month low of 19.51. Longer-term and upper support from late July at 20-19.50 was breached but held. A close below the latter would be an ongoing bullish signal for the stock market.

Lowered resistance is at 21.50-22 is followed by 23.50-24.

The S&P 400 Mid Cap Index (NYSE: MID) rebounded after tagging a late session high of 2,208. Current and lower resistance at 2,225-2,250 easily held. A close above the latter and Tuesday’s all-time high at 2,223 would likely indicate a further push towards 2,275-2,100.

Support is at 2,200-2,175 with a close below 2,150 signaling a possible near-term top.

RSI (relative strength index) is showing signs of rolling over after falling below key support at 70. Continued closes below this level would indicate weakness towards 65-60. Resistance from early June is at 75 and a level that was nearly matched this week.

The Health Care Select Sector SPDR Fund (NYSEArca: XLV) remains in a six-session trading range after finishing on the session high of $109.31. Near-term and lower resistance at $109-$109.50 was recovered. A close above the latter would signal a possible retest towards $110-$110.50.

Support is at $108.50-$108 with backup help at $107-$106.50 and the 50-day moving average.

RSI is trying to curl higher with lower resistance at 55-60 holding. A close above the latter would signal additional upside towards 65-70. Support is at 50-45.

I have a New Trade this morning I would like to get into so let’s go check the tape.

Momentum Options Play List

Closed Momentum Options Trades for 2020: 41-11 (79%). 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 and Text Alerts.

New Trade!

Grocery Outlet Holding (GO, $37.84, up $0.58)

Buy to Open GO January 40 calls (GO210115C00040000, $1.00, up $0.15)

Action: I like these call options at current levels and you can use a Limit Order up to $1.15 to get the best fills. These are the regular GO January 40 calls that expire on January 15th, 2021.

Shares of Grocery Outlet Holding (GO, $37.84, up $0.58) have dropped over 20% since reaching a 52-week peak of $48.87 in early November. Some of the selling pressure came ahead of the company’s third-quarter earnings announcement and continued afterwards despite an impressive quarter.

Grocery Outlet reported third-quarter earnings of 50 cents a share on revenue just north of $764 million. Wall Street had penciled-in earnings of 23 cents a share on sales of $758 million. It was the fourth-straight beat with the prior three quarters topping estimates by 19, seven and four cents a share.

The company reported comparable store sales increased by 9.1% compared to a 5.8% increase in the same period last year. Given the competition in the grocery retail space, this was a phenomenal achievement.

Grocery Outlet is also expanding despite the ongoing coronavirus concerns and currently expects to open 34 stores this year with no closures planned. This is consistent with their longer-term plan to build its real estate pipeline to support 10% annual unit growth.

Guidance was also given as the company said quarter-to-date comparable store sales growth for the fourth quarter was in the positive mid-single digits and expects results for the full fourth quarter to remain consistent at these levels.

Three analysts issued Buy ratings on the stock in July and August with Price Targets in the range from $47-$50. There were two recommendations in November, one with a Buy rating and $50 price target, and another with a lowered price target from $53 to $50 buy still having a Buy recommendation.

The chart below shows shares have been holding longer-term support at $37-$36.50 and levels from September. Current and key resistance is at $38 and the 200-day moving average. If cleared and held, this would be a bullish development for additional near-term strength and a possible retest towards $40-$40.50 and the 50-day moving average. Additionally, relative strength is just above 40 and a level that usually indicates shares are slightly oversold.

At $42, the calls would be $2 “in-the-money” for a 100% return from current levels. If shares are at $41, the trade would breakeven as the calls would be $1 in-the-money. The call options currently have six weeks before expiration so there is plenty of time for the position to play out.

The risk to this trade would be if shares close below $36.50-$36 as it would signal possible lower lows and a further pullback towards the $32 area. If $36 fails to hold, we will likely exit the call options to save the remaining premium.

Current Trades

Utz Brands (UTZ, $20.19, up $0.34)

UTZ January 20 calls (UTZ210115C00020000, $1.15, up $0.10)

Entry Price: $0.75 (11/19/2020)
Exit Target: $1.50
Return: 53%
Stop Target: 85 cents (Stop Limit)

Action: Shares tested a high of $20.20 lower resistance at $20.25-$20.50 getting challenged but holding. Support is at $19.75-$19.50.

Freeport McMoRan (FCX, $23.52, down $0.02)

FCX December 20 calls (FCX201218C00020000, $3.60, down $0.10)

Entry Price: $1.10 (11/13/2020)
Exit Target: $3.75, raise to $4.75 (closed half at $2.75 on 11/24)
Return: 189%
Stop Target: $3.45 (Stop Limit)

Action: Fresh and lower resistance at $24-$24.25 was breached but held with Friday’s 52-week high reaching $24.08. Support remains at $23.25-$23.

The calls traded to a low of $3.47 on Friday following the fade to $23.30 after the opening pop past $24. If $23.25 is breached today, exit the trade regardless, with the Stop Limit at $3.45 likely triggering.