Pre-Market Update for 12/22/2020

Market Rebounds Off Opening Lows/ Profit Alert (GO)

8:00am (EST)

The market shrugged off a nasty open to close mixed on Monday after members of Congress finally reached a compromise on a new coronavirus package for roughly $900 billion of spending to support the economy. However, concerns over a new strain of the coronavirus that is 70% more transmissible than the original covid strain overshadowed the agreement and weighed on sentiment.

The Dow closed higher at 30,216 (+0.1%) despite plunging to a morning low of 29,755. Near-term and upper support 30,000-29,750 was breached but held. A move below the latter would indicate further weakness towards 29,500-29,250.

The Russell 2000 tested a morning low of 1,934 before ending higher by less than a half-point at 1,970 (+0.02%). Current and upper support at 1,950-1,930 was tripped but held. A close below the latter would signal a further pullback towards 1,920-1,900.

The S&P 500 finished at 3,694 (-0.4%) with the morning low tapping 3,636. Near-term and upper support at 3,650-3,625 was breached but held. A close below the latter would suggest ongoing weakness towards 3,600-3,575.

The Nasdaq settled at 12,742 (-0.1%) following the opening fade to 12,525. Fresh and upper at 12,600-12,500 was tripped but held. A move below the latter would signal a deeper retest towards 12,400-12,300.

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the first time in five sessions after zooming to a morning high of 31.46. Prior and lower resistance from late October at 31-31.50 was cleared but held. A close above the 32 level and the 200-day moving average would suggest further upside towards the 34-36 area.

Fresh support is at 24.50-24 followed by 22.50-22.

The Spiders Dow Jones Industrial Average ETF (NYSE: DIA) settled slightly higher despite tapping a morning low of $297.42. Current and upper support at $297.50-$297 was breached but held. A close below the latter would signal a further backtest towards $295.50-$295.

The afternoon rebound to $302.97 challenged lower resistance at $303-$303.50 but a level that held. A move above the latter would signal another run towards the $304 area with last week’s all-time peak at $303.80.

RSI has level out with upper support at 60-55 holding. A close below the latter and the monthly low would suggest additional weakness towards 50 and a level from early November. Resistance is at 65-70.

The Dow Jones Transportation Average (NYSE: TRAN) was down for the second-straight session after testing a first half low of 12,310. Near-term and upper support at 12,400-12,300 was breached but held. A move below the latter would indicate additional weakness towards 12,200-12,100 and the 50-day moving average.

Current resistance is at 12,500-12,600 followed by 12,700-12,800.

RSI is in a downtrend with key support at 50 holding. A close below this level would signal additional weakness towards 45-40 and levels from late October. Resistance is at 55-60.

We closed our 16th-straight winning trade yesterday to lock-in a decent double-digit profit while avoiding a loss. With the portfolio light, I could have a new trade today so stay locked-and-loaded. AT&T (T) has treated us really well over the past two years and shares could be setting up for another nice reentry point.

Momentum Options Play List

Closed Momentum Options Trades for 2020: 45-11 (80%). 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.

Boston Scientific (BSX, $34.82, down $0.63)

BSX February 31 puts (BSX210219P00031000, $0.60, up $0.10)

Entry Price: $0.85 (12/14/2020)
Exit Target: $1.70
Return: -29%
Stop Target: None

Action: Shares tested a low of $34.16 with mid-month and upper support at $34.25-$34 getting breached but holding. Resistance is at $35-$35.25.

Grocery Outlet Holding (GO, $39.08, down $0.65)

GO January 40 calls (GO210115C00040000, $1.10, down $0.25)

Entry Price: $1.00 (11/30/2020)
Exit Target: $2.00
Return: 15%
Stop Target: $1.15 (Stop Limit)

Action: The Stop Limit at $1.15 tripped on yesterday’s pullback to $38.72 in the stock. While slightly disappointed we couldn’t extend our gains, there are other trades that look more promising.