MomentumOptions.com Pre-Market Update for 11/7/2018
Near-Term Resistance Levels Cleared
8:00am (EST)
The market opened mixed while spending the majority of the session trading in positive territory afterwards. There was some late day weakness before a strong rally to session highs into the close and ahead of the midterms elections.
The outcome should help ease the near-term uncertainty of how Congress is controlled but other headwinds remains. Volatility is still giving a neutral reading although the bears have been in control since early October.
The Dow was up 0.7% after trading to an intraday peak of 25,651. Lower resistance at 25,600-25,800 was cleared and held with a move above the latter and the 50-day moving average signaling additional strength.
The S&P 500 soared 0.6% following the run to 2,756. Upper resistance at 2,740-2,750 was cleared with continued closes above 2,765-2,775 and the 200-day moving average being a more bullish development.
The Nasdaq snapped a 2-session losing streak after rising 0.6% while trading to a high of 7,400. Lower resistance at 7,400-7,450 failed to hold with more important hurdles at 7,500-7,525 and the 200-day moving average.
The Russell 2000 also climbed 0.6% after testing an intraday high of 1,557. Near-term resistance at 1,560 held for a 3rd-straight session with a close above this level getting 1,675-1,680 in play.
Materials and Industrials were the strongest sectors after rallying 1.6% and 1.1%, respectively. and 1.4%. Utilities added 0.7% while Technology, Communication Services, Consumer Staples, and Real Estate were all higher by 0.6%.
There were no sector laggards.
The S&P 500 Volatility Index ($VIX) traded in a tight range with the morning low tapping 19.69. Near-term support at 19.50-19 held with a move below 18-17.50 being a possible bullish signal for the market.
However, the 50-day moving average continues to rise above the 200-day moving average with a golden cross in process. This is typically a technical pattern for higher highs down the road.
The index closed below 20.50-20 for a 4th-straight session with resistance at 22-22.50. A move above the latter would be a slightly bearish signal with risk towards 25-27.50.
The Spider Small-Cap 600 ETF (SLY) was up for the 5th time in 6 session after trading to an intraday high of $69.89. Lower resistance at $69.50-$70 was cleared and held with continued closes above $71 and the 200-day moving average being a more bullish signal.
Current support is at $69-$68.50. A close below $68 would likely signal another round of selling pressure.
RSI is approaching resistance at 50. A move above this level could lead to a run towards 55-60 and the September peak. Support is at 45-40.
The Dow Jones Transportation Average ($TRAN) snapped a 2-session slide after peaking at 10,487. Near-term resistance at 10,500 held with additional hurdles at 10,700-10,750 and the 200-day moving average.
Short-term and shaky support is at 10,400-10,350. A move below the latter would be another bearish signal with risk to 10,200-10,000. The 50-day moving average remains in a nasty downtrend.
RSI is back in an uptrend with resistance at 50. Continued closes above this level would signal additional momentum towards 55-60. Support is at 45-40.
I have been watching the action in GLD this week and one of the trades on my Watch List. If $116 can hold, we might go long call options. I would also,like to see BSX clear and hold $37 before possibly going long.
We have closed out 4-straight winning trades, including the 132% winner in MRVL. The portfolio is 25-5 since early May for an 83% win rate. We have just 2 open positions, with these results included, as we are exiting MS this morning. XLP is now up 71% and we have a Stop Limit in place to protect gains while still looking for a triple-digit return.
We have plenty of room to add to fresh positions. I know the past few weeks has been slow as far as action but a major trend should emerge this month with good clues coming this week to go long, or possibly short, the market.
Momentum Options Play List
Closed Momentum Options Trades for 2018: 42-16 (72%). 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.
Morgan Stanley (MS, $45.72, down $0.10)
MS November 50 calls (MS181116C00050000, $0.10, flat)
Entry Price: $0.60 (10/3/2018)
Exit Target: $1.20
Return: -83%
Stop Target: None
Action: Close the trade on this morning’s open.
Shares appear to be peaking so close the trade this morning to save the remaining premium. These options expire a week from Friday and shares will need to surge roughly 10% without a major catalyst in play.
Consumer Staples Select Spiders (XLP, $56.14, up $0.34)
XLP January 58 calls (XLP190118C00058000, $0.60, up $0.05)
Entry Price: $0.35 (9/20/2018)
Exit Target: $0.70
Return: 61%
Stop Target: 45 cents (Stop Limit)
Action: Shares traded to a high of $56.16 with fresh resistance at $56.25-$56.75 now in play. Rising support is at $55.50-$55.