MomentumOptions.com Pre-Market Update for 5/21/2019
VIX Spikes, Holds Resistance
8:00am (EST)
The market struggled for a 2nd-straight session while making lower lows as stalled U.S./ China talks and related tariff escalation remained the focus. Increased scrutiny over Chinese telecom companies are at the forefront and are making it harder for U.S. companies to do business deals following the new restrictions.
Near-term support held with more crucial levels waiting in the wings on continued weakness. Volatility made a higher high but settled down into the closing bell to keep a neutral reading on the market.
The Nasdaq dropped 1.5% following the opening backtest to 7,678. Prior and upper support at 7,650-7,600 with a close below the latter signaling additional weakness towards 7,550-7,500 and the 200-day moving averages.
The Russell 2000 retreated 0.7% after testing an intraday low of 1,521. Near-term and lower support at 1,535-1,520 held with risk towards the 1,500 level on a close below the latter.
The S&P 500 was lower by 0.7% while trading to a late day low of 2,831. Fresh and upper support at 2,825-2,800 held with a move below the latter signaling additional weakness towards 2,775 and the 200-day moving average.
The Dow was down 0.3% after trading to an intraday low of 25,560. Current and upper support at 25,650-25,400 was breached but held with the index being trapped between its 50/200-day moving averages for the past 9 sessions.
Utilities and Financials showed some sector strength after adding 0.1% while Energy nudged up 0.05%.
Technology and Communication Services led sector laggards with losses of 1.7%. Real Estate and Materials gave back 1.6% and 1.4%, respectively.
The S&P 500 Volatility Index ($VIX) surged to a morning peak of 17.63 with upper resistance at 16.50-17 and the 200-day moving average getting stretched but holding. A close back above the 17.50 level would signal higher volatility with upside risk towards 20-20.50.
Rising support is at 15.50-15 followed by 14.50-14 and the 50-day moving average.
The Spider Small-Cap 600 ETF (SLY) fell for the 2nd-straight session after trading to an intraday low of $65.87. Prior and upper support at $66-$65.50 was tripped and failed to hold. A close below the latter would be a continuing bearish development with risk towards $65-$64.50 and mid-March lows.
Lowered resistance is at $66.50-$67 followed by $67.50-$68 and the 50-day moving average.
RSI is in a downtrend with mid-March support at 35. A close below this level could lead to additional weakness towards 30-25 and levels from mid-December. Resistance is at 40-45.
The Industrials Select Sector Spider (XLI) extended its losing streak to 2-straight sessions following Monday’s pullback to $74.28. Fresh and upper support at $74.50-$74 held with a move below the latter signaling additional weakness towards $73 and the 200-day moving average.
Near-term and lowered resistance is at $75-$75.50. Continued closes back above $76 and the 50-day moving average would be a more bullish signal a near-term bottom has been made.
RSI is in a downtrend with support at 40. There is risk towards 35 and the low from earlier this month, as well as early January, on a move below 40. Resistance is at 45.
The lower Friday and Monday close to start the week was a slightly bearish signal and there could be additional choppiness into the upcoming 3-day holiday weekend.
Momentum Options Play List
Closed Momentum Options Trades for 2019: 19-7 (73%). 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.
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AT&T (T, $32.19, up $0.39)
T July 32 calls (T190719C00032000, $1.00, up $0.25)
Entry Price: $0.47 (5/15/2019)
Exit Target: $1.00, raise to $1.75
Return: 113%
Stop Target: 60 cents, raise to 82 cents (Stop Limit)
Action: Raise the Exit Target from $1.00 to $1.75. Raise the Stop Limit at 60 cents to 82 cents to further protect profits.
Shares surged to a high of $33.08 on yesterday’s open with the options peaking at $1.58. Fresh and lower resistance at $32.50-$33. Rising support is at $32-$31.50.
I would like to see shares clear and hold $32.50 today as the surge and pullback was a little concerning. RSI is also getting near resistance at 70. A close above this level would be a bullish signal for continued momentum. However, if shares slide back below $32, we will likely get stopped out.
Cypress Semiconductor (CY, $15.06, down $0.49)
CY September 17 calls (CY190920C00017000, $0.50, down $0.15)
Entry Price: $0.75 (5/16/2019)
Exit Target: $1.50
Return: -33%
Stop Target: None
Action: Shares tumbled to a low of $14.93 with late March and upper support at $15-$14.75 holding. Lowered resistance is at $15.25-$15.50.
Marvell Technology (MRVL, $21.74, down $0.88)
MRVL June 25 calls (CY190621C00025000, $0.22, down $0.19)
Entry Price: $0.47 (5/16/2019)
Exit Target: $1.00
Return: -53%
Stop Target: None
Action: Fresh and upper support at $21.75-$21.50 was breached and failed to hold following the backtest to $21.57 and close below the 50-day moving average. Lowered resistance is at $22-$22.25.
Bank of America (BAC, $28.40, flat)
BAC June 31 calls (BAC190621C00031000, $0.08, flat)
Entry Price: $0.55 (5/8/2019)
Exit Target: $1.10
Return: -85%
Stop Target: None
Action: Lower resistance at $28.50-$28.75 and the 200-day moving average held on Monday’s run to $28.52. Support remains at $28.25-$28
Viavi Solutions (VIAV, $12.52, down $0.28)
VIAV June 14 calls (VIAV190621C00014000, $0.08, down $0.02)
Entry Price: $0.40 (5/2/2019)
Exit Target: $0.80
Return: -80%
Stop Target: None
Action: Close the trade this morning to save the remaining premium. Yesterday’s close back below the 50-day MA was a bearish signal although shares are signaling oversold levels.
Amicus Therapeutics (FOLD, $11.84, down $0.41)
FOLD July 15 calls (FOLD190719C00015000, $0.25, down $0.05)
Entry Price: $1.10 (4/12/2019)
Exit Target: $2.20
Return: -77%
Stop Target: None
Action: Fresh and upper support at $11.75-$11.50 held on the slide to $11.81 yesterday. Lowered resistance is at $12-$12.25. We will likely exit the trade if shares fail to hold $11.50 this week.