MomentumOptions.com Pre-Market Update for 5/30/2019
Bears Push Fresh May Lows
8:00am (EST)
The market was weak throughout Wednesday’s session following fresh threats on trade front war along with renewed political chatter on the possible impeachment of President Trump. Although much of the rhetoric can be and will be debated, one thing is certain, the market hates uncertainty.
As far as the technical picture, fresh monthly lows were tapped with early February and March lows in play for the major indexes. Volatility closed above another key level of resistance but there wasn’t panic selling following was some strength off the midday lows into the close.
The Dow dropped 0.9% following the 1st-half fall to 24,938. Prior and upper support from early February at 25,000-24,750 was tripped but held with a move below the latter getting 24,500-24,250 in focus.
The Russell 2000 also stumbled 0.9% after trading to a low of 1,481. Longer-term and upper support at 1,475-1,460 held with a close below 1,450 and the early January breakout level signaling additional selling pressure.
The Nasdaq tanked 0.8% following the intraday pullback to 7,503. Early March and lower support at 7,550-7,500 held on the close just above the 200-day moving average with a close below 7,500 being an ongoing bearish development.
The S&P 500 sank 0.7% after testing an intraday low of 2,766. Upper support at 2,775-2,750 and the 200-day moving average was breached with a close below the latter opening up further risk towards 2,725-2,700.
Materials were the only sector that showed some strength after inching up 0.02%.
Utilities lead sector weakness after sinking 1.3% while Real Estate was down 1.2%. Communication Services and Healthcare fell 1%.
The S&P 500 Volatility Index ($VIX) closed higher for the 2nd-straight session and 3rd in the past 4 after peaking at 19.04 ahead of the closing bell. Prior and upper resistance is 18.50-19 from earlier this month was breached but held. A move above 19.50-20 could lead to additional selling pressure in the market with upside risk towards 22-23.50.
Rising support is at 17.50-17. A close back below the latter and the 200-day moving average would ease some near-term tension.
The Russell 3000 Index ($RUA) fell for the 2nd-straight session and 4 of the past 5 following the backtest to 1,628. Upper support at 1,625-1,600 held on the close just below the 200-day moving average. A move below the latter would be an ongoing bearish development with downside risk towards 1,575-1,550 and the mini-trading range from mid-January.
Lowered resistance is at 1,650-1,675. Continued closes above the 1,700 level and the 50-day moving average would be a more bullish signal that near-term selling pressure has abated.
RSI remains in a downtrend with major support from earlier this month at 30. A move below this level and prior resistance from late December opens up risk towards 25-20 with the latter representing the Christmas Eve bottom. Resistance is at 35-40 with a move back above the latter signaling a return of strength.
The Dow Jones Transportation Average ($TRAN) extended its losing streak to 5-straight sessions after tapping an intraday low of 9,880. Major support that was tested twice in March at the 10,000 level was breached and failed to hold. January and upper support at 9,900-9,800 is now in play with a close below the latter likely hinting to further weakness towards the 9,600 level.
Lowered and new resistance is at 10,000-10,100. A close back above the 10,200 level would be a slightly bullish signal with more important hurdles at 10,400-10,600 and the 50/200-day moving averages.
RSI remains in a nasty downtrend following the close below early January support at the 30 level. There is risk towards 25-20 on continued weakness and would signal very oversold levels. Resistance is at 35-40.
The market action remains frustrating for a lot of talking heads and investors who don’t know what is really going on and what to watch for. While we have been preparing for this month’s pullback while trimming near-term June positions, I always mention you should have money in the market as evidence with our CY September 17 calls.
You have to know how to play both the upside and downside trends while avoiding trading ranges and whipsaw action. More importantly, you want to trade stocks you know and actively follow and why I wanted to stay in CY.
We have 2 other open trades with the likely outcome of MRVL being decided today and our T position taking us out into July. We have already made triple digit-profits with options on both stocks with gains of 102% and 118% on T alone, along with a massive 223% return on MRVL calls.
I would like to say a near-term bottom is trying to form this week but it will all depend on if the VIX can hold the 20 level into Friday’s closing bell. My Watch List remains both bullish and bearish and I’m hoping to add 1-2 New Trades this week, depending on the action.
If you are a new subscriber and did NOT get a live Text Alert for taking 127% profits in CY yesterday, please let us know. We constantly update our system but we had an overwhelming number of new members over the holiday weekend and sometimes the numbers when signing up are land lines. Email me at Rick@MomentumOptionsTrading.com if you have a number you need added.
Momentum Options Play List
Closed Momentum Options Trades for 2019: 20-8 (70%). 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 “NewTrade” 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.
AT&T (T, $31.91, down $0.02)
T July 33 calls (T190719C00033000, $0.35, flat)
Entry Price: $0.47 (5/24/2019)
Exit Target: $1.00
Return: -28%
Stop Target: None
Action: Tuesday’s low reached $31.69 with upper support at $31.75-$31.50 getting breached but holding. Resistance remains at $32.25-$32.50.
Cypress Semiconductor (CY, $17.25, up $1.85)
CY September 17 calls (CY190920C00017000, $1.65, up $1.05)
Entry Price: $0.75 (5/16/2019)
Exit Target: $1.50, raise to $3 (closed half at $1.70 on 5/29)
Return: 115%
Stop Target: $1.00, raise to $1.40 (Stop Limit)
Action: Raise the Exit Target from $1.50 to $3 on the other half of the position. Raise the Stop Limit at $1 to $1.40 to further protect profits.
Shares tested a high of $17.65 with prior and lower resistance at $17.50-$17.75 from earlier this month getting split but holding. Fresh support is at $17-$16.75.
Shares were halted for volatility shortly after Cypress Semiconductor said it was weighing a sale after receiving takeover interest. The company has made no final decision and could opt to remain independent so there could be higher highs. The 52-week peak is at $18.59 and could easily make a run at $20 by late September if a bidding war ensures, or if they independent.
Marvell Technology (MRVL, $22.02, up $0.67)
MRVL June 25 calls (MRVL190621C00025000, $0.20, up $0.05)
Entry Price: $0.47 (5/16/2019)
Exit Target: $1.00 (Limit Order)
Return: -57%
Stop Target: None
Action: Set a Limit Order to close the trade at $1.
Earnings are due out this morning. I could have a Trade or Profit Alert shortly after the open, depending on the news.
Lower resistance from mid-April at $22-$22.25 was cleared and held on the rebound to $22.21 yesterday. Support is at $21.50-$21.25.