MomentumOptions.com Pre-Market Update for 6/4/2019
Small-Caps Show Strength, VIX Holds 20
8:00am (EST)
The market settled mixed on Monday following a fresh round of Fed speak on the economy and interest rates. The choppy action showed some strength in the morning but weakness in Tech throughout the session weight on sentiment along with ongoing tariff tiffs and chatter.
The small-caps and blue-chips showed closed in positive territory but remain on shaky ground as near-term resistance held. Volatility stayed elevated but once again held a key level of support.
The Nasdaq tanked 1.6% after testing a late session low of 7,292. Prior and upper support from early March at 7,300-7,250 was breached but held with risk towards 7,250-7,200 and early February lows on continued weakness.
The S&P 500 gave back 0.3% following the late day pullback to 2,728. Fresh and upper support at 2,725-2,700 held with a close below the latter being an ongoing bearish signal.
The Dow was up 4 points 0.02% despite testing an intraday low of 24,680. Prior and upper support from late January at 24,750-24,500 was breached but held with risk towards 24,250-24,000 on a close below the latter.
The Russell 2000 snapped a 4-session slide after rising 0.3% while reaching an intraday peak of 1,476. Fresh and lower resistance at 1,475-1,490 held with continued closes back above the 1,500 level signaling a possible near-term bottom.
Materials zoomed 3.2% to easily pace sector leaders. Consumer Staples and Energy rallied 1.3%
Communications Services and Technology fell 3.1% and 1.8%, respectively, to lead sector laggards.
The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 8th-straight after trading to a high of $132.58 and fresh 52-week peak. Lower resistance from late June 2016 at $132-$132.50 was cleared and held with additional longer-term hurdles at $133.50-$134.
Rising support is at $132-$131.50 followed by $130.50-$130.
The S&P 500 Volatility Index ($VIX) showed strength for the 4th time in 5 sessions following the intraday run to 19.75. Near-term and lower resistance at 19.50-20 was breached but held. A close above the latter would be an ongoing bearish signal with risk towards 22-23.50.
Current support is at 18-17.50. Continued closes back below 17 and the 200-day moving average would be a more bullish signal volatility is easing.
The Spider S&P 500 ETF (SPY) was down for the 4th time in 5 sessions following the backtest to $273.09 and close below the 200-day moving average. Upper support from early March at $273.50-$273 was breached but held with a move below the latter signaling additional weakness towards $272.50-$270 and early February levels.
Lowered resistance is at $275.50-$276. Continued closes above the $280 level would be a more bullish signal near-term selling pressure has abated.
RSI is in a downtrend with crucial support at 30. A close below this level would be a bearish signal for additional weakness towards 25-20 and the December lows. Resistance is at 35-40.
The Spiders S&P Homebuilders ETF (XHB) was up for just the 2nd time in 5 sessions after rebounding to a high of $39.22. Near-term and lower resistance at $39-$39.50 was cleared but held. Continued closes above $40 and the 50-day moving average would be a more bullish signal for higher highs.
Late March support is at $38.50-$38. A move below the latter opens up risk towards $37.50-$37 and the 200-day moving average.
RSI is back in a slight uptrend with resistance at 45-50. Continued closes above the latter and a level that has been holding since early May would be a bullish signal for additional strength. Support is at 40. A move below this level would signal additional weakness towards 35-30 and late December lows.
We got some super nice pin action yesterday as shares of CY zoomed nearly 24% after getting a takeover offer just south of $24. This was an absolute windfall for our current CY September 17 calls (CY190920C00017000, $5.10, up $2.80) which we recommended at 75 cents. The even better news is there is still another $1.75-$1.85 in premium to capture when the deal closes later this summer. For now, the trade is up over 350%.
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, $31.09, up $0.51)
T July 33 calls (T190719C00033000, $0.20, up $0.05)
Entry Price: $0.47 (5/24/2019)
Exit Target: $1.00
Return: -57%
Stop Target: None
Action: Lower resistance at $31-$31.25 was cleared and held on the rebound to $31.35 yesterday. A close above $31.50 and the 50-day moving average would be a more bullish signal that a near-term bottom is in. Support is at $30.50-$30.25 and the 200-day moving average.
Cypress Semiconductor (CY, $22.07, up $4.25)
CY September 17 calls (CY190920C00017000, $5.10, up $2.80)
Entry Price: $0.75 (5/16/2019)
Exit Target: $3, raise to $6.75 (Limit Order) (closed half at $1.70 on 5/29)
Return: 353%
Stop Target: $1.90, raise to $4.50 (Stop Limit)
Action: Raise the Exit Target from $3 to $6.75 with a Limit Order on the other half of the trade. Raise the Stop Limit at $1.90 to $4.50.
Shares zoomed to a high of $22.43 with the options peaking at $5.70. The current average closing price is at $3.40 since we closed half at $1.70. Of course, the gains would’ve have been 580% from our entry price but I didn’t think a takeover offer would come this fast following last week’s surge. In any event, congratulations to all that are enjoying the windfall and please feel free to send me your comments as I would love to know your emotions following the biggest trade of the year, thus far.
The company announced Infineon (IFNNY) will acquire them for $23.85 per share in cash. The offer price represented a 46% premium to Cypress’s unaffected 30-day volume-weighted average price during the period from April 15th to May 28th 2019, the last trading day prior to media reports regarding a potential sale of Cypress.
Cypress expects to continue its quarterly cash dividend payments until the transaction closes and these options have an intrinsic value of $6.85. This means the options should rise another $1.75 as the deal comes closer to closing.
The next quarterly cash dividend of 11 cents per share will be paid on July 18th, 2019 to holders the stock at the close of business on June 27, 2019. We will continue to keep the trade open but have set a Stop Limit in case shares slip. They shouldn’t fade unless the deal falls apart and hat seems unlikely since it is a cash deal.
Marvell Technology (MRVL, $22.35, up $0.05)
MRVL June 25 calls (MRVL190621C00025000, $0.10, flat)
Entry Price: $0.47 (5/16/2019)
Exit Target: $1.00 (Limit Order)
Return: -79%
Stop Target: None
Action: Lower resistance at $22.50-$22.75 and the 50-day moving average held on Monday’s run to $22.85. Support remains at $22-$21.75.