MomentumOptions.com Pre-Market for 2/7/2018
Major Moving Averages Hold
8:00am (EST)
The market showed continued volatility with heavy losses on the open and a continued backtest towards November support levels. The major moving averages held with choppy trading afterwards before a surge to the upside into the closing bell.
The Dow gained 2.3% after testing a low of 23,778 and dipping below its 100-day moving average before recovering to close just below the 25,000 level. The S&P 500 jumped 1.7% to finish just below the 2,700 level following an 108-point intraday swing and a low of 2,597.
The Nasdaq was up 2.1% after trading to a low of 6,824 while holding its 100-day moving average and closing back above the 7,000 level. The Russell 2000 rallied 1.1% after falling to a low of 1,461 and coming within a fifth-point of breaching its 200-day moving average while closing back above the 1,500 level.
Materials and Technology were sector standouts after surging 3.2% and 2.8% while Consumer Discretionary was up 2.6%. Utilities fell 1.2% while Real Estate slipped 0.2% and were the only sector laggards.
The VelocityShares Daily Inverse VIX (ZIV) traded to a low of 63.11 after falling for the 3rd-straight session and closing below its 200-day moving average. May 2017 support at 62.50 held with a move below this level getting 60 in play. Fresh resistance is at 69.50-70.
The Spider S&P 500 ETF (SPY) opened below the $260 level while bottoming at $258.70 shortly afterwards. Late November support at $258.50-$258 held before the rebound to $270 into the closing bell. Continued closes above this level keeps lowered resistance at $271-$271.50 and the 50-day moving average.
We mentioned late last month RSI had been extremely elevated and overbought at the 90 with the plunge and close below 30 yesterday now signaling oversold levels. Resistance is at 40 on a rebound with continued closes back above this level signaling a possible short-term bottom.
The Technology Select Sector Spiders (XLK) traded to a low of $62.48 shortly after the open with December support at $62.50-$62 holding. This area also represent the late October breakout above this level. A close below $62-$61.75 could lead to a continued backtest towards $61-$60. Lowered resistance is at $66-$66.25 with today’s close back above the 50-day moving average being a slightly bullish development.
RSI rebounded after bottoming near 30 yesterday. Resistance is at 50 with continued closes above this level signaling a short-term bottom.
The bid/ ask option spreads were wide on yesterday’s open with many of my Watch List stocks. It’s why I waited late in the day to issue 2 new trades. There has also been several reports of brokerage firms experiencing delays and downtimes that may have complicated getting into and out of trades for individual investors, overall.
I mentioned yesterday to start smaller positions in case we have to average down. However, many of you know I rarely do this and haven’t done so since starting this newsletter. My reasoning is I don’t want to be wrong on the same trade, twice, but volatility hasn’t been this insane in 10 years. The main point I wanted to make is to trade light in highly volatile times and during whipsaw action.
Momentum Options Play List
Closed Momentum Options Trades for 2018: 5-5 (50%). 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 “Hard Stops” entered to close any trades or “Exit 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 8am and 12pm–2pm (EST) updates. Also, I will usually give you a heads-up if I think I’m going to send a Trade Alert outside of these time frames.
Viavi Systems (VIAV, $9.99, up $0.29)
VIAV March 10 calls (VIAV180316C00010000, $0.45, up $0.13)
Entry Price: $0.45 (2/6/2018)
Exit Target: $0.90
Return: 0%
Stop Target: None
Action: shares traded to a high of $10 yesterday with near-term resistance at $10.20-$10.25 holding. Support is at $9.50.
The company recently announced better-than-expected earnings by two-cents a share after reporting a profit of 9 cents a share on higher revenues of nearly $202 million, as well. The 3-D sensing technology should see continued growth over the next several years.
Marvell Technology (MRVL, $21.70, up $0.35)
MRVL May 24 calls (MRVL180518C00024000, $0.83, up $0.08)
Entry Price: $0.83 (2/6/2018)
Exit Target: $1.70
Return: 0%
Stop Target: None
Action: Resistance is at $21.75-$22 following yesterday’s rebound to $21.83. Shaky support is at $21.25-$21 with a move below the latter leading towards another backtest to $20.50-$20.
