MomentumOptions.com Pre-Market Update for 7/20/2018
Trade Concerns Back in Focus
8:00am (EST)
The market struggled throughout Thursday’s session following signs the global trade spat may be escalating along with additional comments from President Trump on interest rates. The rebound off the morning lows on trade concerns stalled after the President indicated he wasn’t thrilled with the Fed’s interest-rate hikes.
The remarks raised questions about the ability of the currency to strengthen further in 2018 as the major indexes settled mixed. Despite the ongoing trade rhetoric, the small-caps showed strength while volatility easily held key resistance.
The Russell 2000 rallied 0.6% after making a second half push to 1,702. The close above the 1,700 level was a bullish signal as the index came within a 6-pack of fresh all-time highs.
The Dow had its 5-session winning streak snapped following the 0.5% pullback with the morning low tapping 25,052. Support at 25,000 is back in play and a level that has been holding for 5-straight sessions.
The S&P 500 sank 0.4% on the backtest to 2,799 shortly after the opening bell while holding 2,800 for the 4th time in the past 5 sessions. A move below 2,790 over the near-term would likely signal additional weakness and a possible near-term top.
The Nasdaq fell for the 3rd time in 4 sessions after giving back 0.4% while trading to a low of 7,811. The index has been holding 7,800 for 6-straight sessions with a close below 7,750 signaling a possible short-term peak for Tech.
Utilities and Real Estate showed the most sector strength with both jumping 1% while Materials were up 0.4%.
Financials paced sector laggards after tanking 1.5%. Communications Services sank 0.7% and Health Care declined 0.6%.
The S&P 500 Volatility Index ($VIX) traded to a morning low of 11.79 while splitting support at 12-11.50. The bounce to 13.09 afterwards cleared upper resistance at 12.50-13 but a level that held into the closing bell.
Near-term resistance at 13.50 held with a close above 13.75-14.25 and 50/200-day moving averages being a more bearish development.
The Spiders Dow Jones Industrial Average ETF (DIA) fell for the first time in 6 session after testing a low of $250.61. Fresh and upper support at $250.50-$250. A close below the latter could signal additional weakness towards $248-$247.50 and the 50-day moving average.
Lowered resistance is at $251.50-$252 with a close above $253 signaling a possible run towards $255-$256 and late February highs.
RSI is back in a slight downtrend with support at 60-55. A close below the latter would be a bearish development signaling additional weakness. Resistance is in the 65 area and the early June highs.
The Energy Select Sector Spider (XLE) is trying to form a short-term bottom after closing higher for the 2nd-straight session while reaching an intraday peak of $75.47.
Resistance at $75.50-$76 and the 50-day moving average held with a close above the latter being a slightly bullish development for higher highs.
Support is at $74.50-$74 with a close back below the latter signaling additional weakness.
RSI is approaching resistance at 50-55 with a close above the latter a more bullish development and signaling additional strength. Support is at 45-40.
Next week could be very volatile as the week after July option expiration is prone to wild price swings. This could be a massive breakout to continued all-time highs, or a nasty pullback if history is any indication.
The portfolio is extremely light so we have plenty of room to add new trades. I’m still leaning towards opening bullish trades today or early next week. I have been watching the VIX closely over the past few sessions to ensure resistance holds before pulling the trigger.
The portfolio has posted an 18-4 track record since mid-March and I’ve only recommended one put option trade for all of 2018. One current trade, XLI, is a lock to be profitable while major news for PGNX is due out by the end of the month.
I’ve mentioned the warning signs we need to watch on the VIX before aggressively getting short. There will be plenty of time to get use put options when a major correction does occur, but in the meantime, the bulls are still looking like they want to push all-time highs.
Momentum Options Play List
Closed Momentum Options Trades for 2018: 28-13 (68%). 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 Daily updates.
Viavi Systems (VIAV, $10.27, down $0.13)
VIAV September 11 calls (VIAV180921C00011000, $0.30, down $0.05)
Entry Price: $0.40 (7/16/2018)
Exit Target: $0.80
Return: -25%
Stop Target: None
Action: Shares tested a low of $10.26 yesterday with fresh support at $10.25-$10.20 holding. Lowered resistance is at $10.40-$10.50.
Industrials Select Sector Spider (XLI, $74.52, down, $0.03)
XLI August 75 calls (XLI180817C00075000, $1.00, down $0.05)
Entry Price: $0.65 (7/12/2018)
Exit Target: $1.30
Return: 47%
Stop Target: 80 cents (Stop Limit)
Action: Support at $74.25-$74 and the 50/200-day moving averages held on Thursday’s backtest to $73.97. Resistance is at $74.75-$75.
Progenics Pharmaceuticals (PGNX, $8.39, up $0.10)
PGNX August 10 calls (PGNX180817C00010000, $0.70, flat)
Entry Price: $0.75 (7/5/2018)
Exit Target: $1.50-$2.00
Return: -7%
Stop Target: None
Action: Upper resistance at $8.35-$8.40 held on yesterday’s peak into the close. Support is at $8.25-$8 and the 50-day moving average.