MomentumOptions.com Pre-Market Update for 9/21/2022
Dow/ S&P Tag Fresh Monthly Lows
8:00am (EST)
The stock market reversed course on Tuesday with prior support levels and fresh monthly lows back in focus. The pullback comes ahead of the Fed’s policy-setting meeting on interest rates with a third-straight 75 basis-point increase expected to follow.
The Russell 2000 tested a low of 1,776 while ending at 1,787 (-1.4%). Upper support at 1,800-1,775 failed to hold. A drop below the latter would be a bearish development with additional downside risk towards 1,750-1,725. Below is a chart of the IWM.
The S&P 500 traded to a low of 3,827 before finishing at 3,855 (-1.1%). Current and upper support at 3,850-3,825 was breached but held. A close below the latter would signal a further slide to 3,800-3,775.
The Dow closed at 30,706 (-1%) after kissing an intraday low of 30,456. Key support at 30,500 was tripped but held. Continued closes below this level would indicate additional weakness towards 30,250-30,000.
The Nasdaq settled at 11,425 (-1%) with the low tapping 11,343. Near-term and upper support at 11,400-11,250 was cracked but held. A move below the latter would suggest a retest to 11,150-11,000.
Volatility Index
The Volatility Index (VIX) flipped-flopped for the third-straight session after rebounding to reach a peak of 27.81. Lower resistance at 27.50-28 was cleared but held. A close above the latter would be a very bearish development for the market with upside risk towards 29.50-30.
Support is at 26-25.50.
Market Analysis
The Wilshire 5000 Composite Index (WLSH) fell for the third time in four sessions after bottoming out at 38,027. Fresh and upper support at 38,250-38,000 was breached but held. A close below the latter would signal additional weakness to 37,750-37,500.
Resistance is at 38,750-39,000.
RSI (relative strength index) is in a downtrend with key support at 35 holding. A close below this level would indicate weakness to 30 and nearly the low from earlier this month and mid-June. Resistance is at 40-45.
Sector
The Financial Select Sector Spiders (XLF) was down for the second time in three sessions with the low at $32.47. Key support at $32.50 was tripped but held. Continued closes below this level would signal additional weakness towards $32.25-$32.
Resistance is at $33-$33.25.
RSI has rolled over with key support at 40 holding. A close below this level would indicate downside action to 35-30 and levels from mid-June. Resistance is at 45-50.
Market Outlook
I have a couple of bearish trades I have been wanting to add if the VIX closes above 28 but we just haven’t gotten the opportunity. Shaky support levels have also held to start the week.
This could all change this afternoon once the Fed updates the market, or maybe not. There is the possibility for a significant pullback if Wall Street reacts negatively, or a chance for the bulls to continue to chip away at near-term resistance levels if Fed Chairman Powell can soothe the current situation.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 24-15 (62%). 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 “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 and Text Alerts.
Intel (INTC, $28.96, down $0.48)
INTC (weekly) October 32 calls (INTC221007C00032000, $0.15, down $0.05)
Entry Price: $0.80 (9/9/2022)
Exit Target: $1.60
Return: -81%
Stop Target: None
Action: Shares traded to a low of $28.71 with key support at $28.75 getting breached but holding. Support is at $29.25-$29.
We will likely know the outcome of this trade this week. If new 52-week lows come into play, we will likely exit early. If shares can clear and hold $30, we will stick with it.
Rocket Companies (RKT, $7.36, down $0.28)
RKT December 8 calls (RKT221216C00008000, $0.65, down $0.15)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -36%
Stop Target: None
Action: Upper support at $7.50-$7.25 failed to hold with the low hitting $7.30. Resistance is at $7.75-$8.
Diana Shipping (DSX, $4.79, up $0.25)
DSX December 6 calls (DSX221216C00006000, $0.10, unchanged)
Entry Price: $0.40 (8/18/2022)
Exit Target: $1.00
Return: -75%
Stop Target: None
Action: Tuesday’s peak reached $4.81 with lower resistance at $4.80-$4.90 getting tripped but holding. Support is at $4.70-$4.60.
