MomentumOptions.com Pre-Market Update for 9/23/2022
Market Reaches Oversold Levels
8:00am (EST)
The stock market pushed fresh monthly lows on Thursday to trigger oversold levels from May, June, and earlier this month. The major indexes avoided fresh 52-week lows although the blue-chips came close.
The ongoing nervousness keeps the mid-June and July lows in focus with Friday and Monday’s action likely confirming a bounce, or if these levels are taken out. Volatility once again flirted with disaster, but held a key level of resistance for the fifth-straight session.
The Russell 2000 plunged to an intraday low of 1,716 while settling at 1,722 (-2.3%). Mid-July and upper support at 1,725-1,700 failed to hold. A drop below the latter would signal ongoing weakness to 1,675-1,650 with the mid-June 52-week low at 1,641. Below is a chart of the IWM.
The Nasdaq ended at 11,066 (-1.4%) with the morning low hitting 11,024. Key support at 11,000 was challenged but held. A move below this level reopens downside pressure towards 10,900-10,750.
The S&P 500 tested a low 3,749 before closing at 3,757 (-0.8%). Prior and upper support from mid-July at 3,750-3,725 was triggered but held. A drop below the latter would suggest additional weakness to 3,700-3,675.
The Dow finished at 30,076 (-0.4%) after tagging a first half low of 29,994. Key support at 30,000 was breached but held. A close below this level would indicate a further slide to 29,750 with the 52-week low from a few months ago at 29,653.
Volatility Index
The Volatility Index (VIX) was down for the first time in three sessions after testing a high of 28.38. Key resistance at 28 was once again rock solid. A close above this level sets up a retest to 30-30.50.
Support is at 27-26.50 followed by 25.50-25 and the 200-day moving average.
Market Analysis
The S&P 400 Mid Cap Index (MID) was down for the third-straight session and for the seventh time in eight following the pullback to 2,282. Prior and upper support from mid-July at 2,300-2,275 failed to hold. A close below the latter would suggest a further fade towards 2,250-2,225 with the mid-June 52-week low at 2,187.
Resistance is at 2,325-2,350.
RSI (relative strength index) is in a downtrend with key support at 30 holding. A close below this level would indicate further weakness towards 25 and the January low. Resistance is at 35-40.
Sector
The Industrials Select Sector Spider (XLI) fell for the third-straight day, as well, after trading to a low of $86.24. Fresh and upper support at $86.50-$86 failed to hold. A close below the latter would signal additional weakness to $85-$84.50 with the 52-week low just south of $84.
Resistance is at $87-$87.50.
RSI remains in a downtrend with key support at 30 also holding. A move below this level would suggest downside action towards 25 and the low from November 2021. Resistance is at 35-40.
Market Outlook
With RSI levels at or near the 30 level, the major indexes, on paper, are once again at oversold levels. However, this doesn’t mean RSI can’t fall into the mid to low 20’s before there is a market bounce.
RSI levels for the major indexes tested the high 20’s in January of this year before buying came into the market. The low 20’s and high teens came into play during the March 2020 pandemic crisis.
Of course, this time around is much different but today and Monday’s action will let us know if Wall Street is starting to nibble at these levels or not. A lower Friday/ Monday close would suggest money is continuing to move to the sidelines.
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.
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ProShares Bitcoin Strategy ETF (BITO, $11.87, up $0.20)
BITO October 10.50 puts (BITO221021P00010500, $0.50, up $0.03)
Entry Price: $0.51 (9/22/2022)
Exit Target: $1.05
Return: -2%
Stop Target: None
Action: Yesterday’s low touched $11.54 with key support at $11.50 getting challenged but holding. A close below this level and the 52-week low at $11.47 would be a bearish development with risk towards the $10 level. Resistance is at $12-$12.25.
I wanted to have some put protection rolling into October and in case the market takes out the June 52-week lows. These options were relatively cheap and should do well if bitcoin follows course and trades to fresh yearly lows.
Intel (INTC, $28.07, down $0.40)
INTC (weekly) October 32 calls (INTC221007C00032000, $0.05, down $0.05)
Entry Price: $0.80 (9/9/2022)
Exit Target: $1.60
Return: -93%
Stop Target: None
Action: Shares traded to a 52-week low of $28.04 with key support at $28 holding. Lowered resistance is at $28.25-$28.50.
Rocket Companies (RKT, $7.13, down $0.18)
RKT December 8 calls (RKT221216C00008000, $0.55, down $0.10)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -47%
Stop Target: None
Action: Key support at $7 was challenged but held following the late day fade to $7.05. Lowered resistance is at $7.25-$7.50.
Diana Shipping (DSX, $4.57, down $0.07)
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: Thursday’s low tagged $4.51 with key support at $4.50 and the 200-day moving average getting kissed but holding. Resistance is at $4.60-$4.70.
