MomentumOptions.com Pre-Market Update for 10/4/2022
Bulls Recover Key Support Levels
8:00am (EST)
The stock market roared back on Monday to start the first trading day or October and the fourth quarter after posting its best session in over two months. The major indexes were due for a bounce after reaching oversold conditions but will need to show some follow thru to avoid the same fate as last week’s failed one-day rally.
The Dow made an afternoon push to 29,647 while closing at 29,490 (+2.7%). Fresh and lower resistance at 29,500-29,750 was cleared but held. A pop above the latter would suggest a retest to 30,000-30,250.
The Russell 2000 reached a peak of 1,717 before ending at 1,708 (+2.7%). Near-term and lower resistance at 1,700-1,725 was reclaimed. A close above the latter would signal upside action towards 1,750-1,775. Below is a chart of the IWM.
The Nasdaq finished at 10,815 (+2.3%) with the high hitting 10,875. Lower resistance at 10,750-10,900 was cleared and held. A close above the latter below would be a slightly bullish development for additional strength to 11,000-11,150.
The S&P 500 settled at 3,678 (+2.6%) after tagging a late day peak of 3,698. New and lower resistance at 3,675-3,700 was recovered. A move above the latter would indicate ongoing strength towards 3,725-3,750.
Volatility Index
The Volatility Index (VIX) was down for the second-straight session with the low reaching 29.63. Near-term and upper support at 30-29.50 was breached but held. A drop below the latter would suggest a retest towards 28.50-28.
Resistance is at 33-33.50.
Market Analysis
The S&P 400 Mid Cap Index (MID) snapped a two-session slide after trading to a high of 2,280. Lower resistance at 2,275-2,300 was cleared but held. A close above the latter would suggest upside towards 2,325-2,350.
Shaky support is at 2,250-2,225 with last Tuesday’s 52-week low at 2,185.
RSI (relative strength index) is back in an uptrend with key resistance at 40 getting cleared and holding. Continued closes above this level would indicate further strength towards 35-40. Support is at 35-30.
Sector
The Health Care Select Sector Spider (XLV) was up for the first time in three sessions with the peak reaching $124.07. Lower resistance at $124-$124.50 was topped but held. A close above the latter would imply further upside towards $126-$126.50.
Support is at $124.50-$124.
RSI has reversed course with key resistance at 45 getting recovered. Continued closes above this level would suggest additional strength towards 50-55 and levels from last month. Support is at 40-35.
Market Outlook
The prior trading ranges are back in play so I wouldn’t be surprised if the bulls give back some of yesterday’s gains today. Of course, I’d love to see some follow thru today but the fact the VIX couldn’t hold 30 favors the bears.
I still might add another new trade today so stay locked-and-loaded in case I take action.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 24-16 (60%). 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.
Tyson Foods (TSN, $66.72, up $0.79)
TSN October 70 calls (TSN221021C00070000, $0.55, up $0.10)
Entry Price: $0.50 (10/3/2022)
Exit Target: $1.00
Return: 10%
Stop Target: None
Action: Shares tagged a high of $66.75 with new and lower resistance at $66.50-$67 getting cleared and holding. Shaky support is at $66-$65.50 with yesterday’s 52-week low at $65.52.
Catching a falling knife is never an easy task but with RSI dipping into the mid-teens, I wanted to get into this trade for a possible quick rebound over the next week or two.
Shares were, and remain, at extremely oversold levels and these call premiums were relatively cheap. We only need shares to trade to $71 by the close of October 21st to get an easy double from the entry price.
ProShares Bitcoin Strategy ETF (BITO, $12.06, up $0.07)
BITO October 10.50 puts (BITO221021P00010500, $0.40, unchanged)
Entry Price: $0.51 (9/22/2022)
Exit Target: $1.05
Return: -22%
Stop Target: None
Action: Lower resistance at $12-$12.25 was recovered with the high at $12.14. Support remains at $11.75-$11.50.
Rocket Companies (RKT, $6.58, up $0.26)
RKT December 8 calls (RKT221216C00008000, $0.35, unchanged)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -63%
Stop Target: None
Action: Lowered resistance at $6.50-$6.75 was cleared and held following the rebound to $6.68. Key support is at $6.25.
Diana Shipping (DSX, $3.91, up $0.30)
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: Yesterday’s peak reached $3.97 with lower resistance at $3.90-$4 getting cleared and holding. Support is at $3.70-$3.60.
