MomentumOptions.com Pre-Market Update for 10/5/2022
Volatility Falls Below 30
8:00am (EST)
The stock market showed strength for the second-straight session despite Tuesday’s gains coming on weaker-than-expected economic data. Specifically, job openings in August fell by the most in over 2 years to suggest a possible cooling in the labor market.
The Russell 2000 finished on the session peak of 1,775 (+3.9%). New and lower resistance at 1,775-1,800 was kissed and held. A close above the latter would be an ongoing bullish development with upside to 1,825-1,850 and the 50-day moving average. Below is a chart of the IWM.
The Nasdaq tested an intraday high of 11,189 while ending at 11,176 (+3.3%). Fresh and lower resistance at 11,100-11,250 was topped and held. A move above the latter would suggest ongoing upside towards 11,350-11,500.
The S&P 500 closed at 3,790 (+3.1%) and a point off the high at 3,791. Lower resistance at 3,775-3,800 was cleared and held. A pop above the latter would signal strength to 3,825-3,850.
The Dow traded up to 30,325 before settling at 30,316 (+2.8%). Prior and lower resistance from mid-June at 30,250-30,500 was reclaimed. A close above the latter would indicate a further run towards 30,750-31,000.
Volatility Index
The Volatility Index (VIX) extended its losing streak to three-straight sessions with the low hitting 28.56. New and upper support at 29-28.50 was breached but held. A fade below the latter would signal weakness towards 27.50-27.
Lowered resistance is at 29.50-30.
Market Analysis
The Spider Small-Cap 600 ETF (SLY) was up for the second-straight session after testing a high of $80.57. New and lower resistance at $80.50-$81 was cleared and held. A move above the latter would indicate additional upside action towards $81.50-$82.
Support is at $79.50-$79.
RSI (relative strength indicator) is in an uptrend with key resistance at 50 holding. A close above this level would suggest strength to 55-60 and levels from mid-August. Support is at 45-40.
Sector
The Spiders S&P Homebuilders ETF (XHB) was also up for the second-straight day with the intraday high at $59.34. Prior and lower resistance from last month at $59-$59.50 was cleared and held. A move above the latter would signal additional strength towards $60.50-$61 and the 50-day moving average.
Support is at $58.50-$58.
RSI cleared and held key resistance at 50. Continued closes above this level would suggest upside to 55-60 and mid-August levels. Support is at 45-40.
Market Outlook
The bulls did an excellent job of barreling thru the top of the prior trading ranges whole posting back-to-back wins for the first time since early September. That mini rally lasted four days so we need to keep that in mind as the rest of the month was a disaster.
If there is a pullback today or the rest of the week, the levels that need to hold are at: Dow 29,500; S&P 3,700; Nasdaq 11,000; and Russell 1,700. These levels represent the top of the prior trading ranges.
As for the VIX, a move back above 30 would be a slightly bearish signal for the market with a close above 32.50-33 likely suggesting a failed rebound rally.
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, $67.46, up $0.74)
TSN October 70 calls (TSN221021C00070000, $0.65, up $0.10)
Entry Price: $0.50 (10/3/2022)
Exit Target: $1.00
Return: 30%
Stop Target: None
Action: Shares made a run to $68.28 with the options peaking at 90 cents. Fresh and lower resistance at $68-$68.50 was cleared but held. Support is at $67-$66.50.
We came close to closing half or all of the trade yesterday for $1 to get a triple-digit win. Hopefully shares will show continued strength today and this week but I wasn’t happy with the close below $68.
ProShares Bitcoin Strategy ETF (BITO, $12.52, up $0.46)
BITO October 10.50 puts (BITO221021P00010500, $0.30, down $0.10)
Entry Price: $0.51 (9/22/2022)
Exit Target: $1.05
Return: -41%
Stop Target: None
Action: Lower resistance at $12.50-$12.75 was reclaimed following the late day push to $12.54. Support is at $12.25-$12.
Rocket Companies (RKT, $7.18, up $0.60)
RKT December 8 calls (RKT221216C00008000, $0.50, up $0.15)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -47%
Stop Target: None
Action: Fresh and lower resistance at $7-$7.25 was cleared and held with shares closing on the session peak. Rising support is at $7-$6.75.
Diana Shipping (DSX, $4.02, up $0.11)
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 high reached $4.10 with lower resistance at $4-$4.10 getting cleared and holding. New support is at $3.90-$3.80.