MomentumOptions.com Pre-Market Update for 10/11/2022
Nasdaq Hits 2-Year Low
8:00am (EST)
The stock market fell for the fourth-straight session on Monday as traders awaited another round of inflation news and the start of the third-quarter earnings season. New restrictions by the White House on China’s access to American technology punished the chipmaker stocks and weighed on Tech.
The Nasdaq hit a two-year low of 10,449 before closing at 10,542 (-1%). September 2020 and key support at 10,500 was tripped but held. Continued closes below this level would be an ongoing bearish development for a further fade towards 10,400-10,250.
The S&P 500 tagged a low of 3,588 while ending at 3,612 (-0.8%). Current and upper support at 3,625-3,600 failed to hold. A close below the latter and the late September 52-week low at 3,584 would indicate additional weakness to 3,575-3,550.
The Russell 2000 finished at 1,691 (-0.6%) after testing an intraday low of 1,681. Upper support at 1,700-1,675 was breached and failed to hold. A move below the latter would suggest ongoing weakness towards 1,650-1,625 with the summer 52-week low at 1,641. Below is a chart of the IWM.
The Dow settled at 29,202 (-0.3%) with the midday bottom kissing 29,010. Prior and upper support at 29,250-29,000 failed to hold. A drop below the latter would indicate selling pressure towards 28,750-28,500 with the late September low at 28,715.
Volatility Index
The Volatility Index (VIX) extended its winning streak to three-straight sessions after making a run to 33.99. Late September and lower resistance at 34-35 was challenged but held. A close above the latter will likely cause some panic selling in the market with upside risk towards 37.50-40.
Rising support is at 32-31.50.
Market Analysis
The Wilshire 5000 Composite Index (WLSH) fell for the fourth-straight session with the low at 35,883. Key support from mid-June and late September at 36,000 was breached but held. A close below this level and the September 30th 52-week low at 35,829 would signal additional weakness to 35,750-35,500.
Resistance is at 36,250-36,500.
RSI (relative strength index) is in a downtrend with upper support at 35-30 holding. A close below the latter would indicate weakness to 25 and the low from last month. Resistance is at 40.
Sector
The Communication Services (XLC) extended its losing streak to four-straight sessions after touching a low of $48.17. Upper support at $48.50-$48 was tripped but held. A fade below the latter and the recent 52-week low of $47.80 would signal ongoing weakness towards $47-$46.50.
Lowered resistance is at $49-$49.50.
RSI is trying to stabilize with upper support at 35-30 holding. A close below the latter would indicate additional weakness towards 25-20 and the lows from last month. Resistance is at 40.
Market Outlook
Once again, the bulls find themselves in a critical situation with the VIX just below 35 and all of the major indexes near or at 52-week lows. The Consumer Price Index isn’t due out until Thursday morning and Friday the Financial sector will be in focus with earnings from a number of big banks.
The action could be listless for the next couple of days as the back half of the week will carry the bigger impact. I plan to have a new strangle or straddle trade this week to take advantage of the current volatility and earnings.
I have been wanting to introduce these types of trades for the last couple of months and it is basically buying both a call and put option. We are looking for a stock to move 10%, or more, to get a triple-digit win, but sometimes 5%-8% will be enough to generate a nice double-digit return. Stay tuned…
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, $64.10, up $0.21)
TSN October 70 calls (TSN221021C00070000, $0.10, unchanged)
Entry Price: $0.50 (10/3/2022)
Exit Target: $1.00
Return: -80%
Stop Target: None
Action: Shares snapped a three-session slide after trading to a high of $64.85. Fresh and lower resistance at $64.50-$65 was cleared but held. Shaky support is at $63.50.
ProShares Bitcoin Strategy ETF (BITO, $11.79, down $0.17)
BITO October 10.50 puts (BITO221021P00010500, $0.20, unchanged)
Entry Price: $0.51 (9/22/2022)
Exit Target: $1.05
Return: -61%
Stop Target: None
Action: Upper support at $11.75-$11.50 was breached but held with the low at $11.73. Resistance is at $12-$12.25.
Rocket Companies (RKT, $6.74, up $0.05)
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: Lower resistance at $6.75-$7 was cleared but held by a penny with shares reaching a peak of $6.83. Support is at $6.50-$6.25.
Diana Shipping (DSX, $4.00, down $0.17)
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 low hit $3.97 with upper support at $4-$3.90 holding. Resistance is at $4.15-$4.25.
