MomentumOptions.com Pre-Market Update for 10/14/2022
Nasdaq/ S&P Snap Six-Session Slides
8:00am (EST)
The stock market tumbled on Thursday’s open following stronger-than-expected inflation data. The Consumer Price Index (CPI) for September was up 8.2% versus a year ago and 0.4% month-over-month.
The news pushed all of the major indexes to fresh 52-week lows before one of the biggest intraday turnarounds of the year followed afterwards. The fact volatility held key resistance on the opening selloff was amazing along with the strength of the rally.
The Dow ended at 30,038 (+2.8%) after trading to an afternoon high of 30,168. Key resistance at 30,000 was reclaimed. Continued closes above this level would signal further strength towards 30,250-30,500.
The S&P 500 tagged a high of 3,685 while settling at 3,669 (+2.6%). Prior and lower resistance at 3,675-3,700 was cleared but held. A pop above the latter would indicate upside to 3,725-3,750.
The Russell 2000 finished at 1,728 (+2.4%) with the second half peak hitting 1,734. Lower resistance from the start of the month at 1,725-1,750 was recovered. A close above the latter would be a slightly bullish development with strength towards 1,775-1,800. Below is a chart of the IWM.
The Nasdaq tapped a high of 10,697 before closing at 10,649 (+2.2%). New and lower resistance at 10,600-10,750 was cleared and held. A move above the latter would suggest a retest towards 10,850-11,000.
Volatility Index
The Volatility Index (VIX) fell for the second-straight day after trading down to 31.63. Fresh and upper support at 32-31.50 was breached and held. A drop below the latter would likely lead to a further pullback to 30.50-30.
Lowered resistance is at 33.50-34.
Market Analysis
The Spider Small-Cap 600 ETF (SLY) was up for the third time in four sessions after testing a high of $79.67. Near-term and lower resistance at $79.50-$80 was topped but held. A move above $80.50 would indicate upside action towards $81.50-$82.
Support is at $75.50-$75 with the late September 52-week low at $75.12.
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 late August. Support is at 45-40.
Sector
The Financial Select Sector Spiders (XLF) snapped a six-session losing streak despite kissing a 52-week low of $29.59. Upper support from February 2021 at $29.75-$29.50 was tripped but held. A close below the latter would signal additional weakness towards $29-$28.75.
Resistance is at $31.75-$32.
RSI has rebounded with key resistance at 50 holding. A close above this level would indicate upside action to 55-60 and levels from early September. Support is at 45-40.
Market Outlook
Just as important as it was for the bulls to hold 35 on the VIX, it will also be critical to try and get a close below 30 heading into the weekend. Key resistance for the major indexes are at levels from the beginning of the month.
I will cover them on Monday along with shaky support levels. The first step for the bulls is to at least get back-to-back wins for the first time since the beginning of the month.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 24-17 (59%). 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.
Walgreens Boots Alliance (WBA, $33.65, up $1.71)
WBA October 33 calls (WBA221021C00033000, $1.10, up $0.30)
WBA October 31 puts (WBA221021P00031000, $0.10, down $0.80)
Entry Price: $1.70 (10/12/2022)
Exit Target: $2 (Limit Order on calls)
Return: -30%
Stop Target: None
Action: Set a Limit Order to exit the calls at $2. We can continue to hold the puts into next week. The premiums for both options was $1.70 and yesterday’s close was at $1.20.
Key resistance at $34 was cleared but held following the run to $34.01. The calls traded up to $1.41. We are looking for continued strength into this morning’s open with a push near or past $35 getting our Limit Order in play. Support is at $32-$31.75.
The company actually reported a loss for the quarter but earnings were adjusted for one-time items to produce an 80-cent profit. This was related to a big charge tied to the company’s United Kingdom stores. The catalysts were there for a breakdown to below $30 but the spin news pleased Wall Street. I’m still hoping we can make a nice double-digit profit on continued strength and a push towards the 50-day moving average.
ProShares Bitcoin Strategy ETF (BITO, $11.95, up $0.18)
BITO October 10.50 puts (BITO221021P00010500, $0.15, unchanged)
Entry Price: $0.51 (9/22/2022)
Exit Target: $1.05
Return: -72%
Stop Target: None
Action: Yesterday’s peak reached $12.04 with lower resistance at $12-$12.25 getting cleared but holding. Support is at $11.75-$11.50.
The puts opened at 28 cents and the session peak following the plunge to $11.18. This trade still has the potential to make us a profit with a close below $11 likely leading to panic selling.
Rocket Companies (RKT, $6.77, up $0.04)
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 and held following the trip to $6.86. Support remains at $6.50-$6.25.
Diana Shipping (DSX, $4.11, up $0.05)
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: Lower resistance $4.10-$4.20 was recovered with the intraday high touching $4.19. Support is at $4.00-$3.90.
