MomentumOptions.com Pre-Market Update for 10/18/2022
Bulls Fail to Clear Friday’s Highs
8:00am (EST)
The stock market rebounded on Monday following a positive round of earnings from the financial sector. Bank of America (BAC) was a standout after announcing better-than-expected results but Consumer Discretionary stoled the show after the sector surged more than 4%.
The Nasdaq tapped a high of 10,696 before closing at 10,675 (+3.4%). Current and lower resistance at 10,600-10,750 was reclaimed. A move above the latter would suggest a retest to 10,850-11,000 and the 20-day moving average.
The Russell 2000 finished at 1,735 (+3.2%) with the second half peak hitting 1,738. Lower resistance at 1,725-1,750 was cleared and held. A pop above the latter would be a slightly bullish development with strength towards 1,775-1,800. Below is a chart of the IWM.
The S&P 500 tagged a high of 3,689 while settling at 3,677 (+2.7%). Lower resistance at 3,675-3,700 was recovered. A close above the latter and the 20-day moving average would indicate upside to 3,725-3,750.
The Dow ended at 30,185 (+1.9%) after trading to an intraday high of 30,311. Near-term and lower resistance at 30,250-30,500 was cleared but held. A move above the latter would signal further strength towards 30,750-31,000.
Volatility Index
The Volatility Index (VIX) was down for the third time in four sessions with the low at 30.70. Fresh and upper support at 31-30.50 and the 20-day moving average were breached but levels that held. A close below 30 would be a slightly bullish development for the market with additional weakness towards 29-28.50.
Lowered resistance is at 32.50-33.
Market Analysis
The SPDR S&P 500 ETF (SPY) traded up to $367.98 with lower resistance at $367.50-$368 and the 20-day moving average getting cleared but holding. A pop above the latter would suggest additional strength towards $369.50-$370.
Support is at $364-$363.50.
RSI (relative strength index) is back in an uptrend with lower resistance at 45-50 getting cleared and holding. A close below the latter would signal further upside action towards 55-60 and levels from the first half of September. Support is at 40-35.
Sector
The Industrials Select Sector Spider (XLI) was up for the second time in three sessions after testing a high of $87.06. Current and lower resistance at $87-$87.50 was tripped but held. A close above the latter would signal additional strength to $88.50-$89.
Support is at $86-$85.50 and the 20-day moving average.
RSI rebounded with key resistance at 50 holding. A move above this level would suggest upside action towards 55-60 and mid-September levels. Support is at 45-40.
Market Outlook
Although the major indexes closed higher on Monday, they failed to take out Friday’s opening highs. The good news there has been higher lows over the past two sessions.
The charts show the 20-day moving averages are in play and key resistance levels to watch are: Dow 31,000; S&P 3,800; Nasdaq 11,250; and Russell 1,775. These levels are still shy of the 50-day moving averages but a good week of solid earnings, and no major surprises, could have them in focus by the end of the week.
I could have a new trade today so stay locked-and-loaded.
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, $33.00, down $0.24)
WBA October 33 calls (closed at $0.90 on 10/14)
WBA October 31 puts (WBA221021P00031000, $0.07, unchanged)
Entry Price: $1.70 (10/12/2022)
Exit Target: $2 (Limit Order on calls)
Return: -43%
Stop Target: None
Action: Monday’s high touched $33.98 with key resistance at $34 holding for the third-straight session. Support is at $33-$32.75 and the 20-day moving average.
ProShares Bitcoin Strategy ETF (BITO, $12.05, up $0.25)
BITO October 10.50 puts (BITO221021P00010500, $0.05, down $0.05)
Entry Price: $0.51 (9/22/2022)
Exit Target: $1.05
Return: -90%
Stop Target: None
Action: Lower resistance at $12-$12.25 was reclaimed following the run to $12.14. Support is at $11.75-$11.50.
Rocket Companies (RKT, $6.95, up $0.28)
RKT December 8 calls (RKT221216C00008000, $0.40, up $0.05)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -58%
Stop Target: None
Action: Key resistance at $7 was cleared but held with the peak reaching $7.21. Support is at $6.75-$6.50.
Diana Shipping (DSX, $4.11, 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: Upper support at $4.10-$4 and the 20-day moving average were breached but levels that held following the fade to $4.08. Key resistance is at $4.20.
