MomentumOptions.com Pre-Market Update for 10/24/2022
Blue-Chips Test 50-Day Moving Average
8:00am (EST)
The stock market ended Friday on a high note with the bulls securing a rare weekly win. The blue-chips lead the way after hitting a fresh month high while make a run at key resistance levels from mid-September.
The other major indexes were just as strong but remain in mini-trading ranges ahead of this week’s barrage of earnings announcements. The higher Friday and a positive Monday close would confirm some money is starting to move back into the market.
The Dow ended at 31,082 (+2.5%) after trading to an intraday high of 31,119. Mid-September and lower resistance at 31,000-31,250 was recovered. A move above the latter and the 50-day moving average would signal further strength towards 31,500-31,750.
The S&P 500 tagged a high of 3,757 while settling at 3,752 (+2.4%). Key resistance at 3,750 was reclaimed. Continued closes above this level would indicate upside to 3,775-3,800 with the monthly peak at 3,806.
The Nasdaq tapped a high of 10,875 before closing at 10,859 (+2.3%). Current and lower resistance at 10,850-11,000 was cleared and held. A pop above the latter would suggest a retest to 11,100-11,250 with the beginning of the month high at 11,230.
The Russell 2000 finished at 1,742 (+2.2%) with the second half peak hitting 1,744. Lower resistance at 1,725-1,750 was topped and held. A close above the latter would be a slightly bullish development with strength towards 1,775-1,800 and the 50-day moving average. Below is a chart of the IWM.
Volatility Index
The Volatility Index (VIX) was fell for the second-straight day following the intraday fade to 29.24. Prior and upper support from the beginning of the month at 29.50-29 was tripped but held. A drop below the latter would suggest downside action to 28-27.50.
Lowered resistance is at 30-30.50.
Market Analysis
The S&P 400 Mid Cap Index (MID) snapped a two session slide after trading to a high of 2,315. Lower resistance at 2,300-2,325 was tripped and held. A move above the latter would suggest upside action towards the 2,350-2,375.
Support is at 2,275-2,250 and the 20-day moving average.
RSI (relative strength index) is back in an uptrend with key support at 50 holding. Continued closes above this level would indicate further strength towards 55-60 and late August. Support is at 45-40.
Sector
The Consumer Staples Select Spiders (XLP) bounced back after testing a late day high of $69.08. Lower resistance at $69-$69.50 was cleared but held. A pop above the latter would signal additional strength towards $70-$70.50.
Support is at $68-$67.50 and the 20-day moving average.
RSI is back in an uptrend with key resistance at 50 holding. A close above this level would indicate further strength to 55-60 and levels from the back half of August. Support is at 45-40.
Market Outlook
For the week, the Nasdaq soared 5.2%; the Dow rallied 4.9%; the S&P jumped 4.7%; and the Russell was up 3.8%. This represented the best week for the major indexes since June.
Coming into last week, the key resistance levels we were watching: Dow 31,000; S&P 3,800; Nasdaq 11,250; and Russell 1,800. The blue-chips were the first to clear so let’s see if the rest of the major indexes can follow suit this week.
Key support levels are at: Dow 29,500; S&P 3,600; Nasdaq 10,500; and Russell 1,675.
With the 3Q earnings getting into full swing this week, there is a good possibility of another 3%-5% move this week. This would have the major indexes near or above their 50-day moving averages on continued strength.
A 3%-5% reversal will have fresh 52-week lows back in focus.
With the near-term outlook bullish, we could have another new trade today so stay locked-and-loaded.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 24-18 (58x%). 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.
KraneShares CSI China Internet ETF (KWEB, $21.45, up $0.11)
KWEB November 24 calls (KWEB221118C00024000, $0.65, up $0.11)
Entry Price: $0.58 (10/21/2022)
Exit Target: $1.20
Return: 12%
Stop Target: None
Action: Shares tagged a 52-week low of $20.68 with fresh and upper support at $20.75-$20.50 getting tripped but holding. New resistance is at $21.75-$22.
These options traded over 4,600 contracts and the KWEB November 25 calls traded above 16,000 contracts on Friday. Shares have been in oversold territory since failing to hold key support at $24 earlier this month. A quick retest towards this level and the 20-day moving average over the next two or three weeks should be enough to get a triple-digit return.
Rocket Companies (RKT, $6.32, up $0.04)
RKT December 8 calls (RKT221216C00008000, $0.25, unchanged)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -74%
Stop Target: None
Action: Shares plunged to a fresh 52-week low of $5.97 before recovering to close in positive territory. Key support at $6 was breached but held. Resistance is at $6.50-$6.75 and the 20-day moving average.
Diana Shipping (DSX, $4.17, up $0.13)
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: Friday’s peak reached $4.23 with lower resistance at $4.20-$4.30 getting cleared but holding. Support is at $4.10-$4 and the 20-day moving average.
