MomentumOptions.com Pre-Market Update for 11/11/2022
Bulls Post Biggest Rally in Two Years
8:00am (EST)
The stock market rebounded big time on Thursday following a better-than-expected inflation report. Specifically, the Consumer Price Index posted a still nasty 7.7% increase in October from a year ago but better than forecasts for a 7.9% annual rise.
The Nasdaq made an afternoon trip to 11,119 while ending at 11,114 (+7.4%) and back above the 50-day moving average. Prior and lower resistance at 11,100-11,250 was recovered. A move above the latter and the early October peak at 11,230 would indicate ongoing strength towards 11,350-11,500.
The Russell 2000 went out at 1,867 (+6.1%) after hitting a second half high of 1,868. Key resistance from the end of last month at 1,850 was cleared and held. Continued closes above this level and the 200-day moving average would signal additional gains to 1,875-1,900. Below is a chart of the IWM.
The S&P 500 settled at 3,956 (+5.5%) with the late day peak reaching 3,958. Prior and lower resistance from early September at 3,950-4,000 was reclaimed. A move above the latter would imply further upside towards 4,050-4,100.
The Dow traded to a high of 33,727 before closing at 33,715 (+3.7%). Prior and lower resistance from mid-August at 33,500-33,750 was cleared and held. A move above the latter would suggest strength to 34,000-34,250.
Volatility Index
The Volatility Index (VIX) had its two-session winning streak snapped after tumbling to a low of 22.84. Early September and upper support at 23-22.50 was breached but held. A drop below the latter would imply a further fade towards 21.50-21.
Resistance is at 25 followed by 26.50 and the 200-day moving average.
Market Analysis
The S&P 400 Mid Cap Index (MID) was up for the fourth time in five sessions after zooming to a high of 2,518. Lower resistance from the first half of September at 2,500-2,525 was cleared and held. A move above the latter would suggest upside action towards 2,550-2,575.
Key and shaky support is at 2,475 and the 200-day moving average.
RSI (relative strength index) is back in an uptrend with key resistance at 60 getting cleared and holding. Continued closes above this level would indicate further strength towards 65-70 and the mid-August highs. Support is at 55-50.
Sector
The Real Estate Select Sector Spider (XLRE) rebounded after tapping an intraday high of $38.86. Lower resistance at $38.50-$39 was cleared and held. A close above the latter would signal additional strength towards $40-$40.25.
Support is at $37.50-$37 and the 50-day moving average.
RSI is in an uptrend with key resistance at 65 getting recovered. Continued closes above this level would imply upside action towards 70-75 and levels from mid-August. Support is at 60-55.
Market Outlook
Yesterday’s rip your face off rally forced a ton of bearish traders to cover their short bets. The close above key resistance levels for the major indexes will now serve as crucial support for today and next week.
These levels are at Dow 33,000; S&P 3,900; Russell 1,800 and Nasdaq 10,750. I will talk more about volatility on Monday with the major moving averages showing signs of rolling over.
We got some nice pin action with our current trades so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 25-18 (58%). 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.
Verizon Communications (VZ, $38.52, up $0.90)
VZ December 40 calls (VZ221216C00040000, $0.50, up $0.15)
Entry Price: $0.55 (11/2/2022)
Exit Target: $1.10
Return: -10%
Stop Target: None
Action: Shares surged to a high of $38.55 with prior and lower resistance from early October at $38.50-$38.75 getting cleared and holding. Slightly rising support is at $38.25-$38.
Rocket Companies (RKT, $7.32, up $0.81)
RKT December 8 calls (RKT221216C00008000, $0.30, up $0.15)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -65%
Stop Target: None
Action: Thursday’s peak hit $7.50 with early September and lower resistance at $7.50-$7.75 getting cleared but holding. New support is at $7 and the 50-day moving average.
Diana Shipping (DSX, $4.41, up $0.06)
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 at $4.40-$4.50 was reclaimed following the rebound to $4.49. Support is at $4.30-$4.20 and the 50/20-day moving averages.
