MomentumOptions.com Pre-Market Update for 11/21/2022
Trading Range Continues
8:00am (EST)
The stock market bounced back on Friday to offset some of the weekly losses despite another round of hawkish comments concerning interest rate hikes. The Boston Federal Reserve leader stated there was little evidence price pressures are waning, and that the Fed may need to deliver another 75-basis point rate hike next month.
The gains kept the major indexes in a seven-session trading range with a shortened, but typically bullish, upcoming week for the market. Volatility stayed subdued and is making a push towards another monthly low and possibly the late August low.
The Dow tapped a high of 33,827 before settling at 33,745 (+0.6%). Lower resistance at 33,750-34,000 was cleared but held by a nickel. A close above the latter would signal a further run to 34,250-34,500 with the mid-August top at 34,281.
The Russell 2000 ended at 1,849 (+0.6%) with the high hitting 1,869. Near-term and lower resistance at 1,850-1,875 and the 200-day moving average were tripped but levels that held. A move above the latter would indicate a retest towards 1,900-1,925. Below is a chart of the IWM.
The S&P 500 tagged a high of 3,979 while closing at 3,965 (+0.5%). Current and lower resistance at 3,975-4,000 was topped but held. A pop above the latter would suggest ongoing strength towards 4,025-4,050 and the 200-day moving average.
The Nasdaq finished at 11,146 (+0.01%) after making an intraday push to 11,259. Key resistance at 11,250 was cleared but held. A close above this level would imply another trip to 11,350-11,500 with last week’s monthly peak at 11,492.
Volatility Index
The Volatility Index (VIX) was down for the third-straight day with the low at 22.98. Upper support at 23-22.50 was breached but held. A drop below the latter and the prior Friday’s monthly low at 22.37 would signal weakness to 22-21.50.
Lowered resistance is at 24-24.50.
Market Analysis
The Invesco QQQ Trust (QQQ) rebounded after trading up to $287.99. Near-term and lower resistance at $287.50-$288 was cleared but held. A pop above the latter would imply strength towards $289.50-$290.
Support is at $282.50-$283.
RSI (relative strength indicator) has flatlined with key support at 50 holding. A close below this level would indicate weakness towards 45-40 and the lows from the start of the month. Resistance is at 60.
Sector
The Health Care Select Sector Spider (XLV) snapped a three-session slide after tagging a high of $134.80. Key resistance at $135 was challenged and held. A close above this level and the monthly peak at $135.05 would imply a mini breakout towards $136.50-$137 and levels from mid-March.
New support is at $134-$133.50.
RSI is trying to curl higher with key resistance at 65 holding. A close above this level would signal additional strength towards 70-75 and levels from early April. Support is at 60-55.
Market Outlook
For the week, the Russell dropped 1.7%; the Nasdaq fell 1.6%; the S&P 500 was off 0.7%; and the Dow was basically unchanged after giving back a couple of points. More importantly, key support levels that served as prior resistance held with the prior breakout from the previous Thursday representing the bottom of the current trading ranges.
The Russell cleared, but failed to hold, key resistance at 1,900 last Tuesday with upside potential towards 2,000 on continued closes above this level. Key support at 1,825 was breached on Thursday but held with the low at 1,820. A drop below 1,800 would suggest a near-term top.
The Nasdaq challenged key resistance on Tuesday at 11,500 with the high hitting 11,492. If cleared and held, it sets up a potential push towards 11,750-12,000. Crucial support at 11,000 and the 50-day moving average held on Thursday’s fade to 11,006. A move below 10,750 would be a slightly bearish development.
The Dow reached peaks of 33,964 and 33,987 to start last week with key resistance at 34,000 holding. If cleared and held, a trip to 34,250-34,500 and the mid-August peak at 34,281 would be in focus. Thursday’s bottom kissed 33,239 with upper support at 33,250-33,000 getting tripped but holding. A fade below the latter would signal a near-term top.
The S&P traded in a 122-point range last week and remains just over 2% away from its 200-day moving average. Key resistance at 4,000 was topped, but held, for three-straight sessions with Tuesday’s high tapping 4,029. Continued closes above this level would indicate near-term strength to 4,050-4,100 with the August peak at 4,325. Key support at 3,900 was challenged but held on the pullback to 3,906 last Thursday. There is wiggle room to 3,875 with a close below this level and the 20-day moving average implying a retest towards 3,800 and the 50-day moving average.
The monthly low on the VIX is at 22.37 with the 50-day and 200-day major moving averages remaining stable. A close below 22 would be a bullish development for the market with additional weakness to 20-19 coming into play. The August 12th low touched 19.12. The 20-day moving average remains in a downtrend and represents crucial resistance at 25-25.50. There is stretch up to 27.50-28 with a close above the latter signaling a near-term market top.
Retail sales will be in focus during the shortened week with a few major companies announcing earnings numbers. The market is closed on Thursday and is open just a half day on Friday. There could be an opportunity for a new trade but the lack of action will erode some time decay so we will likely wait until next week for some fresh action.
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.
Pure Storage (PSTG, $30.75, up $0.26)
PSTG December 32 calls (PSTG221216C00032000, $1.40, up $0.05)
Entry Price: $1.75 (11/14/2022)
Exit Target: $3.50
Return: -20%
Stop Target: $1
Action: Friday’s peak reached $30.95 with lower resistance at $30.75-$31 getting reclaimed. Support is at $30.50-$30.25 and the 20-day moving average.
Verizon Communications (VZ, $38.55, up $0.39)
VZ December 40 calls (VZ221216C00040000, $0.40, up $0.10)
Entry Price: $0.55 (11/2/2022)
Exit Target: $1.10
Return: -27%
Stop Target: None
Action: Lower resistance at $38.75-$39 was tripped but held following the bounce to $38.77. Support remains at $38.25-$38 and the 50-day moving average.
Rocket Companies (RKT, $7.50, down $0.06)
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: Current and upper support at $7.50-$7.25 was breached but held following the intraday fade to $7.40. Resistance is at $7.75-$8.
This trade was almost back to even last week but I had a feeling RSI at 70 would hold and a pullback would ensue. This was a bullish trade from early September to buy us time as the overall market was trying to rebound.
Diana Shipping (DSX, $4.30, down $0.11)
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 $4.39-$4.20 was breached but held following the fade to $4.22. Resistance is at $4.40-$4.50.