MomentumOptions.com Pre-Market Update for 12/1/2022
Market Rallies on Powell Comments
8:00am (EST)
The stock market showed strength on Wednesday to close out the last trading day for November after Fed Chairman Powell signaled a 50-basis-point rate hike in December is likely. Powell said it makes sense to moderate the pace of the rate increases as the Fed heads toward its estimated target in benchmark interest rates.
The Nasdaq finished on its session high of 11,468 (+4.4%). Prior and lower resistance at 11,350-11,500 was cleared and held. A move above the latter and the monthly peak at 11,492 would imply a possible run to 11,600-11,750.
The S&P 500 also closed on the day’s high at 4,080 (+3.1%) and back above its 200-day moving average. Early September and lower resistance at 4,075-4,100 was reclaimed. A pop above the latter would suggest ongoing strength towards 4,125-4,150.
The Russell 2000 ended at 1,886 (+2.7%) and the session peak. Lower resistance at 1,875-1,900 and the 200-day moving average were recovered. A close above the latter would indicate a breakout towards 1,925-1,950 and levels from late August. Below is a chart of the IWM.
The Dow settled on the high at 34,589 (+2.2%). Mid-March and lower resistance at 34,500-34,750 was cleared and held. A close above the latter would,setup a push towards 35,000-35,250 in play with the mid-August peak at 34,281.
Volatility Index
The Volatility Index (VIX) was down for the second-straight day after tapping a monthly low of 20.31. Upper support at 20.50-20 was breached and held. A fade below the latter would suggest weakness towards 19.50-19.
Resistance is at 21.50-22.
Market Analysis
The Wilshire 5000 Composite Index (WLSH) snapped a two-session slide after surging and closing on the high of 40,552. Early September and lower resistance at 40,500-40,750 and the 20-day moving average were cleared and held. A move above the latter would signal strength to 41,000-41,250.
Support is at 40,000-39,750.
RSI (relative strength index) is back in an uptrend with lower resistance at 60-65 getting reclaimed. A close above the latter would imply strength to 70-75 and levels from mid-August. Support is at 55-50.
Sector
The Utilities Select Spider (XLU) rebounded with the intraday high kissing $71.58. Prior and lower resistance from late July at $71.50-$72 was busted but held. A close above the latter would suggest upside action to $73-$73.50.
Support is at $70-$69.50.
RSI cleared and held key resistance at 60. Continued closes above this level would signal strength towards 65-70 and levels from early August. Support is at 55-50.
Market Outlook
The S&P and the Dow broke out to fresh multi-month highs while the Nasdaq and the Russell made a run to the top of their current trading ranges. The RSI level for the Dow is once again pushing 70 with the rest of the major indexes hovering the 60 area.
A RSI print of 70 indicates an overbought reading but can get stretched to 75-80 and even into the low 90’s before and index, or stock, makes a noticeable pullback. If there is follow thru today, their could momentum into next week as Wall Street plays catch up while positioning for yearend rebalancing of the portfolios.
We got some nice pin action on our current trades so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 25-19 (57%). 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, $29.19, down $0.27)
PSTG December 32 calls (PSTG221216C00032000, $0.90, up $0.05)
Entry Price: $1.75 (11/14/2022)
Exit Target: $3.50
Return: -47%
Stop Target: None
Action: Wednesday’s low touched of $27.33 with late October and upper support at $27.50-$27.25 getting tripped but holding. Resistance is at $29.50-$29.75.
The calls actually edged up during the day after testing a low of 42 cents. Volume was heavy in anticipation of a good earnings report. The company topped expectations after yesterday’s close on both earnings and revenue with shares up in after-hours trading.
Verizon Communications (VZ, $38.98, up $0.64)
VZ December 40 calls (VZ221216C00040000, $0.25, up $0.05)
Entry Price: $0.55 (11/2/2022)
Exit Target: $1.10
Return: -53%
Stop Target: None
Action: Lower resistance at $39-$39.25 was cleared but held following the afternoon trip to $39.14. Support is at $38.75-$38.50 and the 20-day moving average.
Rocket Companies (RKT, $8.30, up $0.47)
RKT December 8 calls (RKT221216C00008000, $0.60, up $0.30)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -34%
Stop Target: None
Action: Shares traded up to $8.32 with lower resistance at $8.25-$8.50 getting reclaimed. Fresh support is at $8-$7.75.
