MomentumOptions.com Pre-Market Update for 12/2/2022
Tech Tags Monthly Peak
8:00am (EST)
The stock market trended lower on Thursday with Tech showing strength as Wall Street awaits this morning’s monthly employment update. Forecasts have payrolls rising by 200,000 last month with the unemployment rate holding steady at 3.7%.
The Nasdaq ended at 11,482 (+0.1%) with the session high hitting 11,546. Key resistance at 11,500 was cleared but held. Continued closes above this level would suggest additional strength towards 11,600-11,750 and levels from mid-September.
The Dow touched a low of 34,129 before closing at 34,395 (-0.6%). Fresh and upper support at 34,250-34,000 was tripped but held. A move below the latter would imply a further pullback towards 33,750-33,500 and the 20-day moving average.
The Russell 2000 finished at 1,881 (-0.3%) with the late day low tapping 1,876. New and upper support at 1,875-1,850 was challenged and held. A drop below the latter and the 200/ 20-day moving averages would indicate weakness to 1,825-1,800. Below is a chart of the IWM.
The S&P 500 traded down to 4,050 before settling at 4,076 (-1.5%). Current and upper support at 4,050-4,025 was kissed and held. A close below the latter and the 200-day moving average would signal a further fade towards 4,000-3,975.
Volatility Index
The Volatility Index (VIX) extended its losing streak to three-straight sessions with the intraday low touching 19.80. Key support at 20 was breached and held. Continued closes below this level keeps weakness towards 19.50-19 in focus.
Lowered resistance is at 20.50-21.
Market Analysis
The Invesco QQQ Trust (QQQ) was up for the second-straight day after trading up to $295.75. Mid-September and lower resistance at $295.50-$296 was cleared but held. A pop above the latter would imply strength towards $297.50-$298.
Support is at $290.50-$291.
RSI (relative strength indicator) has flatlined with key support at 60 holding. A close below this level would indicate weakness towards 55-50. Resistance is at 65-70 and levels from mid-August.
Sector
The Materials Select Sector (XLB) showed strength for the third-straight day with the peak at $83.41. Fresh and lower resistance at $83-$83.50 was topped but held. A close above the latter would signal a continued breakout towards $84.50-$85.
Near-term support is at $82.50-$82.
RSI remains in a slight uptrend with key support at 70 holding. Continued closes above this level would be a bullish development for upside to 75 and the mid-August peak. Support is at 65-60.
Market Outlook
This morning’s jobs report could help or hinder the bullish week. Wall Street is hoping for a weak report so that the Fed will lower this month’s rate hike to a half-point instead of three-quarters. A strong jobs report could favor the bears and set them up for next week.
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, $30.25, up $1.06)
PSTG December 32 calls (PSTG221216C00032000, $0.50, down $0.40)
Entry Price: $1.75 (11/14/2022)
Exit Target: $3.50
Return: -63%
Stop Target: None
Action: The volatility in the stock this week has been insane with Thursday’s surge off the low reaching a high of $30.57. Resistance at $30.50-$30.75 was cleared but held. Shaky support is at $30-$29.75.
The time premium is starting to play a major role on how this trade is playing out. Let’s see where things are at on Monday morning before possibly saving the remaining premium.
Verizon Communications (VZ, $38.33, down $0.65)
VZ December 40 calls (VZ221216C00040000, $0.15, down $0.10)
Entry Price: $0.55 (11/2/2022)
Exit Target: $1.10
Return: -71%
Stop Target: None
Action: Upper support at $38-$37.75 and the 20-day moving average were tripped but levels that held with the low at $37.81. Resistance is at $38.75-$39.
Rocket Companies (RKT, $8.54, up $0.24)
RKT December 8 calls (RKT221216C00008000, $0.75, up $0.15)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -21%
Stop Target: None
Action: Shares recovered key resistance at $8.50 following the run to $8.65. Rising support is at $8.25-$8.
A run past $9 will get these calls to at least $1 in-the-money and the trade into profitable territory. We were in this position a few weeks ago so hopefully we get a major breakout above the 200-day moving average on possible short-covering as soon as today.
