MomentumOptions.com Pre-Market Update for 12/16/2022
Trading Ranges Crack
8:00am (EST)
The stock market showed continued weakness on Thursday as Wall Street continued to digest Fed Chairman Powell’s latest comments concerning interest rates and the economy. Once again, the bottom of the trading ranges came into play but this time they failed to hold as the major indexes tapped fresh monthly lows.
The Nasdaq settled at 10,810 (-3.2%) after tumbling to an intraday low of 10,775. Prior and upper support from early November at 10,900-10,750 and the 50-day moving average failed to hold. A drop below the latter would suggest further damage to 10,650-10,500.
The S&P 500 tested a low of 3,879 while ending at 3,895 (-2.5%). Key support and the bottom of the trading range at 3,900 failed to hold. A fade below 3,850 and the the 50-day moving average would imply an ongoing slide towards 3,800-3,750.
The Russell 2000 closed at 1,774 (-2.5%) with the session low at 1,770. Early November and upper support at 1,775-1,750 and the 50-day moving average were breached and failed to hold. The November 9th low touched 1,757 and the November 3rd low kissed 1,758. A close below these levels and 1,750 would signal a further decline towards 1,725-1,700. Below is a chart of the IWM.
The Dow traded to an intraday low of 33,016 before finishing at 33,202 (-2.3%). Longer-term and upper support 33,250-33,000 failed to hold. A move below the latter would indicate additional weakness to 32,750-32,500 and the 50-day/ 200-day moving averages.
Volatility Index
The Volatility Index (VIX) snapped a two session slide after tagging a high of 23.67. Lower resistance at 23.50-24 was cleared and held. A move above the latter would imply another trip towards 25.50-26.
Support is at 21.50-21 and the 20-day moving average.
Market Analysis
The Spiders Dow Jones Industrial Average ETF (DIA) was down for the second-straight session after tagging a low of $330.78. Prior and upper support from mid-November at $331-$330.50 was breached but held. A drop below the latter would suggest a further fade towards $329-$328.50.
Resistance is at $337-$337.50.
RSI is in a downtrend with upper support at 45-40 holding. A close below the latter would indicate weakness to 35-30 and levels from late September. Resistance is at 50-55.
Sector
The Health Care Select Sector Spider (XLV) had its three-session winning streak snapped following the pullback to $137.04. Prior and upper support at $137.50-$137 was breached but held. A close above the latter would suggest weakness towards $136-$135.50.
Resistance is at $139-$139.50.
RSI has rolled over with upper support 55-50 failing to hold. A close below the latter would signal additional weakness to 45-40 and levels from mid-October. Resistance is at 60-65.
Market Outlook
The close below the November 10th lows for the major indexes, excluding the S&P 500, was a bearish development for the overall market. The Nasdaq and the Russell’s inability to hold their 50-day moving averages was also a negative storyline.
I wanted to add a new trade yesterday following the breakdown out of the trading ranges and there could be an opportunity to add another one today. If I take action, I will send out a Trade Alert. In the meantime, let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 25-22 (53%). 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.
Cisco Systems (CSCO, $48.15, down $1.15)
CSCO January 47 puts (CSCO230120P00047000, $1.00, up $0.36)
Entry Price: $0.95 (12/15/2022)
Exit Target: $1.90
Return: 5%
Stop Target: None
Action: Shares touched a low of $47.74 with upper support at $48-$47.50 getting tripped but holding. Resistance is at $48.50-$49 and the 20-day moving average.
DraftKings (DKNG, $12.63, down $0.92)
DKNG January 12.50 puts (DKNG230120P00012500, $1.05, up $0.30)
Entry Price: $0.70 (12/6/2022)
Exit Target: $1.40
Return: 50%
Stop Target: None
Action: Thursday’s low kissed $12.58 with early November and upper support at $12.75-$12.50 failing to hold. Lowered resistance is at $13-$13.25.
