MomentumOptions.com Pre-Market Update for 12/22/2022
Volatility Pushes 20
8:00am (EST)
The stock market showed strength for the second-straight day with Wednesday’s gains pushing fresh resistance levels that had previously served as key support. A better-than-expected consumer confidence reading helped sentiment after the index spiked to 108.3 from a revised 101.4 reading in November.
The Russell 2000 traded to a morning high of 1,784 before closing at 1,776 (+1.7%). Lower resistance at 1,775-1,800 was topped and held. A move above the latter and the 50-day moving average would be a more bullish development for a further run to 1,825-1,850. Below is a chart of the IWM.
The Dow tagged a high of 33,437 while going out at 33,376 (+1.6%). Fresh resistance at 33,250-33,500 was tripped and held. A pop above the latter would imply additional upside towards 33,750-34,000 and the 20-day moving average.
The Nasdaq settled at 10,709 (+1.5%) with the intraday peak reaching 10,753. New and lower resistance at 10,750-10,900 was cleared but held. A close above the latter and the 50-day moving average would indicate a retest to 11,000-11,150.
The S&P 500 ended at 3,878 (+1.5%) with the high hitting 3,889. Lower resistance at 3,875-3,900 and the 50-day moving average were recovered. A move above the latter would signal strength towards 3,925-3,950.
Volatility Index
The Volatility Index (VIX) was down for the fourth-straight session with the low at 19.94. Key support at 20 was breached but held. Continued closes below this level would suggest weakness to 19-18.50 with the December 2nd intraday low at 18.95.
Lowered resistance is at 21.50-22 and the 20-day moving average.
Market Analysis
The Invesco QQQ Trust (QQQ) snapped a five-session slide after trading to a high of $274.78. New and lower resistance at $274.50-$275 was cleared but held. A pop above the latter would imply strength towards $276.50-$277.
Support is at $270.50-$270.
RSI (relative strength indicator) is back in an uptrend with key resistance at 40 getting recovered. Continued closes above this level would suggest a run to 45-50 and levels from last week. Support is at 35-30.
Sector
The Energy Select Sector Spider (XLE) extended its winning streak to two-straight days with the intraday peak reaching $86.75. Near-term and lower resistance at $86.50-$87 was cleared but held. A close above the latter and the 20-day and 50-day moving averages would signal additional upside towards $88-$89.50.
Support is at $85.50-$85.
RSI is in an uptrend with key resistance at 50 getting reclaimed. Continued closes above this level would suggest further strength to 55-60 and prior levels from late November. Support is at 45-40.
Market Outlook
The RSI levels for the major indexes are back above 40 with the Dow pushing 50 after falling below 40 to start the week. Closes above 50 might signal a Christmas “rally” afterwards based on current support levels holding. As a reminder, the last five trading days of the year and the first two of the New Year is the time frame, if there is or isn’t a rally.
If RSI at 50 holds across the board into Friday’s close, next week could be bearish, or a new trading range resumes. If next week is bearish, RSI could fade towards the 30 level, and possibly the mid to high 20’s. This would likely confirm the November lows being taken out next week with fresh 52-week lows for the major indexes next month.
Fourth-quarter earnings season will start the second-week of January and will also have a major impact on how the month of January unfolds. Key resistance levels the bulls need to recover this week: Dow 33,750-34,000; Nasdaq 11,000-11,150; S&P 3,900-3,925; Russell 1,800-1,825.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 26-22 (54%). 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.
Intel (INTC, $26.83, up $0.39)
INTC January 26 puts (INTC230120P00026000, $0.65, down $0.20)
Entry Price: $0.85 (12/16/2022)
Exit Target: $1.70
Return: -23%
Stop Target: None
Action: Lower resistance at $26.75-$27 was cleared and held following the morning bounce to $26.97. Support is at $26.50-$26.25.
DraftKings (DKNG, $11.77, down $0.06)
DKNG January 12.50 puts (DKNG230120P00012500, $1.35, unchanged)
Entry Price: $0.70 (12/6/2022)
Exit Target: $2.10
Return: 92%
Stop Target: $1.05 (Stop Limit)
Action: Lower resistance at $12-$12.25 was cleared but held for the second-straight day with the high touching $12.19. Shaky support remains at $11.75-$11.50.
