MomentumOptions.com Pre-Market Update for 1/4/2023
Trading Ranges Continue
8:00am (EST)
The stock market started 2023 in the red as weakness in Apple (AAPL) and Tesla (TSLA), which account for 9% of the market capitalization for the broader market, weighed on sentiment. The losses kept the major indexes in mini trading ranges that have been in play since mid-December.
The Nasdaq ended at 10,386 (-0.8%) after tagging an intraday low of 10,309. Upper support at 10,400-10,250 failed to hold. A drop below the latter and last Wednesday’s low at 10,207 would suggest a retest towards 10,150-10,000 with the October 13th 52-week low at 10,088.
The Russell 2000 traded down to 1,737 while settling at 1,750 (-0.6%). Near-term and upper support at 1,750-1,725 was breached but held. A fade below the latter would signal additional weakness to 1,700-1,675 with the October 13th 52-week low at 1,641. Below is a chart of the IWM.
The S&P 500 tested an afternoon low of 3,794 before finishing at 3,824 (-0.4%). Upper support at 3,800-3,750 was tripped but held. A move below the latter would imply downside risk towards 3,725-3,675 with the November 3rd low at 3,698.
The Dow went out at 33,136 (-0.03%) with the afternoon low hitting 32,850. Current and upper support at 33,000-32,750 was breached but held. A close below the latter would indicate weakness to 32,500-32,250 and the 200-day moving average.
Volatility Index
The Volatility Index (VIX) broke out of a tight range after surging to a high of 23.76. Prior and lower resistance at 23.50-24 and the 50-day moving average were cleared but levels that held. A pop above the latter would suggest another run towards 25.50-26 and the 200-day moving average.
Fresh support is at 22.50-22 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 $328.35. Current and upper support at $328.50-$328 was breached but held. A drop below the latter would signal a further fade towards $327-$326.50.
Resistance is at $333.50-$334 and the 20-day moving average.
RSI is in a slight 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 Materials Select Sector (XLB) was down for the third time in four sessions with the low at $76.89. Upper support at $77-$76.50 was triggered but held. A close below the latter would imply a weakness towards $75.50-$75.
Resistance is at $78-$78.50 and the 200-day/ 50-day moving averages.
RSI is also in a slight downtrend with key support at 40 holding. A close below this level would be a bearish development for downside action to 35-30 and the late September lows. Resistance is at 45-50.
Market Outlook
The current trading ranges are likely going to stay intact into next week and the start of earnings season before we get a bullish or bearish breakout from current levels. The action in the VIX was slightly favorable for the bears but the bulls are safe as long as they can hold 26 going forward.
We added a New Trade yesterday that has gotten off to a good start so let’s go check the action.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 0-0 (0%). 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.
Marathon Oil (MRO, $26.64, down $1.43)
MRO February 24 puts (MRO230217P00024000, $1.10, up $0.30)
Entry Price: $0.90 (1/3/2023)
Exit Target: $1.80
Return: 22%
Stop Target: None
Action: Tuesday’s low tagged $25.32 with prior and upper support from mid-September at $25.50-$25.25 getting busted but holding. A close below the latter would be an ongoing bearish development for downside risk to $25-$24.75. Lowered resistance is at $26-$26.25 and the 200-day moving average.
A breakout above $23 came in late September and where shares could eventually make a backtest to on continued weakness. These options have 44 days before expiration so we have plenty of time to wait for a retreat towards $23-$22.
Pfizer (PFE, $51.26, up $0.02)
PFE January 50 puts (PFE230120P00050000, $0.60, down $0.10)
Entry Price: $0.80 (12/22/2022)
Exit Target: $1.60
Return: -25%
Stop Target: None
Action: Shares tagged a low of $50.82 with current and upper support at $51-$50.50 getting breached but holding. Resistance remains at $51.50-$52 and the 20-day moving average.
DraftKings (DKNG, $11.05, down $0.34)
DKNG January 12.50 puts (DKNG230120P00012500, $1.65, up $0.20)
Entry Price: $0.70 (12/6/2022)
Exit Target: $2.10 (closed 1/3rd at $1.85 on 12/27/2022, 1/3rd at $1.40 on 12/29/2022)
Return: 133%
Stop Target: $1.15, raise to $1.35 (Stop Limit)
Action: Raise the Stop Limit at $1.15 to $1.35 on the remaining third of the position.
Key support at $11 was triggered but held for the third-straight session following the intraday fade to $10.98. Resistance is at $11.50-$11.75.
