MomentumOptions.com Pre-Market Update for 3/16/2023
Financial Sector Back in Focus
8:00am (EST)
The stock market showed ongoing weakness on Wednesday as economic news showed a slowdown in the economy last month, while fresh chaos resumed in the Financial sector. Specifically, February’s producer-price index (PPI) slipped 0.1% in an unexpected decline.
Credit Suisse (CS) sank 14% but closed above $2 after its top shareholder ruled out investing any more money in the bank. This wasn’t really as big of a deal the talking heads made it out to be as shares have been in a steady decline since peaking above $14 in February 2021. However, it was enough of a worry to drag down the Financial sector by 2.7%.
The Nasdaq bucked the trend after finishing at 11,434 (+0.1%) with the late day high hitting 11,447. Lower resistance at 11,450-11,600 was challenged and held. A pop above the latter would suggest a retest towards 11,700-11,850. Shaky support is at 11,400-11,250 and the 50-day/ 200-day moving averages.
The S&P 500 traded down to 3,838 while settling at 3,961 (-0.7%)
Current and upper support at 3,850-3,800 was tripped but held. A close below the latter and the December 22nd low at 3,764 would be a renewed bearish development with downside risk to 3,750-3,700. Lowered resistance is at 3,900-3,950 and 200-day moving average.
The Dow ended at 31,874 (-0.9%) after sinking to a monthly low of 31,429. Late October and key support 31,500 was breached but held. A close below this level would imply additional weakness towards 31,250-31,000.
New resistance is at 32,000-32,250 and the 200-day moving average.
Volatility Index
The Volatility Index (VIX) was up for the fourth time in five sessions with he high at 29.91. Lower resistance at 30-31 was challenged and held. A close above the latter would indicate strength to 32-33.
New support is at 25-24 and the 200-day moving average.
Thursday’s earnings announcements:
Before the open: Dollar General (DG), G-III Apparel Group (GIII), Honest Group (HNST), Jabil (JBL), Lands’ End (LE), RumbleOn (RMBL), Titan Machinery (TITN), Williams-Sonoma (WSM)
After the close: BioLife Solutions (BLFS), FedEx (FDX), WM Technology (MAPS)
Economic news:
Initial Jobless Claims – 8:30am
Import and Export Prices – 8:30am
Building Permits – 8:30am
Housing Starts – 8:30am
Philadelphia Fed Manufacturing Survey – 8:30am
Market Thoughts
The major indexes traded down to key support levels on Monday before ending mixed following another 4% selloff in the Financial sector. The recent bank debacles were highlighted by the FDIC closing Silicon Valley Bank and seizing nearly $175 billion in deposits.
This represents the second-largest bank failure in U.S. history. The events caused the S&P 500 to briefly slip into negative territory for the year with the index currently trying to hold longer-term support. Specifically, the S&P held 3,800 and major support from late December/ early November while the Nasdaq held 11,000 and support from mid-January.
The Dow held shaky support from mid-October at 31,500 and has been in a steeper selloff than the S&P and the Nasdaq. As for the small-caps, the Russell 2000 also held late December/ early November support and is exhibited the same kind of selling pressure as the blue-chips over the past two weeks.
As far as RSI (relative strength index) levels, the major indexes are giving neutral to bearish readings with the Nasdaq being slightly bullish and the Dow being bearish but approaching oversold levels.
The Nasdaq has had a golden cross officially form with the 50-day moving average closing above the 200-day moving average. This is typically a bullish development for higher highs.
The VIX zoomed to a high of 31 to start the week while closing above 26. Tuesday’s close back below 24 was a tease for Wall Street as this level was recovered by the bears yesterday. A bottoming process for the overall market won’t likely happen until there are continued closes back below 22.50-22 over the near-term.
RSI on the VIX traded above 70 before closing below this level on Monday. This typically indicates overbought conditions and 70 has basically been holding since late September. There was a brief trip towards 75 in January 2022 and 80 in November 2021.
As far as our current trades, RIG took a hit yesterday but continues to be offset by the slow gains in T. We are going to stick with RIG into next week and we have raised the Stop Limit on T.
We had a setup for Citigroup (C) last week that could have given us another 200% winner but we didn’t want to chase. However, we are looking at a possible new trade this morning so stay locked-and-loaded.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 7-2 (78%). 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 Otherwise, follow instructions at all times in the updates on Monday’s and Thursday’s along with the Text Alerts throughout the week.
Transocean (RIG, $5.82, down $0.57)
RIG April 8 calls (RIG230421C00008000, $0.08, down $0.03)
Entry Price: $0.45 (3/3/2023)
Exit Target: $0.90
Return: -82%
Stop Target: None
Action: Wednesday’s low kissed $5.45 following the selloff in oil yesterday. Prior and key support from late February and mid-January at $5.50 was tripped but held. Lower resistance is at $6-$6.15.
Obviously, we aren’t happy with yesterday’s action and we still have over a month before these options expire. Let’s see how if there is a recovery for the rest of this week and next above $6-$6.50. If not, we will likely exit the position next Thursday.
AT&T (T, $18.31, down $0.13)
T April 18 puts (T230421P00018000, $0.55, up $0.07)
Entry Price: $0.40 (3/1/2023)
Exit Target: $0.80
Return: 38%
Stop Target: 44 cents, raise to 46 cents (Stop Limit)
Action: Raise the Stop Limit at 44 cents to 46 cents.
Shares tapped a multi-month low of $18.06 with the puts peaking at 69 cents. Late December and upper support at $18.25-$18 and the 200-day moving average were breached but held for the fourth-straight session. Resistance remains at $18.50-$18.75.
