MomentumOptions.com Pre-Market Update for 4/20/2023
Flat Action Continues
8:00am (EST)
The stock market traded in another tight range on Wednesday as Wall Street digested more earnings and the latest economic news. The Fed’s Beige Book showed lending volumes and loan demand declined to keep the central bank’s next policy move in focus.
The Nasdaq tested a low of 12,060 before ending slightly higher at 12,157 (+0.03%). Upper support at 12,000-11,850 was challenged and held. The rebound to 12,191 fell shy of key resistance at 12,200. Continued closes above this level and the February 2nd peak at 12,269 would suggest a possible breakout towards 12,350-12,500.
The S&P 500 closed at 4,154 (-0.01%) with the intraday low reaching 4,134. Upper support at 4,150-4,100 was tripped but held. A move below the latter would imply a further slide to 4,050-4,000 and the 50-day moving average. Key resistance is at 4,200 with the early February peak at 4,195.
The Dow remained in a five session range after settling at 33,897 (-0.2%) with the low kissing 33,814). Current and upper support at 33,750-33,500 was challenged and held. A drop under the latter would indicate a retest to 33,250-33,000 and the 50-day moving average. Resistance remains at 34,000-34,250.
Volatility Index
The Volatility Index (VIX) fell for the sixth-straight session with the fresh 52-week low hitting 16.17. Longer-term and upper support from January 2022 at 16.50-16 was breached but held. A close below the latter would suggest weakness towards 15.50-15. Resistance is at 17.50-18.
Thursday’s earnings announcements:
Before the open: American Express (AXP), AT&T (T), Blackstone (BX), Genuine Parts Company (GPC), Home BancShares (HOMB), KeyCorp (KEY), Nokia (NOK), Philip Morris (PM), Rite Aid (RAD), Snap-On (SNA), Taiwan Semiconductor (TSM), Union Pacific (UNP)
After the close: CSX (CSX), First Financial (FFBC), Knight-Swift Transportation Holdings (KNX), PPG Industries (PPG), Seagate Technology (STX), Valmont Industries (VMI)
Economic news:
Initial Jobless Claims – 8:30am
Philadelphia Fed Business Outlook Survey – 8:30am
Existing Home Sales – 10:00am
Market Thoughts
The major indexes have been tentative this week but have been holding the top of the recent trading ranges during the intraday weakness. The longer-term technical setups show the S&P and the Dow remain in nice uptrend channels off the mid-March lows. The Nasdaq has been consolidating just outside of its uptrend channel following a torrid, low-teen, first quarter gain.
Earnings have been better-than-expected with over 80% of companies topping forecasts by a margin of nearly 8%. This has frustrated the short-sellers that have expected lousy numbers and a market selloff as prior resistance levels from February and December remain in play.
For new subscribers, falling volatility (VIX) typically indicates a bullish market while a rising VIX signals near-term weakness and is bearish for the stock market. The chart shows a longer-term DOWNTREND channel has remained in play since the mid-March market lows with the VIX clearing 30 that month.
Next week represents one of the biggest stretches of the first-quarter earnings season and we have talked about volatility possibly getting stretched towards the 15 area. A close above 18 and out of the downtrend channel would be a slight bearish development for the market.
Tesla (TSLA) matched earnings following yesterday’s closing bell after reporting a profit of 85 cents a share. Revenue was slightly higher at $23.3 billion versus forecasts of $23.2 billion. Elon Musk, the company’s CEO, said that the current macro environment remains uncertain but operating margin remains among the best in the industry despite reduced prices.
Shares were in the low $170’s in after-hours trading last and could test the March 13th low at $163.91 on a steeper selloff after this morning’s opening bell.
As far as the current action, we couldn’t be more happier with how the year has been unfolding and our current win rate. The charts on the major indexes and the VIX have provided great clues on when to be bullish, bearish, or neutral on the market and why we love doing the homework.
We still believe higher highs remain in play for the major indexes as RSI (relative strength index) levels are still hovering around 60. A run to 70 could come across the board if the major indexes breakout to the upside and test prior resistance levels from February and December.
We could have another New Trade today so stay locked-and-loaded.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 11-4 (73%). 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.
Pfizer (PFE, $40.24, down $0.31)
PFE May 40 puts (PFE230519P00040000, $1.00, up $0.11)
Entry Price: $0.90 (4/19/2023)
Exit Target: $1.80
Return: 11%
Stop Target: None
Action: Yesterday’s low kissed $40.20 with upper support at $40.50-$40.25 failing to hold. Resistance is at $41-$41.50 and the 50-day moving average.
We wanted to get back into PFE following the failed nine-session battle with the 50-day moving average. The March 10th 52-week low tagged $39.23 and we believe a drop towards $38-$37.50 could come if $39 fails to hold.
These options have about a month before they expire so we have plenty of time to wait for the breakdown. On that note, earnings are due out May 2nd and the results could have a major impact on the stock price.
The company has topped expectations over the past four quarters so a miss or lowered guidance might spark a renewed selloff. We think the upside could be muted on another earnings beat after shares failed to clear and hold $42.
