MomentumOptions.com Pre-Market Update for 6/26/2023
Bears Post Weekly Win
The stock market fell on Friday with the major indexes snapping multi-week winning streaks after falling for the fourth time in five sessions. The pullback wasn’t much of a surprise as overbought conditions and Fed speak weighed on sentiment.
The Nasdaq settled at 13,492 (-1%) with the intraday low kissing 13,442. Current and upper support at 13,450-13,300 was breached but held. A move below the latter would indicate weakness towards 13,250-13,100. Resistance is at 13,600-13,750 with the prior Friday’s 52-week high at 13,864.
The S&P 500 tagged a low of 4,341 while closing at 4,348 (-0.8%). Upper support 4,350-4,300 failed to hold. A drop below the latter would suggest a retest to 4,250-4,200 and the 50-day moving average. Resistance is at 4,400-4,450 with the recent 52-week peak at 4,448.
The Dow went out at 33,951 (-0.7%) after trading down to 33,646. Prior and upper support at 33,750-33,500 failed to hold. A close below the latter and the 50-day moving average would be an ongoing bearish signal with downside risk towards 33,250-33,000. Resistance is at 34,000-34,250.
The Volatility Index (VIX) was up for the first time in three sessions with the intraday high touching 13.80. Lower resistance at 13.50-14 was cleared but held. Support is 13-12.50 with last Thursday’s 52-week low at 12.73.
Monday’s earnings announcements:
Before the open: Carnival (CCL)
After the close: None
For the week, the Nasdaq dropped 1.4%, snapping an eight-week winning streak, while posting its worst weekly performance since March. The S&P 500 also fell 1.4%, ending five consecutive weeks of gains. The Dow tumbled 1.7%, ending a three-week run to higher highs.
We talked about the back half of June typically being a weak time period for the market and it aligned perfectly with overbought market conditions. The key support levels we said to watch for were at: Nasdaq 13,500; S&P 4,350; and Dow 33,750. Friday’s closes were just below these targets.
Coming into last week, RSI (relative strength index) levels were well above 70 for the S&P and the Nasdaq. We talked about a fade towards 60 with Friday’s closes at 59 and 61, respectively. We still think RSI levels for both indexes will fall towards 55-50 before resuming a possible uptrend.
RSI on the Dow held 50 but there is a good chance weakness to 40 comes into play. This level has been holding since mid-March and where we could see dip buyers step in.
As far as the Russell 2000, we have highlighted key resistance from early January at 1,900. This level was cleared but failed to hold three times during the prior week and was another good clue of upcoming weakness. Friday’s low kissed 1,818 with a close back below 1,800 being a slightly bearish development.
The last trading day for June will be this Friday with the bulls easily on pace to win the month. With end of quarter window dressing likely later in the week, volatility could pick back up. This means there is risk up to 15 on the VIX. If cleared, 16-16.50 and a test to the 50-day moving average is likely a given.
Although economic news is light today, Consumer Confidence is due out on Tuesday and will impact action. Another round of the jobless claims are due ahead of Thursday open and Friday’s Core PCE Price Index could weigh on sentiment.
As far as our current trades, we closed out our third 200+% winner last week with Ford Motor (F) and two of our other trades were close to breaking even. Unfortunately, the market weakness pushed our bullish positions lower.
Pfizer (PFE) was a cheap way to play continued market strength and cost less than a quarter to open. Meanwhile, Verizon continues to struggle so we may close it out at some point this week to save the remaining premium.
The Track Record is at a 76% win rate and we are extremely pleased on how the first half of the year has played out. We believe the second half of 2023 will continue to provide outstanding trading opportunities, both bullish and bearish, so stay locked-and-loaded as we continue to look for exciting opportunities.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 16-5 (76%). 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.
Walt Disney (DIS, $88.10, down $0.39)
DIS July 85 puts (DIS230721P00085000, $0.90, unchanged)
Entry Price: $0.90 (6/21/2023)
Exit Target: $1.80
Stop Target: None
Action: Friday’s low reached $87.61 with prior and upper support at $88-$87.50 getting tripped but holding. The puts traded up to $1.07. Lowered resistance is at $88.50-$89.
Pfizer (PFE, $38.30, down $0.43)
PFE July 42.50 calls (PFE230721C00042500, $0.05, down $0.01)
Entry Price: $0.24 (6/13/2023)
Exit Target: $0.50
Stop Target: None
Action: Shares tapped a low of $38.28 with upper support at $38.50-$38 failing to hold. Resistance is at $38.75-$39.25.
Verizon (VZ, $35.51, down $0.34)
VZ July 38 calls (VZ230721C00038000, $0.05, down $0.02)
Entry Price: $0.40 (5/19/2023)
Exit Target: $0.80
Stop Target: None
Action: Shares traded down to $35.48 with upper support at $35.50-$35.25 getting tripped but holding. Resistance is at $35.75-$36.