MomentumOptions.com Pre-Market Update for 8/14/2023
S&P Holds 50-Day MA/ Nasdaq Turns Bearish
8:00am (EST)
Commentary
The stock market was mixed to end the week following Thursday’s rebound rally on better-than-expected economic news. Specifically, the Consumer Price Index (CPI) rose 0.2% over last month and 3.2% versus the prior year in July.
The latter month-over-month increase was slightly higher than June’s 3% annual jump but below forecasts for a print of a 3.3%. Friday’s action kept fresh monthly lows intact following the recent 52-week market peaks.
The Nasdaq tested a low of 13,609 before closing below its 50-day moving average for the second-straight day at 13,644 (-0.7%). Early July and upper support at 13,650-13,500 failed to hold. A slide below the latter would suggest ongoing weakness to 13,400-13,250. Lowered resistance is at 13,750-13,900.
The S&P 500 ended at 4,464 (-0.1%) with the low hitting 4,443. Key support at 4,450 was tripped but held. A close below the latter and the 50-day moving average would signal a further pullback towards 4,400-4,350. Resistance is at 4,500-4,550.
The Dow slid to an intraday low of 35,059 while finishing higher at 35,281 (+0.3%). Key support at 35,000 was challenged but held for the six-straight session. A close below this level would imply a backtest to 34,750-34,500 and the 50-day moving average. Resistance is at 35,250-35,500 with the recent 52-week peak at 35,679.
Volatility Index
The Volatility Index (VIX) was down for the third-straight day after closing on the low of 14.84. Upper support at 15-14.50 was recovered. A move below the latter and the 50-day moving average would be a slightly bullish signal for the market. Resistance is at 16-16.50.
Monday’s earnings announcements:
Before the open: Bitcoin Depot (BTM), JinkoSolar (JKS), Sunworks (SUNW)
After the close: Biora Therapeutics (BIOR), Chicken Soup for the Soul Entertainment (CSSE), Getty Images (GETY), Vivos Therapeutics (VVOS)
Economic News
None
Market Thoughts
For the week, the Nasdaq was sank 1.9%; the S&P 500 was off 0.3%; and the Dow rose 0.6%. Energy and was the strongest sector after gaining 3.4% for the week while Technology stumbled 2.5% to lead the laggards.
While we have called a successful market top coming into the month, predicting how long a trading range stays intact, or lower lows continue, is more difficult in the early stages. The first major wave of support levels are starting to come into play and it remains to be seen if they get stretched and hold, or fail to hold altogether.
The first and most important development we will be watching this week is support on the Nasdaq at 13,500. We warned in early July if the bears crack this level, it could signal major selling pressure, not only for Tech, but the entire market. Friday’s low was at 13,609. The bulls need to recover 13,850-14,000 to reverse the current trend.
As far as the Relative Strength Index (RSI) for the Nasdaq, it held 40 on Friday and a level that has has been holding since early January. Obviously, a close below 40 would be a bearish development for the index with downside risk towards 30.
The S&P held its 50-day moving average by less than a six-pack on Friday. A close below this level could lead to a quick 2% pullback to 4,350. RSI is holding 45 with a close below this level likely confirming ongoing weakness. Continued closes above 4,550 is needed to get momentum back into the index.
The Dow is in a mini eight-session trading range between 35,000-35,500. A close below or above these round numbers could lead to a 1,000 point run over the near-term. RSI is above 50 and a level that needs to hold again this week.
The high of the VIX hit 18.14 last Tuesday and we talked about risk towards 17.50, possibly 20. Bingo. We will need to see multiple closes above 20 on the VIX before we can say the bears are completely in charge.
We will likely have one or two new trades this week if the action remains to the downside and near-term support fails to hold. However, we still need to be careful for rebound or snapback rallies that could sway the action.
Also, the regular options for September expire in about a month so we may need to look for October trades as we typically like to trade options 4-6 weeks out. In any event, stay locked-and-loaded in case we take action.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 17-8 (68%). 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 we list one. We will send out a “Profit Alert” or “New Trade” if we 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.
Petróleo Brasileiro (PBR, $13.63, down $0.05)
PBR September 15 calls (PBR230915C00015000, $0.12, unchanged)
Entry Price: $0.35 (7/24/2023)
Exit Target: $0.70
Return: -66%
Stop Target: None
Action: Upper support at $13.50-$13.25 was tripped but held with the low at $13.47 on the close back below the 50-day moving average. Resistance is at $13.75-$14.
There were a couple more analyst downgrades last week, and one the week before, but shares continue to hold up well. These calls have a month before expiration and we still like the position. A close below $13.25-$13 would change our mind and likely force us out.
Iovance Biotherapeutics (IOVA, $7.06, down $0.13)
IOVA December 12.50 calls (IOVA231215C00012500, $0.40, unchanged)
Entry Price: $0.80 (7/10/2023)
Exit Target: $1.60
Return: -50%
Stop Target: None
Action: Friday’s low kissed $6.80 with upper support at $7-$6.75 getting breached but holding. Resistance is $7.25-$7.50 and the 50-day moving average.
For new subscribers, please read the writeup from 7/13 or 7/20 on why we are bullish on the stock.
