MomentumOptions.com Pre-Market Update for 8/21/2023
Bears Pushing Key Support Levels
8:00am (EST)
Here is the link for this week’s video:
https://us06web.zoom.us/rec/share/EP7KzJRJzPa4o00SerKgqfLQA6mXxUyWr9SdFp6NGp-k5IymIvGFwhMxLfkG5Npk.nTar-TWw0I8kEI6Z
Passcode: xPG@Rm+1
Commentary
The stock market showed weakness for the fourth-straight session before rallying intraday on Friday to nearly recover positive territory. The slight losses in Tech and the broader market kept four-session losing streaks in play while the blue-chips snapped a three-session slide.
The Nasdaq tested a low of 13,161 before settling at 13,290 (-0.2%). Upper support at 13,250-13,100 was clipped but held. A close below the latter would likely confirm additional weakness to 13,000-12,850 and levels from late May. Resistance is at 13,350-13,500.
The S&P 500 went out at 4,369 (-0.01%) with the low hitting 4,335. Late June and key support at 4,350 was breached but held. A move below the latter would imply a continued slide towards 4,300-4,250. Resistance is at 4,400-4,450 and the 50-day moving average.
The Dow tagged an intraday low of 34,263 while finishing slightly higher at 34,500 (+0.1%). Upper support at 34,250-34,000 was tripped but held. A close below the latter would signal downside action to 33,750-33,500 and the 200-day moving average. Resistance is at 34,750-35,000 and the 50-day moving average.
Volatility Index
The Volatility Index (VIX) had its three-session winning streak snapped despite tagging a fresh monthly high of 18.88. Prior and lower resistance from late May at 18.50-19 was cleared but held. A close above the latter and 200-day moving average would reopen upside towards 20.50-21. Support is at 17-16.50.
Monday’s earnings announcements:
Before the open: Applied UV (AUVI), Eltek (ELTK), Tingo Group (TIO), Zepp Health (ZEPP)
After the close: Fabrinet (FN), Motorsport Games (MSGM), Nordson (NDSN), Ocugen (OCGN), Zoom Video Communications (ZM),
Economic News
None
Market Thoughts
For the week, the Nasdaq sank 2.6%; the S&P 500 fell 2.1%; and the Dow dropped 2.2%. Consumer Discretionary and Real Estate were the weakest sectors after tanking 4.2% and 3.2%, respectively. There were no major sectors that closed higher for the week.
Friday’s action was slightly encouraging for the bulls following the intraday reversal off fresh monthly lows. Coming into last week, we highlighted our support targets from June and early July after nailing the market top during the last week of July and into the first week of August.
Of course, calling market tops and bottoms is an art in itself and it requires a ton of homework. However, the clues were already there as we pointed out overhead resistance levels, overbought conditions, and Apple’s earnings to start the month.
As far as support levels, we referred back to our July 3rd comments they could come into play this month:
“The key support levels we said to watch for last month were at: Nasdaq 13,500; S&P 4,350; and Dow 33,750.”
We talked about continued weakness coming into last week and pointed out the Nasdaq appeared be the first major index that would test key support. The 13,500 level failed to hold last Wednesday and we mentioned there could be “stretch” towards the 13,250 area. This level held into Friday’s close and needs to hold throughout this week to avoid lower lows.
The S&P 500 held 4,350 on Friday and needs to hold this level again this week. If not, there could be another leg lower to 4,300-4,250 and where we could see a bottoming process. This area also served as a slight pause in early June following signs of a May breakout.
The Dow has held up much better than the Nasdaq and the S&P but closed below its 50-day moving average last Thursday. If the blue-chips fail to recover this level, or more importantly 34,750 this week, we would expect a further fade towards its 200-day moving average with the July 10th low at 33,705.
The other slightly bullish signal for the market is the Relative Strength Index (RSI) levels for the major indexes are at or near oversold conditions. We talked about the Nasdaq testing weakness towards 35-30 with intraday weakness below the latter and Friday’s close at 32.
RSI on the S&P is at 34 and appears to be leveling out after holding 30 on Friday. Meanwhile, the Dow closed right on 40 and a level that has been holding since early March. Obviously, a close below 40 would be an ongoing bearish development.
We have mentioned multiple closes above 20 on the VIX would also be an ongoing bearish signal and the jury remains out following Friday’s pin action. The fact the VIX held its 200-day moving average was bullish but there is still stretch up to 21-21.50 if 20 is cleared.
The May 4th and 24th highs are at 21.33 and 20.81 for the VIX. Both days, there was a close above 20, at 20.09 and 20.03, but no follow through afterwards. This is why we say the bears need multiple closes above 20 before we see panic selling pressure.
It is too early to tell if Friday was the start of a bottoming process or if there is one more wave lower before dip buyers step in. The biggest event we will be watching this week will be Nvidia’s earnings following Wednesday’s closing bell.
This is the major stock that influenced the artificial intelligence (AI) rally over the summer with Wall Street expecting a profit of $2.07 a share on revenue just north of $11 billion. A miss, or lowered guidance, would likely crush the stock and the Nasdaq but something we aren’t expecting.
We posted two more winners this month but the gains were minimal as we somewhat expected, given the current market conditions. We are having an incredible year and there is no reason to force the action as there are a number of promising setups we are still watching.
We have remained patient while letting the market action unfold like the charts are telling us. With that said, we are expecting new trades this week so stay locked-and-loaded.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 18-8 (69%). 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, $13.89, up $0.15)
PBR September 15 calls (PBR230915C00015000, $0.14, up $0.03)
Entry Price: $0.35 (7/24/2023)
Exit Target: $0.70
Return: -60%
Stop Target: None
Action: Lower resistance at $14-$14.25 was challenged but held with the peak hitting $13.90. Support is at $13.75-$13.50 and the 50-day moving average.
Iovance Biotherapeutics (IOVA, $6.07, down $0.20)
IOVA December 12.50 calls (IOVA231215C00012500, $0.20, down $0.05)
Entry Price: $0.80 (7/10/2023)
Exit Target: $1.60
Return: -75%
Stop Target: None
Action: Friday’s low was at $6.06 with key support at $6 holding. Resistance is $6.25-$6.50.
For new subscribers, please read the writeup from 7/13 or 7/20 on why we are bullish on the stock.
