MomentumOptions.com Pre-Market Update for 9/18/2023
Dow Posts Weekly Gain
8:00am (EST)
Video
This week we take an extensive look at the VIX and why Friday’s reversal was slightly bearish. We also look at SLV, PBR, QQQ, ANF and DIS.
https://us06web.zoom.us/rec/share/yCj5t-iRNSnp5uNRSFbBHlu05tPvylBGyamVWVAfAUCntJJUHWbixxZs2ILXKm_V.WVCJCEEipbZXX0eR
Passcode: Zjj2JF+x
Commentary
The stock market continued its whipsaw action following Friday’s pullback with the major indexes remaining in tight ranges. The losses spoiled a recovery of the 50-day moving averages from the previous session with volatility spiking during the second half of action to end the week.
The Nasdaq went out at 13,708 (-1.6%) with the low tapping 13,684. Upper support at 13,750-13,600 failed to hold. A drop below the latter would imply a further pullback towards 13,500-13,350. Resistance is at 13,850-14,000 and the 50-day moving average.
The S&P 500 tagged an afternoon low of 4,447 before settling at 4,450 (-1.2%). Key support at 4,450 was tripped but held by a smidge. A close below this level would suggest downside action to 4,400-4,350. Resistance is at 4,500-4,550 and 50-day moving average.
The Dow closed at 34,618 (-0.8%) after testing a low of 34,572. Upper support at 34,500-34,250 was challenged and held. A fade below the latter would indicate further weakness towards 34,000-33,750 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) snapped a two-session slide after tapping a high of 14.17. Lower resistance at 14-14.50 was cleared but held. A close above 15 and the 50-day moving average would be a near-term bearish development for the market with upside risk to 16-16.50. Support is at 13.25-12.75 with Friday’s fresh 52-week low at 12.68.
Monday’s earnings announcements:
Before the open: GreenTree Hospitality Group (GHG)
After the close: Investcorp Credit Management (ICMB), Stitch Fix (SFIX)
Economic News
Home Builder Confidence Index – 10:00am
Market Thoughts
For the week, the Dow was up 42 points; the Nasdaq was down 53 points; and the S&P slipped 7 points. Utilities led sector strength after jumping 2.8% while Technology stumbled 2.3% to pace the laggards.
The major indexes recovered their 50-day moving averages on Thursday’s pin action and looked poised for a possible breakout towards higher highs. However, Friday’s drop back below these levels kept mini and month-long trading ranges in play.
We talked about this possibility happening last week after Tech and the small-caps fell 9% from their July peaks and are trying to form a bottoming process. The Nasdaq and the Russell 2000 have been and are typically more volatile than the Dow and the S&P and that will likely continue this month and into October.
The most important takeaway from last week, especially on Friday, was once again the VIX’s inability to clear and hold 12.75. The surge off the 52-week low was a bad omen for the bulls as it formed a possible triple-bottom.
As for this week, it will be imperative the VIX holds 15 and the 50-day moving average. If this were to occur, we could see a quick test to 17.50-18 and the 200-day moving average to flush out the weaker hands.
Last Monday we highlighted the battlefield and key support / resistance levels for the major indexes: Dow 34,000-35,000; Nasdaq 13,200-14,200; and S&P 4,350-4,550. A strong move below or above these levels will likely confirm the next major trend.
FedEx (FDX) earnings on Wednesday could have a major impact on the Dow and the Transports.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 21-9 (70%). 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, $15.20, down $0.17)
PBR October 16 calls (PBR231020C00016000, $0.35, down $0.05)
Entry Price: $0.35 (9/14/2023)
Exit Target: $0.70
Return: 0%
Stop Target: None
Action: Shares pulled back on Friday with the low tapping $15.18. Fresh and upper support at $15-$14.75 held. Key resistance is at $15.50.
The 52-week peak is at $16.32 and we believe a push to $16.50-$17 could come on a breakout above $15.50.
Barrick Gold (GOLD, $16.64, up $0.31)
GOLD October 17 calls (GOLD231020C00017000, $0.37, up $0.11)
Entry Price: $0.45 (8/29/2023)
Exit Target: $0.90
Return: -18%
Stop Target: None
Action: Lower resistance at $16.50-$16.75 and the 50-day moving average were cleared and held with the session peak reaching $16.69. Rising support is at $16.25-$16.
Iovance Biotherapeutics (IOVA, $5.27, up $0.62)
IOVA December 12.50 calls (IOVA231215C00012500, $0.20, unchanged)
Entry Price: $0.80 (7/10/2023)
Exit Target: $1.60
Return: -75%
Stop Target: None
Action: Close the trade this morning to save the remaining premium.
Shares were volatile to end last week after the FDA, citing insufficient resources, sets a new action date of February 24th, 2024 for the company’s drug Lifileucel. The previous PDUFA date was set for November 25th, 2023 and why we went with December calls.
The news is a headwind going forward and will keep a lid on share price until then with the calls likely expiring worthless. We still think the drug gets approval and we can revisit the story next January/ early February. For now, let’s take advantage of the rebound and exit the position.
