MomentumOptions.com Pre-Market Update for 10/16/2023
Bears Hold Key Resistance Levels
8:00am (EST)
Commentary
The stock market was mixed on Friday after the Financial sector officially kicked off the third-quarter earnings season with better-than-expected numbers. Wells Fargo (WFC) topped both earnings and revenue while JPMorgan (JPM) posted a 37 cent earnings beat but slightly missed on revenue forecasts.
The Nasdaq tested a low of 13,361 while finishing at 13,407 (-1.2%). New and upper support at 13,500-13,350 failed to hold. A move below the latter reopens weakness towards to 13,250-13,100. Resistance is at 13,600-13,750 and the 50-day moving average.
The S&P 500 finished at 4,327 (-0.5%) following the intraday pullback to 4,311. Upper support at 4,300-4,250 held. A drop below the latter and the 200-day moving average would be a renewed bearish development with downside risk to 4,200-4,150. Resistance is at 4,350-4,400 and the 50-day moving average.
The Dow made a push to 33,957 before ending at 33,670 (+0.1%). Lower resistance at 33,750-34,000 and the 200-day moving average were cleared but levels that held. A close above the latter would be a more bullish signal with upside towards 34,250-34,500. Support is at 33,500-33,250.
Volatility Index
The Volatility Index (VIX) was up for the second-straight day after zooming to an intraday high of 20.78. Prior and lower resistance at 20.50-21 was cleared but held. We have repeatedly said a close above 21.50 could lead to panic selling for the market. Fresh support is at 19-18.50.
Monday’s earnings announcements:
Before the open: Charles Schwab (SCHW), Yatra Online (YTRA)
After the close: CrossFirst Bankshares (CFB), FB Financial (FBK), ServisFirst Bancshares (SFBS)
Economic News
Empire State Manufacturing Survey – 8:30am
Market Thoughts
For the week, the Nasdaq was down 0.2%; the S&P added 0.5%; and the Dow advanced 0.8%. Energy jumped 2.2% to led sector strength while Consumer Discretionary fell 1.5% to pace the laggards.
Oil stocks showed strength after the commodity jumped 5% to close in the upper $80’s. Fears that the Israel/ Hamas war could escalate geopolitical tensions in the Middle East fueled higher prices.
Meanwhile, Gold had its best day of the year after rallying 3% while recovering the $1,900 level. The close above the 50-day/ 200-day moving averages was also a bullish development.
The technical setup for the major indexes also turned bearish again as the Nasdaq closed back below 13,500. We mentioned last week it was crucial the bulls cleared and held this level for several sessions while making higher highs into the weekend. After clearing and holding 13,500 for three days, Friday’s failed attempt to clear and hold 13,600 and the 50-day moving average doesn’t feel like a good omen heading into the start of the 3Q earnings season.
The VIX also closed below 17.50 for three days prior to Friday to tease Wall Street but we said to focus on 15. Last Thursday’s low tagged 15.44. The VIX gave us another sweet clue the market could be topping with Friday’s peak coming within a stone’s throw of the monthly high at 20.88.
The VIX topped out at 30.81 on March 13th and why we have highlighted 21.50 being a crucial area the bulls need to defend. If not, we could see the VIX spike to 22-25, then 25-27.50, and possibly peaking north of 30 latter this month if company earnings disappoint.
The RSI (relative strength index) levels for the Nasdaq and S&P are back below 50 (bearish) and in downtrends after peaking at 55 and 50, respectively, last week. Although the Dow’s RSI is in a slight uptrend, it likely stalled just below 50 during the prior session.
If the bears remain aggressive, over the next couple of weeks, RSI levels for the major indexes could test the low 30’s and high 20’s as they did in late September and the start of October.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 22-9 (71%). 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.
Ford Motor (F, $11.81, down $0.19)
F November 12 puts (F231103P00012000, $0.60, up $0.12)
Entry Price: $0.50 (10/3/2023)
Exit Target: $1.00
Return: 20%
Stop Target: None
Action: Friday’s low into the close tagged $11.80 with key support at $11.75 holding. Continued closes below this level would suggest a retest to support from May at $11.25-$11. Resistance is at $12-$12.25 and the 50-day moving average.
A death-cross has officially formed with the 50-day moving average descending below the 200-day moving average. The failed retest to reverse this setup remains a bearish setup heading into the company’s earnings update later this month.
If shares do close below $11.75, we could “piggy-back” this trade with additional put options so stay on the lookout for a possible New Trade Alert this week.
Petróleo Brasileiro (PBR, $15.44, up $0.42)
PBR October 16 calls (PBR231020C00016000, $0.12, up $0.06)
Entry Price: $0.35 (9/14/2023)
Exit Target: $0.70
Return: -66%
Stop Target: None
Action: We said this trade could come down to the wire as shares are once again on the verge of a breakout. Friday’s high reached $15.58 with key resistance at $15.50 getting cleared but holding. A breakout towards $16-$16.50 could come on continued closes above $15.50. Fresh support is at $15.25-$15.
The current price is just time premium as we need shares to clear $16.35, technically, by Friday’s close to breakeven. Everything above that will be profit.
This was a rollover trade as our last PBR position made a slight profit on the day ahead of expiration. We could also roll this trade into November but it will depend on momentum. Our other PBR recommendation from the summer made over 200%.
