MomentumOptions.com Pre-Market Update for 10/19/2023
Bears Continue to Hold Key Resistance Levels
8:00am (EST)
Video
https://us06web.zoom.us/rec/share/ySrG66HXsw31G9C68CDjw5KTHV_7zdr7ob2pXp5ByRmTur84ubzs6-WvOiq3P1vq.uoEIOAKX1kCVLafs
Passcode: V4f.Q0Gt
Commentary
The stock market was weak on Wednesday as US Treasury yields rose with the 10-year tagging a fresh multiyear high. Specifically, the 10-year yield cleared 4.9% for the first time since 2007 while the 2-year closed above 5.2%, and levels last seen in 2006.
The action also pushed mortgage rates higher with the 30-year fixed clearing 8%, a level last seen in 2000. Meanwhile, volatility is once again approaching monthly highs with the bears pushing keys level of resistance into the closing bell.
The Nasdaq went out at 13,314 (-1.6%) after trading down to 13,275. Fresh and upper support at 13,350-13,200 failed to hold. A move below the latter would signal weakness towards 13,100-12,950. Resistance is at 13,500-13,650 and the 50-day moving average.
The S&P 500 tapped a low of 4,303 while settling at 4,314 (-1.3%). Upper support at 4,350-4,300 failed to hold. A drop below the latter would imply a further slide towards 4,250-4,200 and the 200-day moving average. Key resistance is at 4,400 and the 50-day moving average.
The Dow closed at 33,665 (-1%) with the late day low hitting 33,598. Upper support at 33,500-33,250 was challenged and held. A close below the latter would suggest another retest to 33,000-32,750. Resistance is at 33,750-34,000 and the 200-day moving average.
Volatility Index
The Volatility Index (VIX) was up for the second-straight day after soaring to a late day peak of 20.15. Lower resistance at 20-20.50 was cleared but held. A close above 21-21.50 could lead to panic selling for the market and a development we have been watching all month. Fresh support is at 18.50-18.
Thursday’s earnings announcements:
Before the open: American Airlines (AAL), AT&T (T), Taiwan Semiconductor Manufacturing (TSM)
After the close: Atlantic Union Bankshares (AUB), CSX (CSX), Freeport-McMoRan Copper & Gold (FCX), Intuitive Surgical (ISRG), Knight-Swift Transportation (KNX), Philip Morris International (PM), WD-40 (WDFC)
Economic news:
Initial Jobless Claims – 8:30am
Philadelphia Fed Manufacturing Survey – 8:30am
Leading Indicators – 10:00am
Existing Home Sales – 10:00am
Market Thoughts
The Dow started the week off by recovering its 200-day moving average with the S&P and Nasdaq making ongoing attempts to clear their 50-day moving averages. Wednesday’s close back below the 200-day moving average by the blue-chips and the Nasdaq and S&P inabilities to recover their 50-day moving averages were slightly bearish developments.
Some of the nervousness from Wednesday’s slide, aside from rising yields, could have stemmed from the weakness in Tesla (TSLA) and Netflix (NFLX) with both stocks falling nearly 5% and 3%, respectively, ahead of earnings.
Both are heavily weighed stocks in the S&P and Nasdaq. TSLA missed analysts forecasts with shares falling another 4% in after-hours. NFLX posted better-than-expected earnings with shares soaring 12% after yesterday’s close.
The most important chart for the rest of the week will be the action in the VIX. The monthly high is at 20.78 from last week and 20.88 from the start of the month. This is why we have highlighted 21-21.50 as stretch with a move above the latter getting March highs back in focus.
The fact the VIX held 20 was a slightly bullish signal. A close back below 17.50 and the 200-day moving average this week would be a better setup heading into the heart of earnings season next week.
As far as key support levels to watch into Friday’s close: Nasdaq 13,000; S&P 4,225; and Dow 33,000. If these levels are cracked this week, or next, it would likely confirm a much deeper selloff.
We closed Petróleo Brasileiro (PBR) earlier this week as we were once again rewarded for our patience, but not with a huge payout. The trade was profitable, and recovered from a 90% loss, so that is always a positive. There were additional gains in the trade on Wednesday if you stayed in but protect your profits.
We mentioned the trade could follow the same pattern as our previous PBR recommendation that we rolled over after closing one day ahead of expiration. We have been trying to catch another breakout in PBR following our 200+% winner over the summer, so stay locked-and-loaded today in case we take a November position. There are a few other trades we also like ahead of PBR and we will be monitoring them, as well.
It also pushed the Track Record to 23-9 (72% win rate) for 2023 with 8 out of the past 10 being closed for winners since late July. We also had a huge home run with Foot Locker (FL) with shares setting up nicely for a new trade after closing in overbought territory on Wednesday.
We still have Pfizer (PFE) on our Watch List for a possible new trade along with ProShares UltraPro Short QQQ (SQQQ), Walgreens Boots Alliance (WBA), and Abercrombie & Fitch (ANF).
If we take action, we will send out a Trade Alert. In the meantime, let’s go check the current action.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 23-9 (72%). 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.
Cisco Systems (CSCO, $53.77, down $0.17)
CSCO November 53 puts (CSCO231110P00053000, $0.69, down $0.08)
Entry Price: $0.60 (10/18/2023)
Exit Target: $1.20
Return: 15%
Stop Target: None
Action: Shares tagged a low of $53.60 with upper support at $53.50-$53 holding. Resistance is at $54-$54.50 and the 50-day moving average.
Shares have been in a $1 trading range between $53-$54 for much of the month and between $52-$54 since late September. We think a backtest to $52 is likely over the next month with earnings due out after these options expire.
Ford Motor (F, $11.75, down $0.29)
F November 12 puts (F231103P00012000, $0.60, up $0.15)
Entry Price: $0.50 (10/3/2023)
Exit Target: $1.00
Return: 20%
Stop Target: None
Action: Wednesday’s low hit $11.75 with key support at $11.75 getting kissed and 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.
