MomentumOptions.com Pre-Market Update for 11/27/2023
Overbought Conditions Remain in Play
8:00am (EST)
Commentary
The stock market was mostly higher on Friday as the shortened session produced the lightest trading day of the year. Retails stocks like Walmart (WMT) and Target (TGT) showed strength as the holiday shopping season officially got underway.
The gains capped another successful week as the major indexes extended their winning streaks to four-straight. Meanwhile, volatility continued to ease after setting a fresh 52-week low.
The Nasdaq made a run to 14,270 before finishing slightly lower at 14,250 (-0.1%). Key resistance at 14,300 was challenged and easily held. Continued closes above this level would indicate upside towards 14,350-14,500 with the mid-July 52-week high at 14,446. Support is at 14,150-14,000.
The S&P 500 closed at 4,559 (+0.1%) after testing a high of 4,560. Current and lower resistance at 4,575-4,600 easily held. A pop above the latter and the 52-week peak at 4,607 would suggest ongoing strength towards to 4,650-4,700. Support is at 4,500-4,450.
The Dow traded up to 35,399 before settling at 35,390 (+0.3%). Prior and lower resistance from mid-July at 35,250-35,500 was cleared and held. A move above the latter would imply further momentum to 35,750-36,000 with the August 1st 52-week peak at 35,679. Rising support is at 35,000-34,750.
Volatility Index
The Volatility Index (VIX) tapped a fresh 52-week low of 12.45 with key support at 12.75 getting tripped and holding. Continued closes below this level would signal weakness to 12.25-12. Lowered resistance is at 13-13.25.
Monday’s earnings announcements:
Before the open: Cerence (CRNC), Smart Share Global (EM),
After the close: Cango (CANG), SeaDrill (SDRL), Zscaler (ZS)
Economic News
New Home Sales – 10:00am
Market Thoughts
For the week, the Nasdaq added 0.9%; the S&P 500 rose 1%; and the Dow gained 1.3%. Healthcare jumped 2.3% for the week to lead sector strength. There were no laggards.
The Nasdaq cleared and held 14,200 on Monday’s surge to higher highs while the Dow recovered 35,000. The S&P settled above 4,525 to start last week. These were key resistance levels we talked about the bulls needing to clear and hold.
The aforementioned targets will now serve as key support with backup levels at Dow 34,000; S&P 4,400; and Nasdaq 13,800.
Just as impressive as the market’s continued momentum was the VIX’s close below 13.50 on Monday. This set up Friday’s drop and hold below 12.75 with this area holding three times previously throughout the summer. Continued closes below this level would be an ongoing bullish signal.
The RSI (relative strength index) levels for the major indexes continue to hover around 70 and overbought territory. We have mentioned this isn’t too big of a deal as this type of action occurred in June and July with the highs at or a shade above 75.
As far as the small-caps, they remain in a tight range between 1,750-1,800 with continued closes above the latter being a bullish development. We have talked about the Russell 2000 typically showing strength in December so we will be watching for a possible breakout above the 200-day moving average over the next week or so. A close back below 1,750 would be a slightly bearish signal.
All signs are pointing towards higher highs for the market and we have several layers of fresh support to watch going forward that will give us early clues on when a possible top could occur.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 29-9 (76%). 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.
AT&T (T, $16.21, up $0.04)
T January 16 calls (T240119C00016000, $0.60, up $0.04)
Entry Price: $0.40 (11/15/2023)
Exit Target: $0.80
Return: 50%
Stop Target: 45 cents (Stop Limit)
Action: Set an initial Stop Limit at 45 cents to start protecting profits and to avoid a loss.
Fresh and lower resistance at $16.25-$16.50 was cleared but held with the peak reaching $16.32. Rising support is at $16-$15.75 and the 200-day moving average.
These options have over two months before expiration and we have a Price Target of $17 for T by mid-January. If reached, these options will be at least $1 in-the-money for a 150% return.
Petróleo Brasileiro (PBR, $15.33, up $0.03)
PBR December 16 calls (PBR231215C00016000, $0.30, unchanged)
Entry Price: $0.40 (11/2/2023)
Exit Target: $0.80
Return: -25%
Stop Target: None
Action: Shares tested a high of $15.74 with lower resistance at $15.75-$16 getting challenged and holding. Support is at $15.25-$15 and the 50-day moving average.
