MomentumOptions.com Pre-Market Update for 2/8/2024
S&P Within Spitting Distance of 5,000
8:00am (EST)
Commentary
The stock market continued its march towards nice round numbers as upbeat earnings trumped Fed speak on Wednesday. The major indexes tagged another round of 52-week and all-time highs despite a Fed head warning that interest rates aren’t likely to come down in March.
The Nasdaq closed at 15,756 (+1%) with the intraday peak hitting 15,770. Fresh and lower resistance at 15,750-15,900 was cleared and held. A move above the latter would indicate momentum towards 16,000-16,150. Support is at 15,650-15,500.
The S&P 500 tagged a high of 4,999 while ending at 4,995 (+0.8%). Key resistance at 5,000 was challenged and held. Continued closes above this level would signal strength to 5,050-5,100. Support is at 4,950-4,900.
The Dow closed at 38,677 (+0.4%) after making a run to 38,748. New and lower resistance at 38,750-39,000 was challenged and held. A move above the latter would imply upside towards 39,250-39,500. Support is at 38,500-38,250.
Volatility Index
The Volatility Index (VIX) traded down 12.81 with upper support at 12.75-12.50 holding. A drop below the latter would suggest weakness to 12.25-12. Resistance is at 13-13.25 and the 50-day moving average.
Thursday’s earnings announcements:
Before the open: ConocoPhillips (COP), Hershey (HSY), Spirit Airlines (SAVE), Under Armour (UAA)
After the close: Affirm Holdings (AFRM), Cloudflare (NET), Pinterest (PINS)
Economic news:
Initial Jobless Claims – 8:30am
Wholesale Inventories – 10:00am
Market Thoughts
Wall Street continues to analysis the flood of earnings over the past few weeks with nearly two-thirds of the 4Q season in the books. The results have been “better-than-expected” in most cases but its a cat and mouse game that never ends.
The biggest takeaway is that stocks often make their biggest moves, up or down, during these events that occur four times a year. The results also fuel market momentum, or pessimism, over the near-term that lead to higher highs or lower lows.
We have highlighted throughout the start of the year the Nasdaq could make a run towards 16,000, the Dow 40,000, and the S&P 5,000. One of these predictions is on the verge of happening with the other two in hot pursuit.
RSI (relative strength index) levels are at, or below 70, for the major indexes and can certainly trade into the mid to high 70’s again as we have seen over the past few months.
The one curveball that could be coming is the action in the Chinese markets and one we are following closely. We will talk more about this next week, but for now, let’s go check on our current positions.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 4-1 (80%). 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.
Snap (SNAP, $11.41, down $6.04)
SNAP March 20 calls (SNAP240315C00020000, $0.03, down $1.31)
Entry Price: $0.85 (2/2/2024)
Exit Target: $1.70
Return: -96%
Stop Target: None
Action: Once again, Snap blew it and offered up a lousy 2024 outlook after beating earnings. We talked about the high risk/ high reward of an earnings event and this is the unpleasant part of the outcome. We can still keep the trade open for a few weeks but these options are likely going to expire worthless.
We try to limit our exposure to earnings trades but we do take them from time-to-time as they have produced some of our biggest winners, ever. However, going forward, we can also hedge the trade with both calls and puts.
The SNAP March 15 puts (SNAP240315P00015000, $3.60, up $2.63) zoomed 271% and would have easily offset the losses on the calls. We will show this in an upcoming video.
Ford Motor (F, $12.80, up $0.73)
F March 11 puts (F240315P00011000, $0.06, down $0.18)
Entry Price: $0.50 (1/25/2024)
Exit Target: $1.00
Return: -88%
Stop Target: None
Action: Earnings for Ford surprised Wall Street after the company beat by 15 cents. We can also keep this trade open for a few weeks to see if yesterday’s high candlestick represents a near-term top.
