MomentumOptions.com Pre-Market Update for 5/6/2024
Nasdaq Recovers 50-Day MA
8:00am (EST)
Video:
https://go.screenpal.com/watch/cZh1VrVMJ3F
Commentary
The stock market rallied on Friday after a weak jobs report showed the economy added fewer-than-expected jobs in April and an increase in unemployment. This eased fears of an overheating economy and a possible interest rate cut sooner, rather than later.
The Nasdaq ended at 15,156 (+2%) and back above its 50-day moving average after reaching a peak of 16,204. Key resistance at 16,200 was tripped but held. Continued closes above this level would imply momentum towards 16,350-16,500. Support is at 16,050-15,900.
The S&P 500 made a trip to 5,139 while going out at 5,127 (+1.3%) and just below the 50-day moving average. Lower resistance at 5,100-5,150 was recovered. A move above the latter would suggest upside to 5,200-5,250. Support is at 5,050-5,000.
The Dow closed at 38,675 (+1.2%) with the intraday high tapping 38,808. Lower resistance at 38,750-39,000 and the 50-day moving average were cleared but held. A move above the latter would be a more bullish development for strength towards 39,250-39,500. Support is at 38,500-38,250.
Volatility Index
The Volatility Index (VIX) settled at 13.49 with the low reaching 13.48. Prior and key support from early April at 13.50 was recovered. Resistance is at 14.50-15 and the 50-day and 200-day moving averages.
Monday’s earnings announcements:
Before the open: BioNTech (BNTX), Bowlero (BOWL), Freshpet (FRPT), Spirit Airlines (SAVE), TreeHouse Foods (THS), Tyson Foods (TSN)
After the close: Axon Enterprise (AXON), Hims & Hers Health (HIMS), Lucid Group (LCID), Palantir Technologies (PLTR), Rocket Lab USA (RKLB)
Economic News
None
Market Thoughts
For the week, the Nasdaq rose 1.4%; the Dow gained 1.1%; and the S&P added 0.5%. The resiliency of the bulls continues to frustrate the bears as the little momentum they had by midweek was erased by a strong two-day rally.
We mentioned we wanted to see the S&P clear and hold 5,125 to start last week with Monday’s peak at 5,123. Friday’s close above this level was still slightly bullish despite the 50-day MA holding.
As for the small-caps, the Russell managed to reclaim the 2,000 level on Thursday and just missed closing above its 50-day MA on Friday by a few points. Continued closes above 2,050 will likely get a run to 2,100 in play.
The Nasdaq’s recovery of the 50-day MA was helped by the 6% pop in Apple’s (AAPL) stock following earnings after Thursday’s closing bell. The company reported a profit of $1.53 a share, topping forecasts for $1.50. Revenue of $90.8 billion was also above forecasts for a print of $90.01 billion.
The close below 13.50 on the VIX was also a very bullish development heading into this week. However, market tops have occurred when the VIX has failed to get below 12.50 and a level of support that has been holding since late December.
For all-times highs to trip again for the major indexes, the VIX is likely going to have to get below the 12.50 level while making a run at the 52-week low of 11.81. Continued closes back above 15 would be a slightly bearish signal but there is wiggle room up to 16 before we would get cautious on the market again.
The RSI (relative strength index) levels for the major indexes cleared 50 and are in uptrends. This is also a renewed bullish development for the bulls.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 25-6 (81%). 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.
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Rocket Companies (RKT, $13.30, up $0.57)
RKT June 14 calls (RKT240621C00014000, $0.80, up $0.10)
Entry Price: $0.55 (4/29/2024)
Exit Target: $1.10
Return: 45%
Stop Target: 60 cents (Stop Limit)
Action: Set a Stop Limit at 60 cents to start protecting profits and to avoid a loss.
Prior and lower resistance from early April at $13.75-$14 was cleared but held with the high hitting $13.94. New support is at $13.25-$13.
Shares appear to be setting up for another run towards $15. This will be a crucial area for a possible triple-top breakout, or breakdown, depending on the action.
AT&T (T, $16.85, up $0.03)
T June 17 calls (T240621C00017000, $0.45, unchanged)
Entry Price: $0.35 (4/16/2024)
Exit Target: $1.05
Return: 29%
Stop Target: None
Action: Shares traded up to $16.92 with lower resistance at $17-$17.25 holding. Support is at $16.75-$16.50 and the 50-day moving average.
Petróleo Brasileiro (PBR, $16.43, down $0.57)
PBR June 16 calls (PBR240621C00016000, $1.50, down $0.15)
Entry Price: $0.60 (4/11/2024)
Exit Target: $1.80 (closed half @ $1.50 on 5/2)
Return: 150%
Stop Target: 90 cents, raise to $1.20 (Stop Limit)
Action: We closed half the trade on Thursday at $1.50. Raise the Stop Limit at 90 cents to $1.20 on the other half.
Upper support at $16.50-$16.25 failed to hold on the fade to $16.30. Lowered resistance is at $16.75-$17.
Brazil’s government ruled Petrobras had to pay out 50% of extra dividends relative to their 2023 earnings. As a result, a special dividend of 68 cents was paid on Friday and was the main reason for the pullback.
