MomentumOptions.com Pre-Market Update for 5/20/2024
Dow Holds 40,000
8:00am (EST)
Video:
https://go.screenpal.com/watch/cZhYeGVLv0J
Commentary
The stock market was mixed on Friday with the Nasdaq and the small-caps posting slight losses while the broader market and the blue-chips showed some strength. The action represented another tight trading range following last Wednesday’s mini-breakout to fresh lifetime highs.
The Nasdaq closed at 16,685 (-0.1%) after testing a low of 16,613. New and upper support at 16,600-16,450 held. A drop below the latter would suggest weakness to 16,350-16,200. Resistance is at 16,750-17,000 with Thursday’s all-time peak at 16,797.
The S&P 500 traded up to 5,305 while ending at 5,303 (+0.1%). Key resistance at 5,300 was cleared and held. Continued closes above this level would imply further strength towards 5,350-5,400. Support is at 5,250-5,200.
The Dow finished at 40,003 (+0.3%) with the peak at 40,010. Key resistance 40,000 was cleared and held. Continued closes this level would signal upside to 40,250-40,500. Rising support is at 39,750-39,500.
Volatility Index
The Volatility Index (VIX) settled at 11.99 with the low reaching 11.91. Prior and upper support from mid-December at 12.25-11.75 was cracked and held. Lowered resistance is at 12-12.50.
Monday’s earnings announcements:
Before the open: Compugen (CGEN), Li Auto (LI), Sohu.com (SOHU), Wix.com (WIX)
After the close: James Hardie Industries (JHX), Keysight Technologies (KEYS), Nordson (NDSN), Palo Alto Networks (PANW), Zoom Video Communications (ZM)
Economic News
None
Market Thoughts
Following Wednesday’s mini breakout to fresh all-time highs for the major indexes, a slight pause resumed to end the week with the blue-chips holding 40,000.
From February 22nd:
“One interesting nugget that will likely carry the Dow past 40,000, at some point in the future, is the addition of Amazon (AMZN) to the index as it will replace Walgreens Boots Alliance(WBA). The change was in response to fellow blue-chip component Walmart’s (WMT) decision to split its stock 3-for-1.”
Although round numbers are nice, it was no surprise the bulls were on track to make another run at all-time peaks, especially with the bears failing to do any major damage during the April pullback. The question is will investors continue to bid up an overbought market into a historically bearish month for stocks.
The RSI (relative strength index) levels on the major indexes remain at or just below 70 and typically indicate overbought conditions. We mentioned last week an index or stock can stay overbought (or oversold) for days, weeks, and even months so we will rely on technical indicators to help us predict another possible market peak.
The VIX has closed below 12.50 for three-straight sessions and continues to be one of our best indicators in predicting market direction. After testing and holding its longer-term downtrend channel throughout the prior week, we talked about the importance of this event that would bring fresh all-time highs to the market.
The December 12th, 13th and 14th lows reached 11.81, 11.82, and 11.84, respectively, and will be the first targets the bulls need to take out. Continued closes below 11.75 would be a good clue a test to 11.50-11 could come and levels from late 2019, early 2020.
As for the Russell, the index closed back below 2,100 on Thursday and failed to recover this level on Friday despite trading up to 2,104. Not a big deal as the March 28th 52-week peak at 2,135 remains in play. However, a close below 2,075 opens up risk to a backtest to 2,050 and the 50-day moving average.
As a reminder, new support levels to watch for a near-term top are at Nasdaq 16,350; S&P 5,200; Dow 39,250; and Russell 2,050. Otherwise, we remain bullish but cautious while waiting on a market curveball at some point.
We closed out 4 triple-digit winners last week: 311% on Teva Pharmaceuticals (TEVA) call options; 100% Rocket Companies (RKT), 150% on Petróleo Brasileiro (PBR); and a 145% winner during our live 3-day VIP sessions. With that said, we have updated our current trades so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 29-6 (83%). 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.
TG Therapeutics (TGTX, $16.48, down $0.94)
TGTX June 20 calls (TGTX240621C00020000, $0.25, down $0.20)
Entry Price: $0.55 (5/15/2024)
Exit Target: $1.10
Return: -55%
Stop Target: None
Action: Shares faded to a low of $16.33 with upper support at $16.50-$16.25 failing to hold. Lowered resistance is at $16.75-$17.
We wanted to see continued closes above $18 when we got into this trade but we still have over a month before expiration. If this level is cleared and held, a mini breakout to $20-$22.50 could come.
Snap (SNAP, $16.05, up $0.03)
SNAP June 15 puts (SNAP240621P00015000, $0.35, unchanged)
Entry Price: $0.50 (5/13/2024)
Exit Target: $1.00
Return: -30%
Stop Target: None
Action: Friday’s peak reached $16.25 with lower resistance at $16.25-$16.50 getting kissed and holding. Support is at $15.75-$15.50.
We are looking for a backtest to $15 with the possibility of a further fade to $13.50 by mid-June. A close above $17.50 would void the technical setup.
AT&T (T, $17.40, up $0.10)
T June 17 calls (T240621C00017000, $0.63, up $0.03)
Entry Price: $0.35 (4/16/2024)
Exit Target: $1.05
Return: 80%
Stop Target: 45 cents, raise to 48 cents (Stop Limit)
Action: Raise the Stop Limit from 45 cents to 48 cents.
Shares traded up to $17.41 with lower resistance at $17.50-$17.75 holding. Support remains at $17.25-$17 and the 50-day moving average.
We are still looking a run to $18 over the next month as long as the uptrend channel holds. It was stretched on Thursday’s intraday tumble to $17.15.
