MomentumOptions.com Pre-Market Update for 11/21/2024
Key Support Levels Holding All Week
8:00am (EST)
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Market Overview
The stock market traded in a tight range on Wednesday as Wall Street braced for another earnings update from Nvidia (NVDA). The stock can be a rising tide that lifts all boats if numbers impress but the company is no longer a secret as its chips and artificial intelligence have become mainstream.
The Nasdaq smacked a low of 18,724 while closing at 18,966 (-0.1%). Key support at 18,600 easily held. Resistance is at 19,000-19,150.
The S&P 500 settled at 5,917 (0.0%) after testing a low of 5,860. Key support at 5,850 held. Resistance is at 5,950-6,000.
The Dow kissed a low of 43,074 before ending at 43,408 (+0.3%). Key support at 43,250 was tripped for the second-straight day but held. Resistance is at 43,500-43,750.
Earnings and Economic News
Before the open: Baidu (BIDU), Deere & Company (DE), Pinduoduo (PDD)
After the close: Copart (CPRT), Intuit (INTU), Gap (GAP), Ross Stores (ROST), Warner Music Group (WMG)
Economic news:
Initial Jobless Claims – 8:30am
Existing Home Sales – 10:00am
Leading Indicators – 10:00am
Technical Outlook and Market Thoughts
After the close on Wednesday, Nvidia (NVDA) once again topped earnings estimates but the reaction was muted as shares were down 3%. The company topped forecasts by six cents a share with revenue also beating by $1.9 billion.
There have been times where this stock has lifted the entire market but the parabolic rise seems to have settled down in recent months. That could change, however, as the chart still looks very bullish. The recent all-time peak is at $149.77 and another breakout could occur if shares clear the $150 level.
If shares remain weak into Thursday’s open, a close below $140 would be a slightly bearish development for the stock and could weigh on the major indexes. This level was prior resistance on June 20th and again in mid-October.
We normally don’t trade higher priced, near-term options but we checked-in on the regular NVDA January 150 calls to see what they were fetching. They closed Wednesday a shade above $10 and were heavily traded as 22,000 contracts exchanged hands.
It will be interesting to see where these calls close by the end of the week but they don’t expire until January 17th, 2025. If shares trade to $160 by then, this trade would breakeven if these calls were bought ahead of the earnings announcement. If shares top $170, these calls would he at least $20 in-the-money for a 100% return.
Of course, if shares remain below $150 by January 17th, these call options would expire worthless.
The NVDA January 150 puts closed at $13.25 on Wednesday. If shares are above this level by January 17th, these puts would expire worthless. The breakeven point would be if shares are below $137 with a double occurring if the stock is under $124. We will check back on NVDA in a couple of months.
The RSI (relative strength index) levels are back in check as the Nasdaq and S&P currently have RSI readings of 56. The Russell and the Dow are at 55 and 53, respectively. These are basically neutral readings but down from nearly 70 across the board for the major indexes and a level that is considered overbought.
The ongoing consolidation period in the market from last Friday’s technical breakdown from all-time highs was something we said would likely happen. If current support levels hold to build a new base, this would be bullish for another leg higher into yearend.
The Russell 2000 has been holding 2,300 aside from Tuesday’s stretch down to 2,284. The second wave of support is at 2,260 with a close below this level and the 50-day moving average being a bearish development. Resistance is at 2,350-2,375 with a close above 2,400 being a renewed bullish signal.
The Nasdaq has been holding key support at 18,600 with last Friday’s intraday low at 18,598. This area served as double-top resistance from mid-July and late October. Backup support remains 18,500-18,350 and the 50-day moving average. The Nasdaq needs to reclaim 19,250 to get buyers back in the mix with the recent all-time top at 19,366.
The S&P has been trading between 5,925-5,850 over the past four sessions with a close above or below these levels implying the next short-term trend. A retest towards 6,000 and possible fresh record highs will likely come if 5,925 is cleared. There is a possible 150-point elevator drop if 5,850 fails ahead of the weekend.
The Dow has struggled holding key support at 43,250 over the past two sessions with Tuesday’s low at 42,938. Another dip below 43,000 likely gets 42,500 and the 50-day moving average in focus. A close back above 43,600-43,750 and back into the uptrend channel would give the bulls some breathing room. This would get 44,000 and this month’s all-time peak at 44,486 back on the radar.
The Volatility Index (VIX) has been rangebound between 15-17.50 over the past four sessions with Wednesday’s peak at 18.79 clearing the 50-day moving average at 18.16. We said not to get “cautious” on the market until 20 is cleared and held. We would turn bearish on the market on a move above 24. Closes back below 15 would be bullish for the market.
We have updated our current trades so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 61-11 (85%, 29 triple-digit winners). 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.
SoFi Technology (SOFI, $14.67, up $0.25)
SOFI January 17 calls (SOFI250117C00017000, $0.70, up $0.10)
Entry Price: $0.55 (11/19/2024)
Exit Target: $1.10
Return: 27%
Stop Target: 55 cents (Stop Limit)
SOFI January 13 calls (SOFI250117C00013000, $2.40, up $0.20)
Entry Price: $0.65 (11/8/2024)
Exit Target: $3 (Limit Order on half)
Return: 269%
Stop Target: $1.30, raise to $1.95 (Stop Limit)
Action: Set a Stop Limit at 55 cents for the SOFI January 17 calls to start protecting profits and to avoid a loss.
Set a Limit Order to close HALF of the trade at $3 on the SOFI January 13 calls. Raise the Stop Limit from $1.30 to $1.95 to lock-in at least a 200% return.
Shares traded up to $14.65 with lower resistance from January 2022 at $14.50-$14.75 getting topped and holding. Support at $14.25-$14.
If shares can clear and hold $15, there is a good chance a run towards $16-$17.50 could come quickly. The former represents resistance from late December 2021 with the latter resistance from September 2021. At some point in 2025, shares could push $20-$25.
RSI closed at 79 on Wednesday. Overbought conditions can remain in play for weeks, and sometimes months, with the possibility of RSI pushing 80 or 90. If not, and shares fade from here, we have Stop Limits in place. If triggered, we would love to see a backtest to $13.
Pfizer (PFE, $24.94, down $0.16)
PFE January 22.50 puts (PFE250117P00022500, $0.25, up $0.02)
Entry Price: $0.25 (11/19/2024)
Exit Target: $0.50
Return: 0%
Stop Target: None
PFE February 21 puts (PFE250221P00021000, $0.25, up $0.02)
Entry Price: $0.25 (11/19/2024)
Exit Target: $0.50
Return: 0%
Stop Target: None
Action: Shaky support at $24.75-$24.50 held on the fade to $24.65. A close below the latter opens up downside risk towards $22.50-$20. Key resistance is at $25.25. We think shares could test the high teens ($19-$17) by mid-February.
United States Natural Gas Fund (UNG, $14.75, up $0.88)
UNG December 17 calls (UNG241220C00017000, $0.60, up $0.25)
Entry Price: $0.40 (11/13/2024)
Exit Target: $0.80
Return: 50%
Stop Target: 45 cents (Stop Limit)
Action: Set a Stop Limit at 45 cents to start protecting profits and to avoid a loss.
Yesterday’s high touched $14.82 with lower resistance at $14.75-$15 getting recovered. Fresh support is at $14.50-$14.25 and the 50-day moving average. Shares jumped over 6% on forecasts of colder weather on the way.
ProShares Bitcoin Strategy ETF (BITO, $25.42, up $0.47)
BITO January 23 calls (BITO250117C00023000, $3.10, up $0.50)
Entry Price: $0.75 (10/29/2024)
Exit Target: $3.50
Return: 313%
Stop Target: $2, raise to $2.25 (Stop Limit)
Action: Raise the Stop Limit at $2 to $2.25 to further protect profits.
Lower resistance at $24.50-$24.75 was recovered following the rebound to $24.68 into the closing bell. Support is at $24-$23.75 and the 200-day moving average.
