MomentumOptions.com Pre-Market Update for 6/5/2023
Nasdaq Tags Fresh 52-Week Peak
8:00am (EST)
Here is the link for the bi-weekly update:
https://us06web.zoom.us/rec/share/4H-fsU_4Jsnhp1Ga4g5qqoceTFyC1p84LIZqcCq_WzUp0JzSaD3apsGpMJJZ7Ulh.kgn72THK7lWRBFzG
Passcode: 7Q^W$@1=
Commentary
The stock market had one of its best sessions of the year following Friday’s breakout to higher highs as a strong jobs report and the agreement to raise the debt limit added to the bullish sentiment. Specifically, nonfarm payrolls came in at 339,000 versus forecasts for a print of 190,000, marking the 29th-straight month of job growth.
The Dow zoomed up to 33,805 before finishing at 33,762 (+2.1%). Prior and lower resistance from mid-May at 33,750-34,000 was reclaimed. A pop above the latter would suggest another retest to 34,250 and a level that has been holding since mid-January. Support is at 33,500-33,250 and the 50-day moving average.
The S&P 500 settled at 4,282 (+1.5%) with the intraday high tapping 4,290. Prior and lower resistance from last August at 4,275-4,325 was recovered. A close above the latter (and the current 52-week peak from mid-August) would indicate an ongoing breakout to 4,375-4,425. Fresh support is at 4,200-4,150 and the 50-day moving average.
The Nasdaq ended at 13,240 (+1.1%) with the afternoon and fresh 52-week peak reaching 13,256. Key resistance from last August at 13,200 was cleared and held. Continued closes above this level would indicate additional strength towards 13,350-13,500. New support is at 13,150-13,000.
Volatility Index
The Volatility Index (VIX) sank for the second-straight session after establishing a fresh 52-week low of 14.42. Prior and upper support from late June 2021 at 15-14.50 was breached and held. A drop below the latter would suggest ongoing weakness to 13.50-13. Resistance is at 15.50-16.
Monday’s earnings announcements:
Before the open: Allego (ALLG), Fusion Fuel Green (HTOO), Science Applications International (SAIC)
After the close: GitLab (GTLB), HealthEquity (HQY), Sprinklr (CXM)
Economic News
PMI Services Index – 9:45am
Factory Orders – 10:00am
ISM Manufacturing Index – 10:00am
Market Thoughts
For the week, the Nasdaq and the Dow were up 2% while the S&P 500 rose 1.8%. As far as sector action, Consumer Discretionary rallied 3.3% last week and there were no laggards.
The action in the Russell 2000 was one of the biggest takeaways from Friday’s market breakout as the index reclaimed the 1,800 level. The 3.6% surge represented the best one-day gain since November 2022.
More importantly, the small-caps closed above their 200-day moving average for the first time since early March. For the year, the index is up nearly 4%. While we are on the subject, the S&P 500′s has advanced nearly 12% for 2023. The Dow is up 2% and the Nasdaq has zoomed 27%.
The Nasdaq has remained overbought with RSI (relative strength index) closing above 70 for the third-straight session. The November 2021 high is just north of 75 and where the index could start to top out. More interesting is that in the same month there was a slide to 60, a backtest to 70, before a fade below 50, all by month end.
RSI on the Dow is pushing 60 and we mentioned a close above 50 would be bullish. The mid-April peak is just above 65. Meanwhile, the S&P cleared 60 and looks poised to push 70 and the early February high.
As far as volatility, the VIX closing below 15 was also an impressive accomplishment. The breakdown out of the 46-session trading range of 16-20 was unexpected but certainly due. Despite the range, there were some nice swings that provided us some incredible market clues with our bullish and bearish setups.
On that note, we always talk about support and resistance levels getting stretched. The VIX needs to at least close below 16 again today on any rebound, and likely hold this level all week, to confirm higher highs for the overall market.
With the debt ceiling crisis in the rearview mirror, Wall Street will once again turn its focus towards the next Fed meeting and interest rates. While most market pundits are predicting a possible pause, it really depends on what the Fed thinks about the recent economic data.
We are more focused on watching the technical indicators instead of the Fed as they have given us solid market clues all year long. There has been plenty of trading ranges and well defined uptrend and downtrend channels that we have taken advantage of by knowing market sentiment.
Our five-trade winning streak will be snapped this morning as we are closing one of our current positions on the open to save some premium. The portfolio will dip to 14-5 for the year and a 74% win rate.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 14-5 (74%). 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 I list one. I will send out a “Profit Alert” or “New Trade” if I 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.
Petróleo Brasileiro (PBR, $12.24, up $0.26)
PBR July 12 calls (PBR230721C00012000, $0.45, up $0.08)
Entry Price: $0.35 (5/26/2023)
Exit Target: $0.70
Return: 29%
Stop Target: None
Action: Undefined and lower resistance from late January at $12.25-$12.50 was cleared but held by a penny on Friday’s surge to $12.37. Support is at $12-$11.75 and the top of the prior trading range.
We mentioned the golden cross that had officially formed last week with the 50-day moving average crossing above the 200-day moving average. This is typically a bullish signal for higher highs.
We would love to see another spike towards $13.50-$13.75 and the January peak as it would get the calls to $1.50-$1.75 “in-the-money” for a massive return from the entry price of 35 cents.
Verizon (VZ, $34.58, down $1.14)
VZ July 38 calls (VZ230721C00038000, $0.12, down $0.07)
Entry Price: $0.40 (5/19/2023)
Exit Target: $0.80
Return: -70%
Stop Target: None
Action: Fresh and lower resistance at $36-$36.25 was challenged and held with the high at $35.97. Shaky support is at $35-$34.75.
We talked about how important it was for shares to clear and hold $36 last week. This level held on Wednesday and Thursday and was a warning sign for Friday’s leg lower. News that Amazon (AMZN) could be favoring Dish Network (DISH) for possibly offering free nationwide mobile phone service to Prime subscribers resurfaced and a bigger reason for the plunge.
Let’s see where shares are at midweek to see if this was another overreaction as nothing “official” has been announced.
Bank of America (BAC, $28.71, up $0.93)
BAC June 26 puts (BAC230616P00026000, $0.06, down $0.09)
Entry Price: $0.60 (5/10/2023)
Exit Target: $1.20
Return: -90%
Stop Target: None
Action: Close the trade this morning to save the rest of the remaining premium.
Friday’s close back above the 50-day moving average was a near-term bullish sign and creates even more layers of support for the stock. We were hoping for a test towards $26 and the 52-week low last month that never materialized.
