MomentumOptions.com Pre-Market Update for 2/29/2024
Lackluster Action Ahead of Fedspeak
8:00am (EST)
Video:
https://screenpal.com/watch/cZnUfsVKuxM
Commentary
The stock market pulled back on Wednesday but has traded in a tight range this week with volatility remaining relatively calm. The bulls still have the upper hand as the bears remain in hibernation as the rally off the late October lows remains intact.
The Nasdaq bottomed at 15,924 while ending at 15,947 (-0.6%). Upper support at 15,900-15,750 was approached and held. A close below the latter would signal downside action towards 15,650-15,500. Resistance is at 16,000-16,150.
The S&P 500 closed at 5,069 (+0.03%) after trading down to 5,058. Current and upper support at 5,050-5,000 held. A move below the latter would indicate a further fade to 4,950-4,900. Resistance is at 5,100-5,150.
The Dow tested a low of 38,741 while settling at 38,949 (-0.1%). Upper support at 38,750-38,500 was tripped but held. A drop below the latter would suggest weakness towards 38,250-38,000 and the 50-day moving average. Resistance is at 39,000-39,250.
Volatility Index
The Volatility Index (VIX) made a intraday trip to 13.90 with key resistance at 13.50 and the 50-day moving average getting recovered. Continued closes back above this level would would imply a retest to 14.50-15 and the 200-day moving average. Support is at 13.25-12.75.
Thursday’s earnings announcements:
Before the open: Anheuser-Busch InBev (BUD), Best Buy (BBY), Celsius Holdings (CELH), Papa John’s International (PZZA), Six Flags (SIX), TD Bank Group (TD), Vertex (VERX)
After the close: Autodesk (ADSK), CooperCompanies (COO), Dell Technologies (DELL), Hewlett Packard Enterprise (HPE), NetApp (NTAP), Veeva Systems (VEEV)
Economic news:
Initial Jobless Claims – 8:30am
PCE Price Index – 8:30am
Pending Home Sales Index – 10:00am
Market Thoughts
The Dow and S&P have failed to make higher highs this week while the Nasdaq and Russell have traded higher. The blue-chips and the broader market tested all-time highs just last week and they easily remain in play. Tech and the small-caps are still battling 52-week peaks before all-time highs come into focus.
With overall strength still prevalent in the market, the VIX closed back below 13.50 and the 50-day moving average on Tuesday and an area we said the bulls needed to focus on to start the week. We wanted to see some follow thru on Wednesday as the more important hurdle is at 12.75 but the close above 13.50 gives us a neutral reading on the market.
We have repeatedly highlighted in our videos the 12.75 level has served as key market reversal levels. A close above 15 would be a warning sign for Wall Street but we have said not to turn bearish until there are several closes above 17.50 down the road.
Checking in on Amazon (AMZN), the stock tried to break out of its current trading range on Monday’s open after getting added to the Dow. We mentioned this would have been a bullish development as far as a directional and credit spread trade but the enthusiasm wore off quickly as shares have been weak since the unsuccessful attempt.
The RSI (relative strength index) levels for the major indexes are hovering around the 60 level and are also giving a neutral reading as they appear headed to support at 50. For the most part, RSI has stayed above 50 since early November and closes below this level would be bearish indicators for the market.
The uptrend channels we have highlighted in the past few videos continue to hold and this remains bullish over the near-term. The major indexes are on track for February wins to keep all-time highs on the board heading into March.
There are a number of Fed officials that will be speaking throughout during today’s market hours so volatility could pickup depending on their comments.
Momentum Options Play List
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Rocket Companies (RKT, $12.01, up $0.06)
RKT April 13 calls (RKT240419C00013000, $0.50, up $0.02)
Entry Price: $0.50 (2/28/2024)
Exit Target: $1.00
Return: 0%
Stop Target: None
RKT April 12 calls (RKT240419C00012000, $0.90, up $0.07)
Entry Price: $0.55 (2/21/2024)
Exit Target: $1.10
Return: 64%
Stop Target: 56 cents, raise to 75 cents (Stop Limit)
Action: Raise the Stop Limit at 56 cents to 75 cents on the RKT April 12 calls.
Lower resistance at $12.25-$12.50 was cleared but held with the peak at $12.27. Support is at $11.75-$11.50.
Shares are on the verge of breaking out of a symmetrical triangle with continued closes $12.50 confirming the action. If cleared and held, there could be another run to $14.50-$15 in the works.
We added the RKT April 13 calls to advantage of this development while protecting our original position with the higher Stop Limit.
Petróleo Brasileiro (PBR, $16.72, down $0.98)
PBR April 18 calls (PBR240419C00018000, $0.40, down $0.35)
Entry Price: $0.70 (2/12/2024)
Exit Target: $1.40
Return: -43%
Stop Target: None
Action: New and upper support at $16.75-$16.50 failed to hold following the intraday tumble to $16.56. Lowered resistance is at $17-$17.25.
Earnings are coming up so we expected some volatility in the stock. However, there was no major news that we could find that might help explain yesterday’s 5% pullback.
Continue to hold:
Snap (SNAP)
SNAP March 20 calls (SNAP240315C00020000)
Ford Motor (F)
F March 11 puts (F240315P00011000)