MomentumOptions.com Pre-Market Update for 8/17/2023
Bears Getting Aggressive
8:00am (EST)
Commentary
The stock market continues to flirt with fresh monthly lows following Wednesday’s pullback and second-straight day of losses. Some of the gloominess was blamed on the Federal Reserve’s July meeting minutes, which hinted at potentially higher interest rates.
The Nasdaq went out at 13,474 (-1.2%) with the late day low reaching 13,473. Key support at 13,500 failed to hold. Continued closes below this level would imply a further slide towards 13,400-13,250. Lowered resistance is at 13,600-13,750 and the 50-day moving average.
The S&P 500 traded down to 4,403 before settling a point above at 4,404 (-0.8%). Fresh and upper support at 4,400-4,350 was challenged and held. A move below the latter would suggest ongoing weakness to 4,300-4,250. Resistance is at 4,450-4,500 and the 50-day moving average.
The Dow closed at 34,765 (-0.5%) after tumbling to an afternoon low of 34,757. New support at 34,750-34,500 was approached and held. A close below the latter and the 50-day moving average would indicate a further fade to 34,250-34,000. Resistance is at 35,000-35,250.
Volatility Index
The Volatility Index (VIX) was up for the second-straight session with the peak reaching 16.93. Lower resistance at 16.50-17 was cleared and held. A move above 18 and the monthly peak at 18.14 would reopen upside towards 19-19.50 and 200-day moving average. Support is at 15-14.50 and the 50-day moving average.
Thursday’s earnings announcements:
Before the open: Bilibili (BILI), Dole (DOLE), Semantix (STIX), Tapestry (TPR), Walmart (WMT), Yirendai (YRD)
After the close: Applied Materials (AMAT), Keysight Technologies (KEYS), Precipio (PRPO), Red Robin Gourmet Burgers (RRGB), Ross Stores (ROST)
Economic news:
Initial Jobless Claims – 8:30am
Philadelphia Fed Business Outlook Survey – 8:30am
Leading Indicators – 10:00am
Market Thoughts
The S&P 500 closed below 4,450 and its 50-day moving average on Tuesday while the Dow failed to hold the 35,000 level. These events were bearish developments that further confirmed near-term market tops for both indexes.
The Nasdaq was the first to confirm a near-term top as it closed below its 50-day moving average last Friday. We said coming into the week the most important development we would be watching this week was support on the Nasdaq at 13,500. The bears threatened this level in early July before the bulls pushed fresh 52-week peaks later in the month.
Yesterday’s close below this level on the Nasdaq will likely push the Dow and S&P towards our June and July downside targets. For new subscribers, here is what we said stated on July 3rd:
“The key support levels we said to watch for last month were at: Nasdaq 13,500; S&P 4,350; and Dow 33,750. These remain areas to watch going forward. As far as possible market tops during earnings season this month and next: Dow 35,250-35,500; S&P 4,550-4,600; and Nasdaq 14,350-14,500.”
We will have new downside targets next week if the Dow and S&P join the Nasdaq in closing below the aforementioned support targets. Although we have a lower range of 13,400-13,250 for the Nasdaq, the 100-day moving is just above the 13,000 level and could mean another 3%-4% selloff by month end.
The other warning signal we said to watch for on the Nasdaq was the Relative Strength Index (RSI) for the Nasdaq. It held 40 on Tuesday’s drubbing but close at 37 on Wednesday. Another bearish development that keeps weakness to 35-30 in play.
RSI on the S&P is at 38 and could also fall towards 34-30. Meanwhile, the Dow is back below 50 after settling just below 45 yesterday.
As far as volatility, if the VIX clears the monthly peak at 18.14 a quick pop to 20 can be expected. We mentioned on Monday we needed to see multiple closes above 20 on the VIX before we can say the bears are completely in charge.
Needless to say, the next two trading sessions will be crucial for the bulls to hold, and regain as far as the Nasdaq, key support levels into the weekend.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 17-8 (68%). 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.
Pfizer (PFE, $35.48, up $0.09)
PFE September 34 puts (PFE230922P00034000, $0.38, down $0.03)
Entry Price: $0.31 (8/15/2023)
Exit Target: $0.65
Return: 23%
Stop Target: 32 cents (Stop Limit)
Action: Set an initial Stop Limit at 33 cents to protect profits and to avoid a loss. The puts traded up to 50 cents yesterday.
Shares tested a low of $34.99 on Wednesday before ending slightly higher. Upper support at $35-$34.75 was breached but held. Lower resistance is at $35.75-$36.
We wanted to see a close below $35 with the current 52-week low from August 4th at $34.66. If shares clear $36 there is a chance of a retest to the 50-day moving average. However, we will likely get stopped out for a slight profit.
Petróleo Brasileiro (PBR, $13.84, up $0.41)
PBR September 15 calls (PBR230915C00015000, $0.15, up $0.04)
Entry Price: $0.35 (7/24/2023)
Exit Target: $0.70
Return: -57%
Stop Target: None
Action: Lower resistance at $14-$14.25 was tripped but held with the high at $14.06 on the close back above the 50-day moving average. Support is at $13.75-$13.50.
Iovance Biotherapeutics (IOVA, $6.90, down $0.61)
IOVA December 12.50 calls (IOVA231215C00012500, $0.40, down $0.20)
Entry Price: $0.80 (7/10/2023)
Exit Target: $1.60
Return: -50%
Stop Target: None
Action: Shares were volatile on the close back below the 200-day moving average. Yesterday’s low touched $6.84 with upper support at $7-$6.75 failing to hold. Resistance is $7.50-$7.75 and the 50-day moving average.
For new subscribers, please read the writeup from 7/13 or 7/20 on why we are bullish on the stock.