MomentumOptions.com Pre-Market Update for 4/27/2023
Bears Keep Momentum Despite Solid Earnings
8:00am (EST)
We wanted to include a video link in this morning’s update and it is one we made Sunday night. The action we discuss in the video and in our twice weekly emails has unfolded like we have planned for this week.
We would like to do these videos bi-weekly, or even weekly, as they will give you a more detailed chart view of the major indexes. We also talk about current stocks we are watching. We will still do email updates for current trades along with market commentary but we believe you will like the details of the video, as well.
Please email us your thoughts and any questions or suggestions you might have.
https://us06web.zoom.us/rec/share/tLjvZcnyujlOZ4TwkL9T3oExhxeajxdl0uOKWUrTv55DGpxAywpt3-7ciaB0_MM.FvEcAnlnesgvdOhq
Passcode: ?YLk90e7
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Commentary
Wall Street was mixed on Wednesday as upbeat earnings from Alphabet (GOOGL) and Microsoft (MSFT) lifted Tech stocks while the broader market fell for the second-straight session. Economic news was also better-than-expected as U.S. durable goods orders rose 3.2% in March, following the 1.2% drop in February.
The Nasdaq traded to a high of 11,967 before ending at 11,854 (+0.5%). Key resistance at 12,000 was challenged and held. Continued closes back above this level would signal a retest to 12,100-12,250. Key support is at 11,800. Continued closes below this level and the 50-day moving average would likely suggest weakness towards 11,650-11,500 and the 200-day moving average.
The S&P 500 settled at 4,055 (-0.4%) with the afternoon bottom hitting 4,049. New and upper support at 4,050-4,000 was breached but held. A drop below the latter and the 50-day moving average would indicate a further slide to 3,950-3,900 and the 200-day moving average. New resistance is at 4,100-4,150.
The Dow tested a low of 33,235 while finishing at 33,301 (-0.7%). Prior and upper support at 33,250-33,000 was tripped but held. A move below the latter and the 50-day moving average would be an ongoing bearish setup with downside risk towards 32,750-32,500. Resistance is at 33,500-33,750.
Volatility Index
The Volatility Index (VIX) was up for the third-straight session after reaching an intraday peak of 19.61. Current and lower resistance at 19.50-20 was cleared but held for the second-straight day. A close above the latter and the 50-day moving average would imply upside to 21.50-22. Rising support is at 18.50-18.
Thursday’s earnings announcements:
Before the open: Altria Group (MO), Bristol-Myers Squibb (BMY),
Caterpillar (CAT), Domino’s Pizza (DPZ), Harley-Davidson (HOG), Peabody Energy (BTU), Valero Energy (VLO)
After the close: Beazer Homes USA (BZH), First Solar (FSLR), Gilead Sciences (GILD), Imax (IMAX), Pinterest (PINS), Skechers U.S.A. (SKX), Snap (SNAP), United States Steel (X)
Economic news:
Initial Jobless Claims – 8:30am
Pending Home Sales Index – 10:00am
Market Thoughts
There was some serious technical damage done on Tuesday’s pullback with Wednesday’s action likely confirming lower lows over the near-term. We highlighted the S&P’s breakdown out of its bottom uptrend channel last Thursday with the Dow following suit yesterday.
The Nasdaq fell out of an 18-session trading range on Tuesday, and actually closed below 11,800 by a point. However, the 50-day moving average held. We mentioned this would be our clue to possibly go short but we often talk about stocks and indexes getting “stretched”. In any event, the inability of the Nasdaq failing to regain 12,000 yesterday keeps this short thesis in play.
It is no surprise to see the VIX pushing 20 after the major indexes failed to hold key support levels on Tuesday. Yesterday’s close back above 18.50 was another bearish development for the overall market. However, we would like to see the VIX make continued closes above 23 and the 200-day moving average before getting really aggressive.
For the past two weeks we have highlighted key support levels for the major indexes at: Dow 32,500; S&P 4,000; and Nasdaq 11,800. If these levels hold this week, and the VIX falls back below 18, we will remain in a holding pattern as key resistance levels from February and December could still be in play.
The RSI (relative strength index) readings for the major indexes have fallen into the 40’s and we said there would be weakness this week if 50 fails to hold across the board. Obviously, the bulls will also need to recover these levels to reverse the bears current momentum.
As for the Russell 2000, we talked about the longer-term downtrend line from last week holding off of the early February 2nd and 3rd peaks at 2,007 and 2,005, respectively. More importantly, we also did some chart work that showed a death-cross was in the process of forming with the 50-day moving average falling below the 200-day moving average. The video will highlight this action and worth a watch.
This bearish technical setup was confirmed both on the Russell 2000 and the iShares Russell 2000 ETF which mirrors the index. Yesterday’s close below new resistance at $172.50 reopened downside action towards $170-$167.50 with the March 26th low at $167.46.
The rest of the week has a number of key earnings still to come with Meta Platforms (META) announcing mixed results after Wednesday’s closing bell. The company missed on earnings after posting a profit of $2.20 versus $2.53. However, revenue of $28.65 billion was above estimates of $27.67 billion and current revenue for the quarter was above forecasts on the company’s conference call with analysts.
Earnings will become less important as we turn the page on April this week and look forward to what could be a rocky May starting next week. Remember, we don’t care which way the market is headed as we can make just as much money in bull markets as we can in bear markets. On that note, let’s go check the current action and stay locked-and-loaded for a possible new trade today.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 12-4 (75%). 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.
DraftKings (DKNG, $20.41, down $0.61)
DKNG May 20 puts (DKNG230519P00020000, $1.20, up $0.20)
Entry Price: $0.80 (4/21/2023)
Exit Target: $1.60
Return: 50%
Stop Target: $1 (Stop Limit)
Action: Set an initial Stop Limit at $1 to start protecting profits and to avoid a loss.
Shares kissed a low of $20.30 with fresh and upper support at $20.50-$20.25 failing to hold. Lowered resistance is at $20.75-$21.