MomentumOptions.com Pre-Market Update for 3/13/2023
Bears Regain Momentum
8:00am (EST)
The stock market showed continued weakness on Friday following the latest jobs report that came in slightly above forecasts. Payrolls rose to 311,000 last month while private payrolls added 265,000 jobs, following revisions. The jobless rate rose to 3.57% from a previous 54-year low of 3.43%.
The bigger impact on the major indexes was the ongoing weakness in the Financial sector, and more specifically, the collapse of SVB Financial Group (SIVB). To make a long story short, the Silicon Valley bank efforts to raise capital failed and U.S. bank regulators have stepped in to take over the company.
The Nasdaq tested a low of 11,093 before closing at 11,138 (-1.8%). Late January and upper support at 11,150-11,000 failed to hold. A drop below the latter would imply further weakness to 10,900-10,850. Resistance is at 11,350-11,500 and the 50-day/ 200-day moving averages.
The S&P 500 finished at 3,961 (-1.5%) after tapping an intraday low of 3,846. Key support from mid-December at 3,850 was tripped but held. A close below this level would signal a further fade towards 3,800-3,750 with the December 22nd low at 3,764. Lowered resistance is at 3,900-3,950 and
200-day moving average.
The Dow traded down to 31,783 while closing at 31,909 (-1.1%). Prior and upper support from early November at 32,000-31,750 failed to hold. A move below the latter would suggest additional weakness towards 31,500-31,250.
Fresh resistance is at 32,250-32,500 and the 200-day moving average.
Volatility Index
The Volatility Index (VIX) was up for the fourth time in five sessions after zooming to an intraday peak of 28.97. Prior and lower resistance from late September at 28.50-29 was cleared but held. A close above the latter would be an ongoing bearish development for the market with upside risk to 30-30.50.
New support is at 22-21.50.
Monday’s earnings announcements:
Before the open: Benson Hill (BHIL), Eagle Pharmaceuticals (EGRX), Inspired Entertainment (INSE), ZIM Integrated Shipping (ZIM)
After the close: BuzzFeed (PZFD), Finance of America (FOA), Getty Images (GETY), Oportun Financial (OPRT), RF Industries (RFIL), Turtle Beach (HEAR)
Economic News
None
Market Thoughts
For the week, the Dow was down 4.4%; the S&P sank 4.6%; and the Nasdaq stumbled 4.7%. As far as sector action, Materials showed the most weakness after sinking 7.6% for the week while Technology and Utilities rose 0.7% and 0.5%, respectively.
The technical damage from Thursday was a prelude to Friday’s action as the Dow and the S&P closed below their 200-day moving averages. The Nasdaq joined the two after closing below its 200-day and 50-day moving averages. The Financial sector tanked 4.1% on Thursday and 1.8% on Friday.
The Dow fell back into negative territory for 2023 last Tuesday. Friday’s continued selloff has the S&P clinging to a 0.6% gain for the year with a close below 3,839 pushing the seesaw back into the bears favor. The Nasdaq ended 2022 at 10,466 and is still up 6%. However, a continued market selloff will likely be led by Tech (and the small-caps).
The VIX surged 18% to close back above 20, and more importantly the 22.50 level on Thursday. Friday’s close above 24 and the 200-day moving average was an ongoing bearish development. The inability of the bulls to get below 18 to start last week and confirm higher market highs was a bearish clue and one we have kept repeating throughout the year.
As far as RSI (relative strength index) levels, the major indexes are once again back in the 30’s and are approaching oversold conditions. There is still risk towards the mid to high 20’s and levels from late September/ early October if there is no market strength to start the new week.
As far as our current trades, we couldn’t be happier as we continue to benefit from the volatility. The market, especially Tech, had a strong January but we warned overbought conditions were in play and anticipated the February pullback.
We have also traded lightly as waited to see if there would be a temporary bottom coming into March. Thursday’s monthly lows on the Dow and the S&P were continued into Friday with the Nasdaq also joining in.
This week’s economic news and more updates on inflation will likely determine if the bulls will hold current levels and muster a seasonal rebound. If not, the bears will be poised to make a serious run at fresh 52-week lows from last October.
As far as possible setups, Bank of America (BAC) is starting to get interesting at these levels. Shares touched a fresh 52-week low of $28.92 on Friday with key support at $29 getting tripped but holding.
RSI is just below 20 and typically indicates extremely oversold conditions. The last time RSI trade down this low was January 2020 and when it dipped to under 15. We will likely need to see multiple closes above fresh resistance at $31-$31.50 before selling pressure eases.
If we take action, we will send out a Trade Alert. As for our current trades, the initial premiums are at 85 cents for both with the April options having 39 days before expiration. We have placed a Stop Limit on T.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 7-2 (78%). 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.
Transocean (RIG, $6.68, up $0.02)
RIG April 8 calls (RIG230421C00008000, $0.15, unchanged)
Entry Price: $0.45 (3/3/2023)
Exit Target: $0.90
Return: -67%
Stop Target: None
Action: Shares tapped a high of $7.07 with lower resistance at $7-$7.15 getting cleared but holding. Support is $6.55-$6.40 and the 50-day moving average.
AT&T (T, $18.43, up $0.11)
T April 18 puts (T230421P00018000, $0.50, down $0.01)
Entry Price: $0.40 (3/1/2023)
Exit Target: $0.80
Return: 25%
Stop Target: 44 cents (Stop Limit)
Action: Set an initial Stop Limit at 44 cents to start protecting profits and to avoid a loss. Friday’s low touched 49 cents.
Shares traded down to $18.24 before the higher close. Late December and upper support at $18.25-$18 and the 200-day moving average were tripped but held. A close below the later two should really get this trade going. Resistance is at $18.50-$18.75.