MomentumOptions.com Pre-Market Update for 6/22/2023
Bears Win Third-Straight Session
8:00am (EST)
Commentary
The stock market fell for the third-straight session with Wednesday’s losses attributed to Fed Powell’s latest comments on inflation and the likelihood of two more hikes. He repeated that it makes sense and was prudent for the Fed to move rates up at a more moderate pace given the uncertainties over the extent of credit tightening.
The Nasdaq traded to a low of 13,460 while ending at 13,502 (-1.2%). New and upper support at 13,500-13,350 was breached but held. A drop below the latter would signal downside risk to 13,250-13,100. Resistance is at 13,600-13,750 with last Friday’s 52-week peak at 13,864.
The S&P 500 finished at 4,365 (-0.5%) after bottoming out at 4,360. Fresh and upper support 4,350-4,300 was challenged and held. A close under the latter would imply a further slide to 4,250-4,200 and the 50-day moving average. Resistance is at 4,400-4,450 with last Friday’s 52-week high at 4,448.
The Dow tapped a low of 33,876 before settling at 33,951 (-0.3%). Current and upper support at 34,000-33,750 failed to hold. A move below the latter and the 50-day moving average would signal ongoing weakness towards 33,500-33,250. Resistance is at 34,250-34,500 with the mid-December 52-week peak at 34,712.
Volatility Index
The Volatility Index (VIX) was down despite the lower session with the 52-week low kissing 13.10. Key support at 13.50 was breached and failed to hold. Continued closes below this level keeps 13-12.50 in play. Resistance is at 14-14.50.
Thursday’s earnings announcements:
Before the open: Accenture (ACN), Commercial Metals (CMC), Darden Restaurants (DRI), FactSet Research Systems (FDS), Methode Electronics (MEI)
After the close: Beyond Air (XAIR), Capstone Green Energy (CGRN), Smith & Wesson Brands (SWBI)
Economic news:
Initial Jobless Claims – 8:30am
Existing Home Sales – 10:00am
Market Thoughts
We talked about the back half of June typically being a weak time period for the market and it aligned perfectly with overbought market conditions. Key support levels held: Nasdaq 13,500; S&P 4,350; and Dow 33,750.
If the aforementioned downside targets fail to hold in today’s session, there will probably be continued weakness to Friday. This might push RSI levels for the Nasdaq and the S&P to below 60.
If RSI on the Dow falls below 50, it would be a bearish development for lower lows, with the S&P and the Nasdaq likely making fades towards 55-50. This would be a nice setup for possibly buyers to come into the market but we will need to confirm if a bottoming process comes ahead of earnings season.
We highlighted the Transports coming into the week with the 15,000 level holding from last Friday. After testing fresh support at 14,600, $TRAN closed a smidge higher on Wednesday. The 50-day moving average is also curling higher with backup support at 14,400-14,200.
Meanwhile, FedEx (FDX) announcing numbers after Tuesday’s close that were mixed. The company topped profit forecasts but revenues were below expectations. Shares closed below the 50-day moving average on the news.
The lower close on the VIX following Wednesday’s weakness was odd but not uncommon. This typically indicates short-term indecision and can be an omen for a final flush towards our 12.50 near-term target we talked about ahead of month end.
We have a lot to talk about with our current positions so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 16-5 (76%). 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.
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Walt Disney (DIS, $88.64, down $1.11)
DIS July 85 puts (DIS230721P00085000, $0.90, up $0.13)
Entry Price: $0.90 (6/21/2023)
Exit Target: $1.80
Return: 0%
Stop Target: None
Action: Shares traded to an intraday low of $88.11 with upper support at $88.50-$88 getting tripped but holding. The puts tagged a high of $1.07 on heavy volume. Resistance is at $89.50-$90.
A close below $87.50 would be an ongoing bearish development with the December 28th 52-week low at $84.07. We have a target price of $82.50 by the time these puts expire which would have them at $2.50 “in-the-money”, technically, if reached.
The options still have over four weeks before expiration so we have plenty of time for this setup to play out. A close back above $92.50 would likely force us out of the position.
Pfizer (PFE, $38.90, down $0.44)
PFE July 42.50 calls (PFE230721C00042500, $0.06, down $0.04)
Entry Price: $0.24 (6/13/2023)
Exit Target: $0.50
Return: -75%
Stop Target: None
Action: Wednesday low kissed $38.76 with upper support at $39-$38.50 failing to hold. Resistance is at $39.25-$39.75.
We were slightly disappointed in the pin action after the company received FDA approval for its prostate cancer drug, TALZENNA. In any event, we still like this trade as long as the 50-day moving average holds into the weekend.
Verizon (VZ, $35.83, up $0.02)
VZ July 38 calls (VZ230721C00038000, $0.07, down $0.02)
Entry Price: $0.40 (5/19/2023)
Exit Target: $0.80
Return: -83%
Stop Target: None
Action: Shares traded up to $35.97 with lower resistance at $36-$36.25 getting challenged but holding. Support is at $35.50-$35.25.