MomentumOptions.com Pre-Market Update for 4/10/2023
Bulls Hold Key Support
8:00am (EST)
The stock market shrugged off a weak open following a worse-than-expected jobless claims report on Thursday but the gains weren’t enough to offset the overall weekly loss. The bulls managed to easily hold key support levels on the session lows with an ongoing trading range likely continuing this week and into the start of the first-quarter earnings season.
The Nasdaq traded to a high of 12,098 while ending at 12,087 (+0.8%). Current and lower resistance at 12,000-12,150 was reclaimed. A move above the latter would suggest another run to 12,200-12,350 with the February 2nd high at 12,269. Support is at 11,900-11,750 and the 50-day moving average.
The S&P 500 closed at 4,105 (+0.4%) after testing an afternoon peak of 4,107. Key resistance at 4,100 was recovered. Continued closes above this level keeps 4,150-4,200 in focus with the February 2nd high at 4,195. Support is at 4,050-4,000 and the 50-day moving average.
The Dow hit an intraday high of 33,525 before settling at 33,485 (+0.01%). Current and lower resistance at 33,500-33,750 was cleared but held for the second-straight day. A move above the latter would indicate strength towards 34,000-34,250 with the January 13th peak at 34,342. Support remains at 33,250-33,000 and the 50-day moving average.
Volatility Index
The Volatility Index (VIX) tagged a monthly low of 18.35 with upper support at 18.50-18 getting breached and holding. A drop below the latter would be a very bullish development for the market with weakness towards 17.50-17. Resistance is at 19.50-20.
Monday’s earnings announcements:
Before the open: Greenbrier Companies (GBX), iMedia Brands (IMBI)
After the close: PriceSmart (PSMT), Tilray (TLRY)
Economic News
Wholesale Inventories – 10:00am
Market Thoughts
For the week, the Dow gained 0.6%; the S&P 500 slipped 0.1%, the Nasdaq gave back 1.1%. The choppiness during a shortened week wasn’t a surprise as we said Wall Street seemed to be looking ahead towards first-quarter earnings. The season “officially” starts this Friday with the financial sector stepping up to the plate.
Citigroup (C), JP Morgan (JPM), PNC Financial (PNC), and Wells Fargo (WFC) will announce numbers ahead of the opening bell and reminders of the recent bank blunders will be back in the headlines. The technical setup and charts for all of the aforementioned companies look bearish with a death cross and fresh 52-week lows on the verge of happening with Wells Fargo.
If current resistance at $38 holds throughout the week, it might suggest further weakness on the earnings announcement. This level served as prior support in late January that failed in mid-March. The 52-week low on March 24th hit $35.25.
The weekly WFC April 36 puts (WFC230414P00036000, $0.35, down $0.28) and the WFC April 40 calls (WFC230414C00040000, $0.25, up $0.12) that expire THIS Friday will likely be very active throughout the week. Traders could take inexpensive bets on a major rebound, or a pending breakdown in the stock, based on the results and outlook. We will likely stay on the sidelines as far as WFC but we will be watching the action for possible clues on how the overall market might react.
Coming into last week we mentioned key support levels were at: Dow 32,500; S&P 4,000; and Nasdaq 11,800. As for the Dow, last Monday’s bottom hit 33,245 and the March 29th low at 32,539. The S&P touched 4,069 on Friday and 4,032 on March 29th.
Friday’s opening low tagged 11,898 on the Nasdaq and the March 29th low is at 11,823. All of the March 29th lows follows the previous session’s breakout above Dow 32,500; S&P 4,000; and Nasdaq 11,800, respectively.
As a reminder, closes below these levels and the 50-day moving averages would reengage the prior nine and 10-session trading ranges for the major indexes. As far as RSI (relative strength index) readings, they came into last week near 60 and went out at basically the same levels. However, instead of a bearish outlook, that was correct for last week, this week they look neutral to bullish.
We stated there was a chance 70 was going to come into focus and if there was consolidation last week, it could actually work in the bulls favor if Wall Street rewards 1Q earnings. So far, so good.
Carmax (KMX), Delta Air Lines (DAL), Fastenal (FAST), Infosys Technologies (INFY) and Progressive (PGR) will announce numbers at some point this week and ahead of Friday’s fireworks with their results likely impacting certain sectors.
The biggest takeaway from last Thursday was the action in the VIX which finally cracked 18.50. A close below 18 and the March 3rd low at 18.16 after Friday’s barrage of earnings from the Big Banks would be a very bullish setup for the market.
The one bearish clue we continue to watch for is a close above 20.50 on the VIX. Last Thursday’s peak was at 20.08 that was also tapped on March 30th. The VIX has closed below 20 for eight-straight sessions and why it is imperative this level holds for higher market highs to be made this month.
Friday’ jobs report didn’t have much of an impact on futures throughout the day, or last night, as there were no major surprises. There are a few trades we could take action on this week so stay locked-and-loaded.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 9-4 (69%). 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.
Verizon Communications (VZ, $40.11, up $0.
VZ May 40 calls (VZ230505C00040000, $0.80, down $0.05)
Entry Price: $0.65 (4/5/2023)
Exit Target: $1.30
Return: 23%
Stop Target: 70 cents (Stop Limit)
Action: The Stop Limit at 70 cents held with the low at 71 cents.
Shares were up for the seventh-straight session with the high at $39.78. Lower resistance at $39.75-$40 was cleared but held. Rising support is at $39.25-$39.
A dividend of 65-cent was paid and discounted in the stock on Friday. We were unaware of this event coming into play when we opened the position so the parameters of the trade has changed, to a degree.
If shares show continued strength, we will stay in the position. However, any weakness this morning will likely trip the Stop Limit so be prepared to exit if shares start off in the red.