MomentumOptions.com Pre-Market Update for 8/31/2023
Bulls Reclaim 50-Day Moving Averages
8:00am (EST)
Commentary
The stock market was up for the fourth-straight session as the bulls showed continued strength on Wednesday. The gains follow Tuesday’s surge past the 50-day moving averages and completes a v-shape recovery off the monthly lows for the major indexes.
The Nasdaq closed at 14,019 (+0.5%) after testing an intraday high of 14,050. Prior and lower resistance at 14,000-14,150 was cleared and held. A close above the latter would indicate strength towards 14,250-14,400 with the July 19th 52-week peak at 14,446. Support is at 13,900-13,750 and the 50-day moving average.
The S&P 500 topped out at 4,521 while ending at 4,514 (+0.4%). Lower resistance at 4,500-4,550 was cleared and held. A pop above the latter would suggest ongoing upside towards 4,600-4,650 with the late July 52-week high at 4,607. New support is at 4,450-4,400 and the 50-day moving average.
The Dow went out at 34,890 (+0.1%) with the high at 35,025. Lower resistance at 35,000-35,250 was cleared but held. A close above the latter would suggest strength towards 35,500-35,750 with the August 1st top at 35,679. Support is at 34,750-34,500 and the 50-day moving average.
Volatility Index
The Volatility Index (VIX) was fell for the fourth-straight session after kissing a low of 13.83. Prior and upper support at 14-13.50 was breached and held. A drop below would be an ongoing bullish signal for the market with retest potential to 13.25-12.75. Resistance is at 14.50-15 and 50-day moving average.
Thursday’s earnings announcements:
Before the open: Campbell Soup (CPB), Dollar General (DG), Duluth Holdings (DLTH), Hormel Foods (HRL), Ollie’s Bargain Outlet (OLLI), Signet Jewelers (SIG),
After the close: Dell Technologies (DELL), Lululemon Athletica (LULU), PagerDuty (PD), Tilly’s (TLYS), VMware (VMW)
Economic news:
Initial Jobless Claims – 8:30am
PCE Price Index – 8:30am
Market Thoughts
Lululemon Athletica (LULU) will announce numbers after today’s closing bell. Wall Street is looking for a profit of $2.54 a share on revenue of $2.17 billion. The company has topped estimates the past four quarters by
Shares have moved 12% the past two earnings cycles and the options market is pricing in a 10% pop or drop on Friday. The 52-week peak is north of $394 and would be cleared if shares soar more than 10%. Key support is at $360-$350 and the 200-day moving average. Selling pressure could be induced if $350 fails to hold on Friday’s open.
We looked at a possible setup for LULU but it is a heavily traded stock priced to perfection. The calls and puts that are 20% and out are quite pricey and makes them possible credit spreads. However, we still don’t like the event risk as the trade looks overcrowded.
The biggest developments this week have been the recovery of the 50-day moving averages by the major indexes and the VIX settling back below the 15 level. Obviously, these targets need to hold into the weekend to keep fresh 52-week highs in play for the overall market.
The Russell 2000 also joined the major indexes in clearing key resistance levels following the close back above 1,900 and the 50-day moving average on Wednesday. Continued closes above these levels would imply another trip towards the 2,000 area.
We will have more to say in our Monday morning update once this week’s dust settles. The charts continue to give us incredible clues on playing the trend and providing us great trading opportunities. On that note, let’s go check the current action and stay on the lookout for possible updates to close out the week.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 18-8 (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 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.
Barrick Gold (GOLD, $16.35, up $0.11)
GOLD October 17 calls (GOLD231020C00017000, $0.47, up $0.02)
Entry Price: $0.45 (8/29/2023)
Exit Target: $0.90
Return: 4%
Stop Target: None
Action: Key resistance at $16.50 and the 50-day moving average was challenged but held on Wednesday’s trip to $16.51. Support is at $16.25-$16.
We have trade GOLD several times over the past couple of years with good results. Longer-term and key support from March at $15.50 held earlier this month and was a good sign of a possible near-term bottom.
The October options have 50 days before expiration and gives us plenty of time for this trade to play out. Our price target is $17.75-$18 by the time these options expire which represents mid-July and mid-May resistance. If the latter is reached, these calls will be $1 in-the-money for a 100+% return.
Snap (SNAP, $10.12, up $0.23)
SNAP October 10 calls (SNAP231020C00010000, $0.85, up $0.13)
Entry Price: $0.55 (8/29/2023)
Exit Target: $1.10
Return: 55%
Stop Target: 60 cents (Stop Limit)
Action: Set an initial Stop Limit at 60 cents to start protecting profits and to avoid a loss.
Wednesday’s peak reached $10.17 with fresh and lower resistance at $10-$10.25 getting cleared and holding. Support is at $9.75-$9.50.
We wanted to get into this trade Tuesday morning after shares were showing signs of breaking out of a mini-trading range between $9.50-$9. Shares were at oversold levels with RSI dipping below 30 and another reason we liked this setup.
iShares Silver Trust (SLV, $22.57, down $0.14)
SLV October 22 calls (SLV231020C00022000, $1.15, down $0.10)
Entry Price: $0.60 (8/22/2023)
Exit Target: $1.80
Return: 92%
Stop Target: 90 cents, raise to $1 (Stop Limit)
Action: Raise the Stop Limit from 90 cents to $1. Yesterday’s low touched $1.13 on the calls.
Shares tested a high of $22.94 before ending in the red. Lower resistance at $22.75-$23 was cleared but held. Support is at $22.50-$22.25.
Petróleo Brasileiro (PBR, $14.54, down $0.04)
PBR September 15 calls (PBR230915C00015000, $0.22, down $0.02)
Entry Price: $0.35 (7/24/2023)
Exit Target: $0.70
Return: -37%
Stop Target: None
Action: Lower resistance at $14.75-$15 was approached and easily held with the high at $14.66. Support is at $14.25-$14.
Iovance Biotherapeutics (IOVA, $6.16, up $0.04)
IOVA December 12.50 calls (IOVA231215C00012500, $0.30, unchanged)
Entry Price: $0.80 (7/10/2023)
Exit Target: $1.60
Return: -44%
Stop Target: None
Action: Yesterday’s high reached $6.19 with lower resistance at $6.25-$6.50 holding. Support remains at $6-$5.75.
For new subscribers, please read the writeup from 7/13 or 7/20 on why we are bullish on the stock.