MomentumOptions.com Pre-Market Update for 3/2/2023
Bulls Trying to Stabilize
8:00am (EST)
The stock market fell on Wednesday and on the first trading day for March as economic news and Fedspeak weighed on sentiment. Specifically, the Purchasing Managers’ Index (PMI) was a disappointment and two Fed heads suggested aggressive interest rate hikes are the path forward to ease inflation.
The Nasdaq tested a low of 11,349 before ending at 11,379 (-0.7%). Current and upper support at 11,400-11,250 and the 200-day moving average failed to hold. A fade below the latter and the 50-day moving average would imply a further slide to 11,150-11,000. Resistance is at 11,450-11,600.
The S&P 500 closed at 3,951 (-0.5%) with the low tagging 3,939. Key support 3,950 and 200-day moving average were breached but levels that held. A close below the latter would indicate weakness towards 3,900-3,850 with the January 3rd low is at 3,794. Current resistance is at 4,000-4,050.
The Dow settled slightly higher at 32,661 (+0.02%) despite trading down to 32,500. Mid-December/ early November and key support at 32,500 was kissed and held. A close below this level and would be an ongoing bearish signal with downside risk to 32,250-32,000 and the 200-day moving average. Resistance is at 33,000-33,250.
Volatility Index
The Volatility Index (VIX) was down for the third-straight session with the low at 20.22. Upper support at 20.50-20 and the 50-day moving average were tripped but held. Lowered resistance at 21-21.50.
We talked about a battleground forming between 20-24 and the 50-day and 200-day moving averages this week. A close below 20 ahead of the weekend would be a slightly bullish development for the market.
Thursday’s earnings announcements:
Before the open: Anheuser-Busch InBev (BUD), Best Buy (BBY), Big Lots (BIG), Hormel Foods (HRL), Kroger (KR), Macy’s (M), Six Flags (SIX), Utz Brands (UTZ)
After the close: C3.ai (AI), Costco Wholesale (COST), Great Ajax (AJX), Marvell Technology (MRVL), Nordstrom (JWN), VMware (VMW), Zscaler (ZS)
Economic news:
Initial Jobless Claims – 8:30am
Market Thoughts
Last month’s market pullback wasn’t much of a surprise following the strong January that had reached overbought levels coming into February. The Dow led the way lower after falling 4.2%; the S&P stumbled 2.6%; and the Nasdaq was down 1.1%.
The major indexes have been trying to form a bottoming process over the past five sessions but there needs to be some continued caution. A closer look at the charts are showing the possibility of downside channels forming from mid-February. Continued closes above key resistance levels are needed to reverse the current technical damage.
The RSI (relative strength index) levels for the market are giving neutral readings but could provide clues on the next short-term trend. Closes above 40 on the Dow and 50 on the Nasdaq and S&P would be a bullish signal pf a near-term market bottom.
March is typically a bullish month for the market but it can be prone to huge price swings. Earnings won’t be much of a factor but warnings, or lowered guidance, could be and something Wall Street hates.
We have a lot to talk about with our current trades so lets’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 5-2 (71%). 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.
AT&T (T, $18.61, down $0.30)
T March 19 puts (T230317P00019000, $0.50, up $0.13)
Entry Price: $0.30 (2/24/2023)
Exit Target: $0.60, raise to $0.90
Return: 67%
Stop Target: 40 cents (Stop Limit)
T April 18 puts (T230421P00018000, $0.44, up $0.05)
Entry Price: $0.40 (3/1/2023)
Exit Target: $0.80
Return: 10%
Stop Target: None
Action: Raise the Exit Target from 60 cents to 90 cents for the T March 19 puts. Set an initial Stop Limit at 40 cents to start protecting profits.
We added the April 18 puts on the breakdown out of the 15-session trading range. There is new risk towards $17.50 and the December low as there was heavy volume in these contracts yesterday.
Tuesday’s close below the 50-day moving average was a nice setup for Wednesday’s fade to $18.61 and close on the session low. Prior and upper support mid-January at $18.75-$18.50 failed to hold. A drop below the latter sets up a further fade towards $18.25-$18 and the 200-day moving average. Key resistance is at $19.
Pfizer (PFE, $40.18, down $0.39)
PFE March 42.50 puts (PFE230317P00042500, $2.30, up $0.20)
Entry Price: $0.47 (2/14/2023)
Exit Target: $2.60 Limit Order (closed half at 80 cents on 2/16/23)
Return: 230%
Stop Target: $1.80 (Stop Limit)
Action. Set a Limit Order at $2.60 on the remaining half. Raise the Stop Limit at $1.80 to $2.10 to lock in at least a 209% winner. It always feels good to triple your money in two weeks.
Late September 2021 support at $40 held for the second-straight day and could signal a near-term bottom. Lowered resistance is at $40.50-$40.75.
We are trying to squeeze another 30 cents out of the trade but RSI has now reached 20. We talked about a fade to the mid-teens but we won’t be surprised if we are stopped out today. If so, we will send out a Profit Alert.