MomentumOptions.com Pre-Market Update for 12/9/2024
Small-Caps Slack After Weekly Pullback
8:00am (EST)
Technical Outlook (video link)
https://go.screenpal.com/watch/cZlQnnnn0R3
The stock market tagged intraday record highs again on Friday while settling mostly higher on the session. The blue chips lagged while the small-caps were down for the week as volatility remained subdued heading into the final few weeks of the year.
The Nasdaq closed at 19,859 (+0.8%) after tagging a record high of 19,863. New and lower resistance at 19,850-20,000 was cleared and held. Rising support is at 19,750-19,600.
The S&P 500 traded up to an all-time top of 6,099 while ending at 6,090 (+0.3%). Key resistance at 6,100 was challenged and held by 0.03 of a point. Support is at 6,050-6,000.
The Dow went out at 44,642 (-0.3%) with the low tapping 44,596. Upper support at 44,750-44,500 failed to hold. Resistance is at 45,000 with last Wednesday’s lifetime peak at 45,076.
Earnings and Economic News
Before the open: Hello Group (MOMO), Rent the Runway (RENT), VersaBank (VBNK)
After the close: Braze (BRZE), Casey’s General Stores (CASY), C3.ai (AI), Oracle (ORCL), Planet Labs (PL), Toll Brothers (TOL), Vail Resorts (MTN), Yext (YEXT)
Economic News
Wholesale Trade Sales – 10:00am
Technical Outlook and Market Thoughts
The major indexes easily remained in their current uptrend channels while making higher highs throughout the week. The one index that slacked were the small-caps as the Russell was down about 1% for the week. This wasn’t too surprising as the index outpaced the other major indexes over the prior two weeks.
Shaky but key support at 2,400 failed to hold on Thursday’s fade to 2,395 and close at 2,396. Friday’s close back above this level keeps 2,450-2,500 and the November 25th all-time high at 2,466 in play. The 2,500 level represents our 25% higher Price Target from February 23rd when the Russell was at 2,016.
There is wiggle room down to 2,375-2,350 if 2,400 and the middle of the uptrend fails. Major support is at 2,300 and the bottom of the current uptrend channel if 2,350 fails.
The Nasdaq started breaking out on Monday and is just 1% away from our February 23rd Price Target of 20,000 when the index was at 15,996. There weren’t many Wall Street analysts calling for this magical number and we expect the talking heads to push this narrative this week. The current uptrend channel is now showing near-term upside towards 20,500 on closes above 20,000. The first wave of support is at 19,600-19,500 followed by 19,250 and the bottom of the current uptrend channel.
The S&P has recorded six-straight closes above 6,000 and seven of the past eight sessions. This level now represents the bottom of the current uptrend channel. There is stretch down to 5,950-5,900 and the 50-day moving average if 6,000 fails. The top of the current uptrend channel shows momentum to 6,300 with our February price target for yearend at 6,500 when the index was at 5,088. This was slightly higher at 28% with 6,350 representing a 25% run.
The Dow is hovering in the middle of its uptrend channel with closes above 45,200 suggesting a renewed breakout to higher highs. The near-term top of the channel has moved up 46,500 with our February Price Target at 50,000. As a reminder, Nvidia (NVDA) was added to the index on November 4th. There are several layers of key support starting at 44,500 and 44,000.
In summary, there is no need to turn cautious on the overall market until the Nasdaq falls back below 19,250; the Dow slips under 44,000; and the S&P fails to hold 6,000. We mentioned the small-caps cracking point at 2,300 would also be a bearish development.
The Volatility Index (VIX) tagged a multi-month low of 12.70 with crucial support throughout July at 12.75 getting tripped but holding. We have targeted a possible drop towards 11.50 on continued closes below 12.75. Resistance is at 13.50 with additional layers at 15 and 17.50.
The third-quarter earnings season has pretty much concluded but there are some key companies reporting numbers throughout the week. Earnings trades can be tricky and require extra research but we could swing the bat on a candidate that could surprise or disappoint analysts.
The fourth-quarter earnings season (and yearend 2024 results) begins in early January and will have a major impact on the market. The presidential change of guard could also play a major role but events we don’t have to plan for until another few weeks. Until then, we said to stay bullish as the charts continue to give great clues.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 71-11 (86%, 34 triple-digit winners). 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.
Trades Updates (video)
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Fastly (FSLY, $10.90, up $0.97)
FSLY January 12.50 calls (FSLY250117C00012500, $0.70, up $0.33)
Entry Price: $0.45 (12/6/2024)
Exit Target: $1.35
Return: 75%
Stop Target: 45 cents (Stop Limit)
FSLY March 12.50 calls (FSLY250321C00012500, $1.40, up $0.45)
Entry Price: $1.15 (12/6/2024)
Exit Target: $2.30
Return: 22%
Stop Target: None
Action: Given the huge run up in the January calls, we suggest setting a Stop Limit at the entry price of 45 cents. The 75% paper gain in a few hours is nice but we set a stop in case shares pullback to start the week.
Shares stayed in a strong uptrend after our alert, adding another 5%, while trading up to $10.95. Undefined and lower resistance at $10.75-$11 was cleared and held. Current support is at $10.25-$10.
We have been profiling the stock since early November and said continued closes above $9.50 could lead to a gap up towards $12.50. This level served as solid support throughout April before a 32% plunge to below $9 in early May following earnings. The company reported a seven-cent loss but better than forecasts, along with higher revenues.
In the most recent quarter, Fastly reported a profit of two-cent a share versus expectations for another loss of seven cents. Revenue also topped forecasts at $137 million versus $132 million.
For 2025, analysts expect the company to earn $0.03 a share with the high at $0.16. There are also some firms that believe the company could lose up to $0.05 a share next year.
FSLY is one of our favorite small-cap stocks to play the artificial intelligence sector. Its businesses include CDN’s (content delivery networks), video streaming, and security solutions that cater to a number of big-cap companies.
Shares had hovered below $10 since May 2nd but started to clear this level on the December 2nd 16% breakout. Our near-term target remains at $12.50 but there is a chance for a run towards $14 if that level is cleared. The 52-week high is north of $25.
AT&T (T, $23.88, up $0.05)
T January 24 calls (T250117C00024000, $0.55, up $0.02)
Entry Price: $0.40 (11/25/2024)
Exit Target: $0.80
Return: 38%
Stop Target: None
Action: Friday’s high reached $23.90 with key resistance at $24 getting challenged and holding. Continued closes above this level and Tuesday’s 52-week peak at $24.03 gets $24.50 and the top of the current uptrend channel in play. Support is $23.25-$23.
We have a 2025 Price Target of $28 for the stock which represents resistance from March 2020. The current yield on the stock is at 4.7%. Over the past two years, we are 5-0 trading covered calls on AT&T and 12-1 with directional trades. If shares can clear $24.80 by mid-January (or sooner) we will lock-in at least a 100% return.
Ford Motor (F, $10.74, down $0.08)
F January 12 calls (F250117C00012000, $0.10, unchanged)
Entry Price: $0.25 (11/25/2024)
Exit Target: $0.50
Return: -60%
Stop Target: None
Action: Friday’s high touched $10.60 with lower resistance at $10.50-$10.75 getting recovered. Key support is at $10.25 and the bottom of the current three-month trading range.
The drop below the 50-day moving average reopens another backtest to $10.25. We are 7-2 trading calls and puts on Ford over the past two years with our biggest winners at 1,200%, 622% and 257%. The current dividend yield is at 5.8%.
Newell Brands (NWL, $10.31, up $0.38)
NWL January 10 calls (NWL250117C00010000, $0.75, up $0.15)
Entry Price: $0.20 (11/25/2024)
Exit Target: $0.80
Return: 275%
Stop Target: 30 cents, raise to 40 cents (Stop Limit)
Action: Raise the Stop Limit at 30 cents to 40 cents.
Longer-term and lower resistance from September 2023 at $10.25-$10.50 was cleared and held with the 52-week peak hitting $10.45. Rising support is at $10-$9.75.
We said a run towards $11-$11.50 could come by late January on continued closes above $10. Given the momentum, this could happen in December following Wednesday’s and Friday’s 3.8% surge on both days. The dividend yield is currently at 2.8%.
SoFi Technology (SOFI, $16.02, up $0.37)
SOFI January 17 calls (SOFI250117C00017000, $1.10, up $0.10)
Entry Price: $0.55 (11/19/2024)
Exit Target: $1.10
Return: 100%
Stop Target: 95 cents (Stop Limit)
SOFI January 13 calls (SOFI250117C00013000, $3.05, up $0.
Entry Price: $0.65 (11/8/2024)
Exit Target: $4 (closed half at $3 on 11/21)
Return: 392%
Stop Target: $2.75 (Stop Limit)
Action: Key resistance at $16 was recovered with the high reaching $16.05 ahead of the close. Support is at $15.25-$15.
A close above $16.61 and the recent high in back-to-back sessions would get $17-$17.50 in play with the latter representing the upper end of our December price target.
Pfizer (PFE, $25.73, up $0.03)
PFE January 22.50 puts (PFE250117P00022500, $0.10, unchanged)
Entry Price: $0.25 (11/19/2024)
Exit Target: $0.50
Return: -60%
Stop Target: None
PFE February 21 puts (PFE250221P00021000, $0.15, unchanged)
Entry Price: $0.25 (11/19/2024)
Exit Target: $0.50
Return: -40%
Stop Target: None
Action: Shares have been rangebound the past 10 sessions with Friday’s low kissing $25.59. Key support at $25.25 held. Resistance is $26-$26.25 with a close above the latter being a bullish signal.
There is still risk up to $26.75-$27 on a close above $26.25 but we have plenty of time for the death-cross to play out. However, if shares clear $27 by yearend, we will likely exit the trades to save the remaining premium.