MomentumOptions.com Pre-Market Update for 3/6/2023
Dow Snaps Four-Week Losing Streak
8:00am (EST)
The stock market showed strength for the second-straight day with Friday’s gains further locking-in the weekly win for the bulls. The reversal off the prior session lows was enough to clear key resistance levels and provided some relief following February’s end of the month selloff.
The Nasdaq closed at at 11,689 (+2%) following the intraday push to 11,699.
Lower resistance at 11,600-11,750 was reclaimed. A move above the latter would suggest a retest towards 11,850-12,000. Support is at 11,500-11,350 and the 200-day moving average.
The S&P 500 traded to a high 4,048 while settling at 4,045 (+1.6%). Key resistance at 4,000 and 50-day moving average were cleared and held. Continued closes above these levels would imply upside to 4,050-4,100. Backup support is 3,950 and 200-day moving average.
The Dow finished at 33,390 (+1.2%) with the afternoon peak hitting 33,405. Current and lower resistance at 33,250-33,500 was recovered. A pop above the latter and the 50-day moving average would be a slightly bullish signal for ongoing strength towards 33,750-34,000. Support is at 33,000-32,750.
Volatility Index
The Volatility Index (VIX) closed below 20 for the second-straight day after tagging a low of 18.16. Prior and upper support from mid-February at 18.50-18 was breached and held. The February 2nd and 52-week low is at 17.06 and would come into play on a drop below 18.
Lowered resistance is at 19.50-20 and the 50-day moving average.
Once again, it will imperative the bulls recover the 18 level for multiple sessions to confirm a near-term market bottom. The February 1st close was at 17.87 and the only time the bulls have held 18 over the past year.
Monday’s earnings announcements:
Before the open: Adaptimmune Therapeutics (ADAP), Biodesix (BDSX), Ciena (CIEN), Science 37 Holdings (SNCE)
After the close: Aris Water Solutions (ARIS), Calavo Growers (CVGW), Dave (DAVE), Guidewire Software (GWRE), Markforged (MKFG), RxSight (RXST), WW International (WW), Zynex (ZYXI)
Economic News
Factory Orders – 10:00am
Market Thoughts
For the week, the Dow was up 1.8%; the S&P added 1.9%; and the Nasdaq was higher by 2.6%. As far as sector action, Materials showed the most strength after rising 4.2% for the week while Utilities paced the laggards with a decline of 2.2%.
The fact the bears pushed lower lows last Thursday needs to be respected until the bulls can clear the next wave of resistance levels: Dow 33,500; S&P 4,050; and Nasdaq 11,800. This would establish a possible near-term bottom for the major indexes with solid support levels clearly defined.
The RSI (relative strength index) levels for the market are starting to show bullish readings and could provide clues on the next short-term trend. Continued closes above 50 for the major indexes would also be a bullish development.
We talked about March typically being an up month, and more specifically, there tends to be mid-month strength before a fade afterwards and into April. With the VIX falling below 20 throughout last week, it was also a good indicator the market was trying to form a near-term bottom.
With the Fed speaking later this month, the news cycle could help, or hinder, March’s historical trading patterns. Recent economic news will likely have another rate hike in focus with the debate heating up on if it will be a quarter or half-point increase.
The talking heads love to tell you that it is impossible to time the market but good chart work along with technical indicators often prove them wrong. This same discipline can often lead to outstanding trades as we continue to enjoy a great start to 2023.
The portfolio remain somewhat light and that is okay as we typically avoid trading ranges and bottoming processes. We prepared for this last week, and the prior week’s selloff…and the January run to prior resistance levels. This is why we do the homework on a daily basis.
We closed three trades last week in DKNG, PFE, and T for gains of 50%, 262%, and 33%, respectively.
On that note, stay locked-and-loaded as we could have a new trade as early as today, or at least by mid-week. It just depends as we might have to wait a day or two to see how the action plays out before getting too aggressive.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 7-2 (78%). 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.
Transocean (RIG, $7.51, up $0.15)
RIG April 8 calls (RIG230421C00008000, $0.45, up $0.07)
Entry Price: $0.45 (3/3/2023)
Exit Target: $0.90
Return: 0%
Stop Target: None
Action: Friday’s push to to $7.61 cleared and held lower resistance at $7.50-$7.65. A close above the latter and the February 16th 52-week peak at $7.69 could lead to a breakout towards $8-$8.50. Fresh support is at $7.25-$7.10.
Volume was heavy in these call options on Friday as nearly 8,000 contracts traded. This means options traders are expecting higher highs over the near-term. The breakeven point for this trade is at $8.45 and a triple digit return is at $8.90 if shares are technically above these levels by April 21st.
AT&T (T, $18.81, up $0.15)
T April 18 puts (T230421P00018000, $0.35, down $0.07)
Entry Price: $0.40 (3/1/2023)
Exit Target: $0.80
Return: -13%
Stop Target: None
Action: Shares tested a high of $18.85 with lower resistance at $18.75-$19 getting topped and holding. A close above the latter would reengage the prior trading range that lasted throughout much of February. Support is at $18.50-$18.25.
The December low is at $17.x. The April puts will return a triple-digit profit if shares are below $17.20, technically, on the April 21st close.