MomentumOptions.com Pre-Market Update for 12/19/2024
Market Tanks After Fed Cuts Rates
8:00am (EST)
Wall Street ran for the exits on Wednesday despite news of a rate cut as the Fed struck a more cautious tone about future policy moves heading into 2025. Volatility soared to its highest level since early August as the selling pressure picked up steam into the closing bell.
The Nasdaq smacked a low of 19,336 while closing at 19,392 (-3.6%). Key support at 19,600 failed to hold. Resistance is at 19,750-20,000.
The S&P 500 settled at 5,872 (-3%) after testing a low of 5,867. Backup support at 5,850 held. Resistance is at 5,900-5,950.
The Dow bottomed at 42,300 before ending at 42,326 (-2.6%). Key support at 42,500 failed to hold. Resistance is at 42,750-43,000.
Earnings and Economic News
Before the open: Accenture (ACN), Cintas (CTAS), CarMax (KMX), Conagra Brands (CAG), FuelCell Energy (FCEL), Paychex (PAYX)
After the close: Blackberry (BB), FedEx (FDX), Mission Produce (AVO), Nike (NKE)
Economic news:
Initial Jobless Claims – 8:30am
GDP – 8:30am
Philadelphia Fed Manufacturing Survey – 8:30am
Existing Home Sales – 10:00am
Technical Outlook and Market Thoughts
In our notes over the past two Monday’s we said there was “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 also added to watch 2,300 on the Russell.”
The Nasdaq was the only index that held these targets with the S&P and the Russell cracking their key levels on Wednesday. The Dow fell below 44,000 last Thursday.
Wednesday’s technical damage was significant as three of the four major indexes fell out of their current uptrend channels while pushing backup levels of support. We will update the charts in our next video but wanted you to see how they look before and afterwards.
For the Nasdaq, it remained in its uptrend channel but fell below the December 4th gap up while closing below 19,600. A move below 19,250 and the bottom of the uptrend channel will likely get 19,000 and the 50-day moving average in focus. Lowered resistance is at 19,750.
The S&P had been in a 100-point range between 6,000 and 6,100 for 16 sessions. We mentioned to watch the pin action for another breakout to higher all-time highs, or a possible signal for a near-term top. The close below the 50-day moving average was a bearish signal and we have been mentioning a close below 5,850 would suggest a near-term top. The index needs to recover 6,00 and the bottom of the uptrend channel to reverse the technical damage.
The Dow fell 1,123 points to extend its losing streak to 10th-straight sessions, its longest in over 50 years. We warned a close below 43,250 and the 50-day moving average would suggest further risk to 42,500. The next waves of support are at 42,000 followed by 41,500. A recovery of the 44,000 level would suggest an overreaction on the Fed news.
The Russell tested late October and backup support at 2,225 with yesterday’s low at 2,215. Continued closes below these levels gets downside pressure towards 2,175-2,135 in focus. A recovery of the 2,300 would be a slightly renewed bullish signal.
The Volatility Index (VIX) skyrocketed 74% higher after reaching an intraday peak of 28.32. Early August resistance at 28-30 was tripped but held. A pop above the latter could get 60-70 in play, quickly, with the August 5th intraday high at 65.73. Closes back below 24 would be ease some nearnervousness but closes back below 20 are needed to settle down the bears.
Typically we are cautious on Fed updates as volatility can be extreme based on interest rate decisions. However, the recent action was suggesting a near-term top as the VIX made a higher high on Monday and cleared 15 on Tuesday. This follows last week’s weakness in the Dow and Russell which made lower lows on Tuesday.
The rest of the week will be interesting to say the least. However, don’t worry if the market is headed lower, we have strategies for both bull and bear markets.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 75-12 (86%, 36 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.
Teva Pharmaceuticals (TEVA, $21.20, up $0.32)
TEVA March 24 calls (TEVA250321C00024000, $0.60, up $0.10)
Entry Price: $0.50 (12/17/2024)
Exit Target: $1.00
Return: 20%
Stop Target: None
Action: Yesterday’s high touched $21.98 with the calls peaking at 95 cents. Closes above $22 would be an ongoing bullish development. Key and undefined support is at $19.
Shares zoomed 26% on Tuesday following positive news on a drug in Phase 2 trials that addresses treatment for inflammatory bowel disease (IBD).
The company is working with Sanofi (SNY) in a joint collaboration to develop the drug Duvakitug and said patients achieved a higher rate of remission compared to a placebo group. Additionally, a group of patients with Crohn’s disease also responded at a higher rate.
This was great news for both companies with Sanofi already agreeing to take the lead of Phase 3 developments and both splitting commercialization across the globe. Of course, bringing the drug to market is still a year or two away and any negative news could have the same impact on both stocks.
Teva has numerous generic and innovative medicines and growing revenues as the company has topped Wall Street’s forecasts the past seven quarters. For the current quarter, Teva is expected to earn 69 cents a share on revenue of $4.1 billion.
We looked at the multi-year chart for TSLA and it shows key resistance at $25. Tuesday’s island breakout needs some follow thru or a possible trading to develop. We wanted to give the alert enough time for shares to make a possible run to $25+ and why we went with the March call options.
TEVA has been one of our favorite stocks this year as we are 9-0 with directional alerts, and 5-0 on covered calls.
Fastly (FSLY, $10.52, down $0.81)
FSLY March 12.50 calls (FSLY250321C00012500, $1.10, down $0.40)
Entry Price: $1.15 (12/6/2024)
Exit Target: $2.30
Return: -4%
Stop Target: None
Action: The calls traded up to $1.03 yesterday. Lowered resistance is at $10.75-$11 following the run to $12.08. Yesterday’s low hit $10.29 with new and upper support at $10.50-$10.25 getting tripped but holding.
The chart remains bullish despite the 7% spanking with the 50-day moving average on track to cross above the 200-day moving average. This would form a golden cross which is bullish for higher highs and our Price Target at $12.50.
Note: Lower the Stop Limit on the March 10 calls (LEAP from 11/8) to $1.50 from $1.80. We want to give a little wiggle room on continued weakness after they traded up to $2.79 on Wednesday. The profile price was at 45 cents so continue to hold.
AT&T (T, $22.48, down $0.35)
T January 24 calls (T250117C00024000, $0.15, down $0.05)
Entry Price: $0.40 (11/25/2024)
Exit Target: $0.80
Return: -63%
Stop Target: None
Action: Fresh and key support at $22.50 and the 50-day moving average failed to hold on the late session fade to $22.46. A close below $22.25 would be a slightly ongoing bearish development. resistance at $23.75-$24
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 4.9%. Over the past two years, we are 5-0 profiling covered calls on AT&T and 12-1 with directional alerts.
Ford Motor (F, $9.69, down $0.28)
F January 12 calls (F250117C00012000, $0.05, down $0.02)
Entry Price: $0.25 (11/25/2024)
Exit Target: $0.50
Return: -80%
Stop Target: None
Action: Exit on Thursday’s open to save the remaining premium.
Monday’s nearly 4% fade failed to hold key support at $10.25 and is now key resistance. There is risk towards the August 5th 52-week low at $9.49 following yesterday’s close below $9.75.
Newell Brands (NWL, $10.13, down $0.37)
NWL January 10 calls (NWL250117C00010000, $0.65, down $0.30)
Entry Price: $0.20 (11/25/2024)
Exit Target: $1.80 (closed half at $1.40 on 12/9)
Return: 475%
Stop Target: 90 cents (Stop Limit)
Action: The Stop Limit at 90 cents tripped on yesterday’s fade towards $10. We would like to see a continued backtest towards $9.50 and a hold for a possible reentry point. This was our 36th triple-digit winning alert for 2024.
Pfizer (PFE, $25.89, down $0.54)
PFE January 22.50 puts (PFE250117P00022500, $0.10, down $0.02)
Entry Price: $0.25 (11/19/2024)
Exit Target: $0.50
Return: -60%
Stop Target: None
PFE February 21 puts (PFE250221P00021000, $0.15, down $0.03)
Entry Price: $0.25 (11/19/2024)
Exit Target: $0.50
Return: -40%
Stop Target: None
Action: Shares have been rangebound the past 18 sessions with the high hitting $26.52. Lower resistance at $26.50-$26.75 was topped but held. Key support is at $25.25.
The mid-November low is at $24.48 with a drop below this level likely inducing selling pressure towards $23-$22.50.