MomentumOptions.com Pre-Market Update for 8/7/2023
Jobs Report Disappoints
8:00am (EST)
Video: Here is the bi-weekly video on the current market environment, plus we took a look at Pfizer and silver.
https://us06web.zoom.us/rec/share/cw7T38r1W8NA_4pgnY9kMNC85ETnb_Yq1gkFxC9lMfeBPAI7ELlJdBXXfryozoNS.EXjx1tdaKWeA8I-o?startTime=1691371033000
Passcode: #7FD5ST$
Commentary
The stock market showed continued weakness on Friday as a disappointing jobs report weighed on sentiment. The US economy created 187,000 new jobs in July, below expectations for a print of 200,000.
Meanwhile, the unemployment rate fell to 3.5% versus forecasts for an unchanged reading of 3.6%. The losses wrap up a bearish week on Wall Street with volatility remaining at an elevated level.
The Nasdaq tested a low of 13,897 before settling at 13,909 (-0.4%). Key support at 13,850 was challenged and held for the third-straight day. A close below this level would likely confirm weakness to 13,750-13,600 and the 50-day moving average. Resistance remains at 14,100-14,250.
The S&P 500 went out at 4,478 (-0.5%) with the intraday low hitting 4,474. Shaky and upper support at 4,500-4,450 failed to hold. A move below the latter would imply a continued slide towards 4,400-4,350 and the 50-day moving average. Resistance is at 4,550-4,600 with last month’s 52-week peak at 4,607.
The Dow tagged a late afternoon low of 35,033 while finishing at 35,065 (-0.4%). Upper support at 35,000-34,750 held. A close below the latter would signal downside action to 34,500-34,250 and the 50-day moving average. Resistance is at 35,250-35,500 with last week’s 52-week high at 35,679.
Volatility Index
The Volatility Index (VIX) tested a low of 14.57 with upper support at 15-14.50 and the 50-day moving average getting breached but holding. The rebound to 17.39 held key resistance at 17.50. A close above this level would be a bearish development for the market with upside risk towards 19.50-20 and the 200-day moving average.
Monday’s earnings announcements:
Before the open: Berkshire Hathaway (BRK.B), Freshpet (FRPT), Tyson Foods (TSN), Viatris (VTRS), TreeHouse Foods (THS)
After the close: Beyond Meat (BYND), Diamond Offshore Drilling (DO), FibroGen (FGEN), Palantir Technologies (PLTR), Primerica (PRI), RingCentral (RNG), Skyworks Solutions (SWKS)
Economic News
Consumer Credit – 3:00pm
Market Thoughts
For the week, the Nasdaq sank 2.9%; the S&P 500 tanked 2.7%; and the Dow slid 1.1%. Communication Services was the strongest sector after surging 4.7% for the week while Communication Services dropped 4.6% to pace the laggards.
The Nasdaq and the S&P are on a four-session losing streak with the Dow down three-straight. Last week’s pullback and consolidation period could lead to a continued trading range this week.
We talked about a trading range forming with a pullback coming during the height of earnings season or the first week of August and when Apple announced numbers. So far, so good. The major moving averages remain in bullish uptrends and a healthy pullback was certainly a given.
The question will be if investors are willing to buy the first possible pullback to the 50-day moving averages, or wait for better entry points. The RSI levels for the major indexes closed below 50 for the Nasdaq and the S&P but is holding on the Dow.
If RSI for the major indexes fall below 45, it would be a bearish development as this level has held since March for the S&P and the Nasdaq. The Dow has backtest potential to 45-40 if 50 fails to hold this week.
Apple’s (AAPL) nearly 5% decline also weighed on the market despite better-than-expected earnings and a revenue beat. Part of the disappointment came after revenue misses in iPhones, Macs, and iPads that were made up in service sales.
We talked about a possible close below the 50-day moving average if Apple’s numbers failed to impress. With RSI at 33, shares are in oversold territory. However, we would wait for the bottoming process to play out before getting too aggressive with this one.
The transition from a possible market top to a trading range was something we have prepared for throughout July and our timing has been impeccable. This also coincides with less trading action as we wait for the next major trend to form.
We can still look for new trades and there are a numbers of stocks and options we like on our Watch List. We just need to be patient as support and resistance play out and we get better setups.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 17-8 (68%). 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.
Petróleo Brasileiro (PBR, $13.52, down $0.51)
PBR September 15 calls (PBR230915C00015000, $0.15, down $0.15)
Entry Price: $0.35 (7/24/2023)
Exit Target: $0.70
Return: -57%
Stop Target: None
Action: Prior and upper support at $13.25-$13 was tripped but held on Friday’s stumble to $13.22. Lowered resistance is at $13.75-$14.
An analyst downgrade weighed on sentiment but shares held their 50-day moving average and was a positive signal. With that said, a drop below $13 would be a bearish development.
Iovance Biotherapeutics (IOVA, $7.24, up $0.01)
IOVA December 12.50 calls (IOVA231215C00012500, $0.40, unchanged)
Entry Price: $0.80 (7/10/2023)
Exit Target: $1.60
Return: -50%
Stop Target: None
Action: Friday’s peak reached $7.42 with lower resistance at $7.25-$7.50 getting cleared but holding on the second-straight close above the 200-day moving average. Support is at $7-$6.75.
For new subscribers, please read the writeup from 7/13 or 7/20 on why we are bullish on the stock.