MomentumOptions.com Pre-Market Update for 6/29/2023
Market Mixed on Fed Comments
8:00am (EST)
Commentary
The stock market was mixed on Wednesday with Tech (and the small-caps) showing strength while the blue-chips and the broader market slipped. Much of the action was subdued with Fed Chair Powell speaking on a panel at the European Central Bank Forum on Central Banking.
Powell said there is still a risk of doing too little to bring down inflation, noting that he wouldn’t take hiking interest rates at two consecutive policy meetings “off the table”. Volatility remained compressed after recovering a key support level.
The Nasdaq finished at 13,591 (+0.3%) after testing a high of 13,654. Prior and lower resistance at 13,600-13,750 was approached and held. A move below the latter would indicate weakness towards 13,250-13,100. Resistance is at 13,600-13,750 with this month’s 52-week peak at 13,864.
The S&P 500 traded down to 4,360 before settling at 4,376 (-0.04%). Upper support 4,350-4,300 held. A move below the latter would imply a further slide towards 4,250-4,200 and the 50-day moving average. Resistance remains at 4,400-4,450 with the recent 52-week high at 4,448.
The Dow closed at 33,852 (-0.2%) with the intraday low tagging 33,755. Upper support at 33,750-33,500 was challenged and held. A fade below the latter and the 50-day moving average would be a renewed bearish signal with weakness to 33,250-33,000. Resistance is at 34,000-34,250.
Volatility Index
The Volatility Index (VIX) was down for the second-straight session after tapping a low of 13.36. Key support at 13.50 was recovered. Continued closes below this level gets 13-12.50 back in play with the recent 52-week low at 12.73.
Thursday’s earnings announcements:
Before the open: Acuity Brands (AYI), Greenbrier Companies (GBX), Lindsay Manufacturing (LNN), McCormick & Company (MKC), Paychex (PAYX), Simply Good Foods (SMPL)
After the close: Accolade (ACCD), Nike (NKE), Progress Software (PRGS), SMART Global Holdings (SGH)
Economic news:
Initial Jobless Claims – 8:30am
GDP (revised) – 8:30am
Pending Home Sales Index – 10:00am
Market Thoughts
The major indexes are showing slight gains for the week with two days left in the month, quarter, and first half of the year. With this morning’s jobless claims and revised GDP numbers along with Friday’s Core PCE Price Index update, the bulls aren’t out of the woods. However, they continue to be resilient with RSI (relative strength index) levels now giving neutral readings instead of bearish.
There could be some strength in the Financial stocks today following news after yesterday’s close that all 23 U.S. banks that participated in the new Federal Reserve stress test would be able to withstand a severe global recession. This is good news given the recent default headlines in the banking industry.
The results were impressive given the catastrophic conditions the Fed assumed to absorb losses and continue lending. Some of the eye-popping numbers included unemployment at 10%, and the stock market crashing 45%.
The key support levels we said to watch for coming into the week were at: Nasdaq 13,500; S&P 4,350; and Dow 33,750. All of these levels held or were recovered this week and what we will be watching into Friday’s close.
The market is closed on Tuesday and Monday is a half day with Wall Street shutting down at 1pm (EST) for the July 4th holiday. It will be interesting to see if traders want to stay long into Monday, or take some chips off the table and make it a four-day weekend.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 16-5 (76%). 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.
Walt Disney (DIS, $88.83, down $0.23)
DIS July 85 puts (DIS230721P00085000, $0.65, up $0.05)
Entry Price: $0.90 (6/21/2023)
Exit Target: $1.80
Return: -28%
Stop Target: None
Action: Yesterday’s low tagged $88.53 with prior and upper support at $88.50-$88 getting challenged and holding. Resistance is at $89-$89.50.
The chart remains bearish for DIS and we would like to see a close below $87.50 to end the week. A move above $90 could force an early exit to save premium.
Pfizer (PFE, $36.29, down $0.13)
PFE July 42.50 calls (PFE230721C00042500, $0.02, down $0.01)
Entry Price: $0.24 (6/13/2023)
Exit Target: $0.50
Return: -92%
Stop Target: None
Action: Close the trade this morning to save the remaining premium.
Shares took a hit on Monday after the company decided to discontinue the clinical development of its obesity and Type 2 diabetes drug, Lotiglipron. We were hoping for better news and the trade is now busted with shares testing a fresh 52-week low yesterday.
Although the “percentage loss” looks nasty, these were 24-cent options on a possible breakout if Pfizer had announced better news. Overall, the position was down 22 cents and something we can easily make up. We made 264% with put options on PFE in early March so we will keep shares on our Watch List.
Verizon (VZ, $36.82, up $0.27)
VZ July 38 calls (VZ230721C00038000, $0.10, up $0.01)
Entry Price: $0.40 (5/19/2023)
Exit Target: $0.80
Return: -75%
Stop Target: None
Action: Shares hit a high of $36.86 with lower resistance at $36.75-$37 getting cleared and holding. Support is at $36.50-$36.25.
This trade continues to tease us with shares once again gaining momentum on the close back above the 50-day moving average. We were close to becoming profitable earlier this month on the run to $37 with more important resistance at $37.50 and the 200-day moving average.
Earnings are due out on July 7th and catalyst that could propel shares towards a breakout, or breakdown, depending on the numbers.