MomentumOptions.com Pre-Market Update for 2/26/2024
Nasdaq Facing Crucial Test
8:00am (EST)
Video:
https://screenpal.com/watch/cZnThqVK2Y4
Commentary
The stock market was mostly higher on Friday as the broader market and the blue-chips tagged another round of all-time highs. Tech faded off its fresh 52-week peak to settle lower while the small-caps also showed strength but remain over 2% away from their December 52-week high.
The Nasdaq settled lower at 15,996 (-0.3%) despite tagging a high of 16,134. Key resistance at 16,200 was challenged and easily held. A close above this level would imply upside to 16,350-16,500. Support is at 15,900-15,750.
The S&P 500 tagged a high of 5,111 while going out at 5,088 (+0.03%). Fresh and key support at 5,100 was cleared but held. Continued closes above this level would suggest strength towards 5,150-5,200. Support is at 5,050-5,000.
The Dow ended at 39,131 (+0.2%) with the high hitting 39,282. New and lower resistance at 39,250-39,500 was cracked but held. A move above the latter would indicate strength to 39,750-40,000. Support is at 39,000-38,750.
Volatility Index
The Volatility Index (VIX) traded down to 13.64 with upper support at 14-13.50 getting recovered. A close below the latter and the 50-day moving average would be a more bullish signal for the market with weakness to 13.25-12.75. Resistance is at 14.50-15 and the 200-day moving average.
Monday’s earnings announcements:
Before the open: Berkshire Hathaway (BRK.B), BioCryst Pharmaceuticals (BCRX), Domino’s Pizza (DPZ), Freshpet (FRPT), Krystal Biotech (KRYS),
After the close: iRobot (IRBT), Trex (TREX), Workday (WDAY), Zoom Video Communications (ZM)
Economic News
New Home Sales – 10:00am
Market Thoughts
Once again, the bulls averted a near-term pullback as Thursday’s gains more than made up for the prior week’s losses. This past weekly win was the 15th in 17 for the bulls off of the October lows and keeps nice round numbers in play.
The Dow is up nearly 1,000 points for February while the S&P has added 184 points. The Nasdaq is up 832 points for the month and the Russell has rallied 69 points. The gains of 3%-5% should hold this week to give the bulls the monthly win but nothing is ever a guarantee.
The Nasdaq’s all-time intraday high is at 16,212 from November 22nd 2021 and where we have talked about a possible double-top forming if there is not a strong breakout from current levels. However, if the “AI” rally remains strong over the near-term, and this year, dare we say Nasdaq 20,000?
At current levels, this would represent another 25% upside but can this type of rally be sustained? While we are at it, 25% for the Dow from our near-term price target of 40,000 target would be 50,000 and for the S&P we would have to raise our near-term target from 5,100 to 6,500.
That would be amazing if those targets trip this year, but more likely in 2025, and that’s assuming there are no major corrections, or world disasters. In any event, we only focus on the near-term and where the market will be in a few weeks or a month.
The Nasdaq’s streak of not hitting a new all-time high has now reached 566 trading days but that could get broken this week on continued closes back above 16,000. This represents the longest time frame since the 3,801 trading days following the collapse of the dot-com bubble from March 2000 to April 2015.
The Russell reached a 52-week high of 2,071 in December with the all-time intraday peak at 2,458 from November 8th, 2021. At current levels, the small-caps are 22% away from lifetime highs.
To no surprise, the VIX closed back below 15 on Thursday following Nvidia’s earnings and a market moving event. We highlighted we would turn more bearish if the VIX cleared and held 17.50 so back to the sidelines we go.
The VIX will face a major test at 13.50 and the 50-day moving average this week and a level that has been holding for nine sessions. Of course, the more important hurdle is at 12.75 and an area we have highlighted repeatedly in our videos as key market reversal levels.
As fas as Nvidia, shares did clear and hold the crucial $750 level on Thursday while setting an all-time high of $823.94 on Friday. That’s an easy double off the late October low just south of $400 on a stock that has dominated the AI space.
Amazon (AMZN) will make its debut on the Dow this week and could help propel the index towards 40,000. The stock has been in a $10 trading range all month between $165-$175. A break out of this range and above $175 might represent the perfect opportunity for both a credit spread AND a possible call option trade.
As a bullish call option trade, we are watching the Amazon.com March 180 calls (AMZN240315C00180000, $2.30, down $0.15). We usually don’t like buying call options above $2 as it requires more capital but one contract is only $230 at current levels. If shares trade to $185 by March 15th, these calls will be $5 in-the-money for an easy double.
As for a bull put spread, the AMZN March 1st, 2024 170 / 167.50 Bull Put Credit Spread has a credit of 30 cents and a trade we are targeting for RedZone Alerts. If you are not a subscriber to this newsletter, send us an email, or click on the link, as we are offering an amazing one-year deal for a way for you to generate weekly income. The newsletter has over an 80% win rate and is 7-0 this year.
We are expecting higher highs this week as long as the uptrend channels we have highlighted in the video hold. If they don’t, support levels going forward are at Dow 37,750; S&P 4,900; Nasdaq 15,600; and Russell 1,950.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 11-1 (92%). 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.
Rocket Companies (RKT, $11.56, up $0.58)
RKT April 12 calls (RKT240419C00012000, $0.70, up $0.08)
Entry Price: $0.55 (2/21/2024)
Exit Target: $1.10
Return: 27%
Stop Target: 56 cents (Stop Limit)
Action: Set an initial Stop Limit at 56 cents to start protecting profits and to avoid a loss.
Shares soared to a high of $12.35 with lower resistance at $12.25-$12.50 getting cleared but holding. New support is at $11.25-$11.
The company reported a breakeven quarter versus expectations for a loss of four cents a share. Revenue of $694 million was shy of forecasts for $769 million but current quarter revenue was guided higher and why shares showed strength. The options market was pricing in an 8% move in the stock and we were looking for 10% or more. Friday’s gains fell shy but we are up on the position with earnings out of the way.
There were recently six analyst downgrades on the stock and we were looking for some of them to reverse course…
Petróleo Brasileiro (PBR, $17.36, down $0.22)
PBR April 18 calls (PBR240419C00018000, $0.60, down $0.10)
Entry Price: $0.70 (2/12/2024)
Exit Target: $1.40
Return: -14%
Stop Target: None
Action: Fresh and upper support at $17.25-$17 was tripped but held following the intraday fade to $17.20. Resistance is at $17.50-$17.75.
Continue to hold:
Snap (SNAP)
SNAP March 20 calls (SNAP240315C00020000)
Ford Motor (F)
F March 11 puts (F240315P00011000)