MomentumOptions.com Pre-Market Update for 2/22/2024
VIX Stays Above 15
8:00am (EST)
Video:
https://screenpal.com/watch/cZn3eEVKhuv
Commentary
The stock market rebounded off its intraday lows on Wednesday as Wall Street prepared for Nvidia’s (NVDA) latest earnings after the closing bell. The stock has been one of the biggest influences during the current bull market rally off the October lows and the company did not disappoint.
The fourth-quarter profit of $5.16 a share easily topped forecasts for a print of $4.60. Meanwhile, revenue of $22.1 billion was also above estimates of $20.41 billion. Shares were up 9% in extended trading but not above its recent all-time high north of $746. In any event, futures rallied and any gains could be a rising tide that lifts all boats.
The Nasdaq closed at 15,580 (-0.3%) after tagging a low of 15,451. Late January and upper support at 15,500-15,350 was tripped but held. A drop below the latter would indicate weakness to 15,250-15,100. Resistance is at 15,600-15,750.
The S&P 500 traded down to 4,946 while ending slightly higher at 4,981 (+0.1%). Upper support at 4,950-4,900 was breached but held. Continued closes back above 5,000 keeps upside towards 5,050-5,100 in play.
The Dow settled at 38,612 (+0.1%) with the low hitting 38,338. Upper support at 38,500-38,250 was cracked but held. A fade below the latter would suggest weakness to 38,000-37,750 and the 50-day moving average. Resistance is at 38,750-39,000.
Volatility Index
The Volatility Index (VIX) tagged a low of 15.22 with key support at 15 and the 200-day moving average holding. A close below this level would be a slightly bullish signal for the market with retest potential to 14-13.50 and the 50-day moving average. Resistance is at 16-16.50 with a close above 17.50 likely confirming a near-term market top.
Thursday’s earnings announcements:
Before the open: Dominion Energy (D), Moderna (MRNA), Planet Fitness (PLNT), Wayfair (W)
After the close: Block (SQ), Carvana (CVNA), Intuit (INTU), Live Nation Entertainment (LYV), MercadoLibre (MELI), Vale (VALE)
Economic news:
Initial Jobless Claims – 8:30am
PMI Services Index – 9:45am
Existing Home Sales – 10:00am
Market Thoughts
The biggest development to start the shortened week was the close above 15 on the VIX. This represented only the second time since November 9th that the VIX had closed above 15 and just the fifth time this year it has traded above this level.
Of course, the bears needed to get multiple closes above 15 after failing to do so on the close at 15.85 on February 13th. While the bears did hold the VIX above 15 again yesterday, it will be interesting to see how today’s action will play out following Nvidia’s numbers.
If Nvidia fails to make higher all-time highs today, or this week, any market rally could be short-lived if demand for the stock wains. If shares clear $750 and continue to run higher after the open, the overall market could make another push towards all-time peaks.
We have been mentioning the back half of February is typically weak and this follows us calling for a market top at the start of the month and the height of earnings season. The uptrend channels have been established from the October lows that have lasted into January and February.
This gives us an added technical setup that shows all-time highs remain in play or a possible top forming – if they hold again this week. Wednesday’s action pushed the Nasdaq and the S&P below their uptrend lines but we often talk about charts getting stretched for a day or two.
The Nasdaq peaked at 16,080 on the February 12th which represented a 28% surge off the October 26th bottom at 12,543. The S&P also soared 23% from the October 27th low of 4,103 to 5,048. The Dow zoomed 20% from 32,327 to 38,927 over the same time period.
We also predicted in January that nice round numbers of Nasdaq 16,000, S&P 5,000, and Dow 40,000 would come into play. If the market does close February on lower lows, it would be another nice call on predicting a market top, or a least a near-term pause.
One interesting nugget that will likely carry the Dow past 40,000, at some point in the future, is the addition of Amazon (AMZN) to the index as it will replace Walgreens Boots Alliance(WBA). The change was in response to fellow blue-chip component Walmart’s (WMT) decision to split its stock 3-for-1.
We do the homework like this because it is vital to know how the market is trending. Most investors, and Wall Street pros, only know, or want to make money when the market is going higher. We are neither bullish or bearish, we just like to trade the trend and trade light when we identify market trading ranges.
As a reminder, we have talked about support levels at Dow 37,750; S&P 4,900; Nasdaq 15,600; and Russell 1,950. The Nasdaq closed below 15,600 and was the first to crack key support. Once again, we talk about wiggle room or stretch so we will be watching closely how the rest of the week unfolds in Tech (and the VIX).
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.
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Rocket Companies (RKT, $11.00, down $0.15)
RKT April 12 calls (RKT240419C00012000, $0.55, down $0.12)
Entry Price: $0.55 (2/21/2024)
Exit Target: $1.10
Return: 0%
Stop Target: None
Action: Shares tagged a low of $10.87 with upper support at $11-$10.75 getting tripped but holding. Resistance is at $11.25-$11.50.
Earnings are due out today so there is added risk to this trade. These are April calls which gives the trade plenty of time to play out. However, a miss, or poor guidance, will likely have a negative impact. We think shares could move 10%-15% based on the results.
Petróleo Brasileiro (PBR, $17.64, unchanged)
PBR April 18 calls (PBR240419C00018000, $0.80, unchanged)
Entry Price: $0.70 (2/12/2024)
Exit Target: $1.40
Return: 14%
Stop Target: None
Action: Key resistance at $17.75 was cleared but held with the high at $17.83. A close above this level gets $18-$18.25 in focus. Support is at $17.50-$17.25.
We remain bullish on PBR with a near-term price target of $20. If shares clear this level by April 19th, the calls will be worth at least $2-$2.10 for a 200% return. Earnings are due out March 7th with the current dividend yield just south of 17%.
Continue to hold:
Snap (SNAP)
SNAP March 20 calls (SNAP240315C00020000)
Ford Motor (F)
F March 11 puts (F240315P00011000)