MomentumOptions.com Pre-Market Update for 5/22/2023
S&P Showing Signs of Breakout
8:00am (EST)
Commentary
The stock market pulled back on Friday despite making higher highs while closing the week in positive territory. Fed speak from Chairman Powell and an unsolved debt ceiling agreement weighed on sentiment.
The S&P 500 settled at 4,191 (-0.1%) with the morning high tapping 4,212. Key resistance at 4,200 was cleared but held for the second-straight day. Continued closes above this level and the February top at 4,195 would indicate a breakout to 4,250-4,300. Support is at 4,150-4,100 and the 50-day moving average.
The Nasdaq ended at 12,657 (-0.2%) with the intraday peak reaching 12,731. Prior and lower resistance from early August at 12,750-12,900 was challenged and held. A close above the latter would indicate additional strength towards 13,000-13,150. Fresh support is at 12,650-12,500 followed by 12,400-12,250.
The Dow traded up to 33,652 before reversing course to finish at 33,426 (-0.3%). Lower resistance at 33,500-33,750 was cleared but held. Continued closes above 34,000 would be a more bullish development. Support remains at 33,250-33,000 and the 50-day moving average.
Volatility Index
The Volatility Index (VIX) was up for the first time in three sessions after stalling at 15.85. Upper support at 16-15.50 was breached but held. A close below the latter and the May 1st 52-week low at 15.53 would indicate ongoing strength in the overall market. Resistance is at 17.50-18 followed by 19-19.50 and the 50-day moving average.
Monday’s earnings announcements:
Before the open: Digital Brands Group (DGBI), Global-e Online (GLBE), IceCure Medical (ICCM), Nordic American Tankers (NAT), Ryanair Holdings (RYAAY), ZIM Integrated Shipping (ZIM)
After the close: AlTi Global (ALTI), BM Technologies (BMTX), Capital Southwest (CSWC), Lufax (LU), Nordson (NDSN), PetMed Express (PETS), Transcat (TRNS), Zoom Video Communications (ZM)
Economic News
None
Market Thoughts
The S&P 500 is trying to follow the Nasdaq’s breakout from the prior week after busting out of a 34-session trading range last Thursday. The Dow remains mired in a 35-session trading range but its 50-day moving average is trending up to match the other two indexes.
On a side note, the Russell 2000 cleared key resistance at 1,800 by a half-point on Friday before closing at 1,773. Continued closes above 1,800 would also be a bullish signal for the overall market.
The VIX’s inability to get a close below 16 in back-to-back sessions remains a slight concern for the bulls. Thursday’s and Friday’s lows at 16.05 and 15.85 were solid developments but the one-day close at 15.78 on April 28th remains a big hurdle.
We have been highlighting the now 34-session trading range in the VIX and have stated closes back above 20 would be a bearish signal for the market. That sentiment remains the same.
It remains to be seen if Friday’s action was a near-term top. The U.S. debt ceiling debacle could drag into next week as the official deadline is June 1st before there is a default.
There are talks scheduled for Monday but the two sides remain far apart.
Treasury Secretary Yellen said over the weekend that some tough decisions will need to be made about which bills will go unpaid if the debt ceiling is not raised.
We will continue to trade the trend as there have been great opportunities to play the action inside of the ranges, breakouts, and breakdowns. Our homework has been spot on and it has led to a very successful 2023. However, we feel like we are just getting started as we think the rest of the year will continue to bring some exciting opportunities.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 14-4 (78%). 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.
Verizon (VZ, $36.05, down $0.08)
VZ July 38 calls (VZ230721C00038000, $0.35, down $0.01)
Entry Price: $0.40 (5/19/2023)
Exit Target: $0.80
Return: -13%
Stop Target: None
Action: Shares traded up to $36.52 with new and lower resistance at $36.50-$36.75 getting cleared but holding. The fade to $36.03 into the closing bell held key support at $36.
We like this trade as long as $35.25-$35 holds going forward. We have traded VZ numerous times in the past and we like the risk/ reward of this longer-term setup. It’s why we went with the July calls as it gives us nearly two months for the trade to play out.
Bank of America (BAC, $28.11, down $0.36)
BAC June 26 puts (BAC230616P00026000, $0.30, up $0.05)
Entry Price: $0.60 (5/10/2023)
Exit Target: $1.20
Return: -50%
Stop Target: None
Action: Friday’s fade to $28.03 failed to hold upper support at $28.25-$28. Resistance is at $28.50-$28.75 and the 50-day moving average.
If shares clear and hold $29, we could exit the trade to save the remaining premium. If so, we will send out a Trade Alert.