Weekender for 10/22
1. Market Summary
- Stocks bounce on Chairman Powell’s speech seen to be more dovish, but the move does not hold.
- Indices sell hard, some holding support, others dropping to next support, still others breaking even lower.
- The strongest stocks continue holding, e.g. software, some NASDAQ mega-caps, oil and gas while other leader wannabes are found out.
- Geopolitical tensions remain high into the weekend, likely limiting short covering after a down week.
Stocks started the day decently higher, anticipating Chairman Powell’s noon speech. Chairman Powell was hawkish as usual, with a few dover feathers thrown in, e.g. noting doing too much could unnecessarily harm the economy.
Chairman Powell also said the tightening financial conditions may require adjusting the path of monetary policy. Chairman Powell reiterated the need to return the inflation rate 2%. That task, however, likely requires lower economic growth. Well, if you look at the Fed’s own website, growth is already slower, so some of Chairman Powell’s work is done — and he can then magically point to it in a month or so.
NOTE: The figures and information above are from the 10/19 report.
MARKET VIDEOS
MARKET SUMMARY
TECHNICAL SUMMARY
NEXT SESSION
NOTE: The videos are from the 10/18 report.
2. Targets Hit
Investment House Daily:
Matador Resources Co. (NYSE: MTDR): Oil and gas can be volatile even as demand remains strong for their product. The United States has drained its strategic reserve to quite low levels and the world is lit up with conflict — a strong recipe for continued moves higher for oil and gas stocks.
MTDR is a case in point. It was cruising higher and broke through resistance in late August. Then … a drop to the 200-day simple moving average (SMA) into early October — volatile.
From there, however, MTDR formed a short inverted head and shoulders pattern, breaking higher through the 50-day SMA on Oct. 12. From there, MTDR ran higher into late week, hitting our initial target. We were in November $60 call options, purchased for $6.20.
Per the plan, as MTDR hit the initial target, we issued the alert to sell half the position with the options bidding $8.00. That put a solid 29% into the bank, and now we look for the remaining half of the position to extend the breakout toward the higher high from November 2022.
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Technical Trader:
Lululemon Athletica Inc. (NASDAQ: LULU): Retail is not dead — or at least there are still some brighter upside prospects in the group among a lot of struggling stocks. LULU has remained a winner even as the majority of retailers trended lower. After six months of a lateral move, we were waiting for LULU to make a break higher, and it did.
We were in some December $390 call options purchased for $28.40, as LULU came off a 200-day SMA test in early October. On Oct. 16 LULU made one of its trademark upside gaps, rallying to a new high. The options were trading on the bid at $43.10 when we issued the alert to sell, turning into a solid 51% gain.
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3. Covered Call Options Play
Life Time Group Holdings Inc. (NYSE: LTH) — Life Time Group Holdings Inc. is currently trading at $14.97. The Nov. 17 $15 calls (LTH20231117C00015000) are currently trading at $1.05. That provides a return of about 8% if LTH is above $15 by the expiration.
