MomentumOptions.com Pre-Market Update for 1/25/2021
Tech Taps Another Record Peak as Bulls Get Weekly Win
The stock market was weak throughout Friday’s session as disappointing corporate earnings and profit taking weighed on sentiment. The major indexes rebounded off the opening lows following better-than-expected economic news, especially from the housing market which remains white-hot.
A final hour rally helped the small-caps and Tech close in positive territory with the latter trading to another all-time high. The mixed finish still produced some nice gains for the week for the major indexes and ahead next week’s barrage of fourth-quarter earnings announcements.
The Russell 2000 closed on its session high of 2,168 (+1.3%). Current and lower resistance at 2,170-2,180 was challenged but held. A pop above the latter and last week’s all-time high at 2,173 would indicate additional strength towards 2,190-2,210.
The Nasdaq tested a late day record peak of 13,567 while finishing at 13,543 (+0.1%). Uncharted territory and lower resistance at 13,550-13,700 was cleared but held. A move above the latter would suggest additional momentum towards 13,750-13,900.
The S&P 500 ended at 3,841 (-0.3%) with the opening low hitting 3,830. Near-term and upper support at 3,850-3,825 failed to hold. A close below the latter would signal additional weakness towards 3,800-3,775.
The Dow settled at 30,996 (-0.6%) after tagging a low of 30,908 shortly after the opening bell. Current and upper support 31,000-30,750 was breached and failed to hold. A move below the latter would indicate further weakness towards 30,500-30,250.
For the week, the Nasdaq jumped 4.2% and the Russell 2000 rallied 2.1%. The S&P 500 soared 1.9% and the Dow was up 0.6%.
Markit preliminary manufacturing PMI jumped 2 points to 59.1 in January, a new record high, after edging up 0.4 ticks to 57.1 in December. New orders improved to 59.5 versus 56.5 previously. The preliminary services PMI climbed 2.7 points to 58 in January following the 3.6 point drop to 54.8 in December. The input price index climbed to 66 from 64.7, and is the highest ever. The preliminary January composite index also bounced 2.7 points to 57.5 after falling 3.3 points to 55.3 last month. Input prices also increased for an eight-straight month to a record peak at 66 from 64.8 in December while the employment component dipped to the lowest level since July.
Existing Home Sales rebounded 0.7% to 6,760,000 in December, versus forecasts for 6,550,000, and follows the -2.2% decline to 6,710,000 in November. Single family sales were up 0.7% to 6,030,000 versus the -2.3% drop to a November rate of 5,990,000. Condo/coop sales rose 1.4% to 730,000 versus the -1.4% decline to 720,000 previously. The months’ supply of homes dropped to a new record low of 1.9 from 2.3 in November. The median sales price slipped to $309,800 after falling to $310,900 in November.
Baker-Hughes reported the U.S. rig count was up 5 from last week to 378 with oil rigs adding 2 to 289, gas rigs rising 3 to 88, and miscellaneous rigs unchanged at 1. The U.S. Rig Count is down 416 rigs from last year’s count of 794, with oil rigs down 387, gas rigs down 27 and miscellaneous rigs down 2. The U.S. Offshore Rig Count is unchanged at 16, down 5 year-over-year.
The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) rebounded after testing an intraday peak of $152.01. Near-term and lower resistance at $152-$152.50 was cleared but held. A close above the latter would signal a retest towards $153.50-$154.
Support remains at $151.50-$151 followed by $150.50-$150.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) snapped a three session losing streak after trading to a morning high of 23.73. Prior and lower resistance at 23.50-24 and the 50-day moving average were breached but levels that held.
Support is at 21.50-21 followed by 20.50-20.
The Spiders Dow Jones Industrial Average ETF (NYSE: DIA) had its three-session winning steak snapped following the pullback to $309.09. Near-term and upper support at $309.50-$309 was tripped but held. A close below the latter would signal further weakness towards the $308-$307.50.
Resistance is at $311-$311.50 followed by $312.50-$313 with Thursday’s all-time peak at $312.71.
RSI is back in a downtrend with key support at 60 holding. A close below this level would suggest weakness towards 55-50 with the former holding since early November. Resistance is at 65-70.
The iShares PHLX Semiconductor ETF (Nasdaq: SOXX) was down for the second rime in three sessions with the intraday low reaching $417.13. Current and upper support at $417.50-$417 was breached and failed to hold. A close below the latter would suggest additional risk towards $415.50-$415.
Resistance $422.50-$423 followed by $426-$426.50 with Thursday’s all-time record high at $426.25.
RSI is showing signs of rolling over with key support at 70 failing to hold. Continued closes below this level would signal additional weakness towards 65-60. Resistance is at 75-80 with the latter representing overbought levels from earlier this month.
I have updated our current trades so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2021: 2-0 (100%). 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 Daily updates and Text Alerts.
Western Union (WU, $22.06, up $0.03)
WU March 23 calls (WU210319C00023000, $0.70, up $0.05)
Entry Price: $0.65 (1/21/2021)
Exit Target: $1.30
Stop Target: None
Action: Shares tagged a high of $22.17 with lower resistance at $22.25-$22.50 easily holding. Support is at $22-$21.75 and the 50-day moving average.
MGM Resorts International (MGM, $31.39, down $0.14)
MGM February 34 calls (MGM210219C00034000, $0.95, unchanged)
Entry Price: $0.80 (1/13/2021)
Exit Target: $1.60
Stop Target: None
Action: Upper support at $31-$30.75 was breached but held on Friday’s fade to the latter. Resistance remains at $31.50-$31.75 with a close above $32 signaling a possible breakout.
AT&T (T, $28.93, up $0.10)
T February 31 calls (T210219C00031000, $0.20, unchanged)
Entry Price: $0.40 (1/6/2021)
Exit Target: $0.80
Stop Target: None
Action: Shares tapped a high of $29.05 with lower resistance at $29-$29.25 getting cleared but holding. Support is at $28.75-$28.50 and the 50-day moving average.
Boston Scientific (BSX, $37.03, down $0.49)
BSX February 31 puts (BSX210219P00031000, $0.10, unchanged)
Entry Price: $0.85 (12/14/2020)
Exit Target: $1.70
Stop Target: None
Action: Friday’s low reached $37 with upper support at $37-$36.75 and the 200-day moving average getting kissed but holding. Resistance at $37.25-$37.50.