MomentumOptions.com Pre-Market Update for 1/28/2021
Wall Street Hammered on Mixed Earnings, Fed Update
The stock market suffered its biggest declines in three months as traders digested the latest Fed news and mixed earnings. The FOMC announcement stated interest rates will remain unchanged as the pace of the recovery in economic activity and employment has moderated in recent months. However, it wasn’t enough to ease the selling pressure as the losses reaccelerated into the closing bell.
The S&P 500 closed at 3,750 (-2.6%) following the afternoon fade to 3,732. Prior and upper support at 3,750-3,725 was breached but held. A drop below the latter would suggest additional weakness towards 3,700-3,625 and the 50-day moving average.
The Nasdaq ended at 13,270 (-2.6%) following the intraday tumble to 13,192. Current and upper support at 13,200-13,100 was breached but held. A close below the latter would indicate further weakness towards 13,000-12,900.
The Dow settled at 30,303 (-0.1%) after tapping a late day low of 30,206 and extending its losing streak to five-straight sessions. Prior and upper support from the start of the month at 30,250-30,000 and the 50-day moving average were breached but levels that held. A move below the latter would signal a further backtest towards 29,750-29,500.
The Russell 2000 finished at 2,108 (-1.9) after trading to a morning low of 2,088. Near-term and upper support from earlier this month at 2,100-2,080 was tripped but held. A close below the latter would signal a continued backtest towards 2,070-2,050.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the third time in four sessions after closing on the session high of 37.21. Prior and lower resistance from late October at 37-37.50 was breached and failed to hold.
New support is 36-35.50 followed by 34.50-34.
The Wilshire 5000 Composite Index (NYSE: WLSH) was down for the second-straight session following the morning tumble to 39,605. Prior and upper support is at 39,750-39,500 was breached but held. A move below the latter would indicate continued weakness towards 39,250-39,000.
Lowered resistance is at 40,250-40,500 followed by 40,750-41,000 with Tuesday’s all-time peak at 41,097.
RSI (relative strength index) is in a downtrend with key support at 50 failing to hold. Continued closes below the latter would indicate additional weakness towards 45-40 and levels from early November. Resistance is at 55-60.
The Communication Services Select Sector SPDR (NYSE: XLC) had its seven-session losing streak snapped following the intraday pullback to $67.44. Fresh and upper support is at $67.50-$67 was tripped but held. A close above the latter would suggest further weakness towards $66.50-$66 and the 50-day moving average.
Resistance is at $69-$69.50 with Tuesday’s record peak at $70.30.
RSI is back in a downtrend with upper support at 55-50 failing to hold. A drop below the latter would indicate additional weakness towards 45-40 and levels from earlier this month. Resistance is at 60.
Shares of GameStop Corp. (NYSE: GME) skyrocketed 135% as the frenzy continues to drive the stock up from a massive short squeeze. The stock has become a favorite of online traders who invest in companies highlighted on social media sites like the Reddit forum WallStreetBets.
The battle between retail traders and Wall Street hedge funds has been making major headlines throughout the week with huge winners and losers on both sides of the trade.
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, $23.15, up $0.32)
WU March 23 calls (WU210319C00023000, $1.45, up $0.35)
Entry Price: $0.65 (1/21/2021)
Exit Target: $1.30, raise to $2 (closed half at $1.50 on 1/27/2021)
Stop Target: 80 cents, raise to $1.10 (Stop Limit)
Action: Raise the Exit Target from $1.30 to $2 on the other half of the trade. Raise the Stop Limit from 80 cents to $1.10.
Shares traded a high of $23.83 with new and lower resistance at $23.75-$24 getting cleared but holding. Rising support is at $23-$22.75.
MGM Resorts International (MGM, $28.36, down $1.23)
MGM February 34 calls (MGM210219C00034000, $0.45, down $0.10)
Entry Price: $0.80 (1/13/2021)
Exit Target: $1.60
Stop Target: None
Action: Wednesday’s bottom reached $27.81 with prior and upper support from late November at $28-$27.75 getting breached but holding. Lowered resistance is at $28.75-$29.
AT&T (T, $29.14, down $0.61)
T February 31 calls (T210219C00031000, $0.30, down $0.10)
Entry Price: $0.40 (1/6/2021)
Exit Target: $0.80
Stop Target: None
Action: Shares were volatile yesterday with the high reaching $30.20 and the options hitting 50 cents. Prior and lower resistance at $30-$30.25 was cleared bit held. The fade to $28.96 afterwards breached but held upper support is at $29-$28.75.
Boston Scientific (BSX, $35.82, down $0.82)
BSX February 31 puts (BSX210219P00031000, $0.15, up $0.05)
Entry Price: $0.85 (12/14/2020)
Exit Target: $1.70
Stop Target: None
Action: Yesterday’s low reached $35.66 with upper support at $35.75-$35.50 getting breached but holding. Lowered resistance is at $36-$36.25 and the 200-day moving average.