MomentumOptions.com Pre-Market Update for 2/8/2021
Bulls Wrap Up a Solid Week
The stock market showed continued momentum for the firth-straight session following Friday’s run to another round of record highs. News that the Senate approved a $1.9 trillion budged bill in a 51-50 reconciliation vote fueled the bullish sentiment.
Additional headlines on the vaccine front also supported the momentum after Johnson & Johnson (NYSE: JNJ) requested authorization of its one shot coronavirus vaccine that would be the third vaccine available in the United States if approved by the FDA.
The Russell 2000 closed on the session high of 2,233 (+1.4%). New and lower resistance at 2,220-2,240 was cleared and held. A move above the latter would indicate additional upside towards 2,250-2,270. Below is a chart of the IWM.
The Nasdaq settled at 13,856 (+0.6%) after tapping a midday all-time peak of 13,878. Unchartered territory and lower resistance at 13,800-13,900 was cleared and held. A close above the latter would suggest ongoing momentum towards 14,000-14,100.
The S&P 500 tagged a fresh lifetime high of 3,894 before finishing at 3,886 (+0.4%). Current and lower resistance at 3,875-3,900 was cleared and held. A close above the latter would indicate additional strength towards 3,900-3,925.
The Dow tapped a morning high of 31,252 before ending at 31,148 (+0.3%). Near-term and key resistance at 31,250 was breached but held. A close above this level and January’s record high of 31,272 would signal a breakout towards 31,500-31,750.
For the week, the Russell 2000 zoomed 7.8% and the Nasdaq zoomed 6%. The S&P 500 soared 4.7% and the Dow added 3.9%.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was down for the fifth-straight session after tapping a low of 20.86 ahead of the closing bell. Key support at 21 was recovered. Continued closes below this level would indicate a retest towards 20-19.50 with the late November low at 19.51.
Lowered resistance is at 22-22.50 followed by 23-23.50 and the 50-day moving average.
The Wilshire 5000 Composite Index (NYSE: WLSH) extended its winning streak to five-straight sessions following the intraday run to 41,498. Unchartered territory and lower resistance at 41,250-41,500 was cleared and held. A move below the latter would indicate additional momentum towards 41,750-42,000.
Rising support is at 41,000-39,750.
RSI (relative strength index) remains in an uptrend after clearing and holding lower resistance at 65-70. A close above the latter would indicate additional strength towards 75-80 and levels from early September. Key support is at 60.
The Technology Select Sector Spider Fund (NYSE: XLK) was down for the second time in three sessions despite tagging an all-time intraday high of $136.05. Unchartered territory and lower resistance at $136-$136.50 was breached but held. A move above the latter would signal ongoing strength towards $137.50-$138.
Current support is at $135-$134.50 followed by $133.50-$133.
RSI is showing signs of leveling out with key resistance at 65 holding. A close above this level would signal a retest towards 70 and the December peak. Support is at 55-50 on a move back below the 60 level.
I have updated our current position so let’s go check the action. I may also have a New Trade if the bulls can keep the momentum going throughout today’s session so stay locked-and-loaded.
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IShares MSCI Emerging Markets ETF (EEM, $56.24, up $0.48)
EEM March 58 calls (EEM210319C00058000, $0.75, up $0.10)
Entry Price: $0.65 (2/5/2021)
Exit Target: $1.30
Stop Target: None
Action: Friday’s high reached $56.26 with current and lower resistance at $55.50-$56 getting cleared and holding. A close above the latter and the current 52-week peak at $56.54 would signal a possible breakout towards $57-$57.50. Support is at $55.25-$55.
Volume was heavy in these contracts on Friday with over 42,500 trading and the March 60’s also mirroring the action. This is signaling bullish traders are expecting a breakout towards the $60 level by mid-March.
Bank of America (BAC, $32.37, down $0.13)
BAC March 32 calls (BAC210319C00032000, $1.50, down $0.05)
Entry Price: $0.65 (2/2/2021)
Exit Target: $1.30, raise to $2.05
Stop Target: $1.30 (Stop Limit)
Action: Raise the Exit Target from $1.30 to $2.05.
Shares reached a peak of $32.90 before the slightly lower close with the options peaking at $1.78. Prior and lower resistance from mid-January at $32.75-$33 was cleared but held. Rising support is at $32.25-$32.
MGM Resorts International (MGM, $34.25, up $1.77)
MGM February 34 calls (MGM210219C00034000, $1.70, up $0.75)
Entry Price: $0.80 (1/13/2021)
Exit Target: $1.60, raise to $2.50 (closed half at $1.75 on 2/5/2021)
Stop Target: $1.25, raise to $1.45 (Stop Limit)
Action: Raise the Exit Target from $1.60 to $2.50 on the other half of the trade. Raise the Stop Limit from $1.25 to $1.45.
Shares traded to a fresh 52-week peak of $34.66 with fresh and lower resistance at $34.50-$34.75 getting cleared but holding. New support is a $34-$33.75.
Earnings are due out on Wednesday so we may close another quarter of the position ahead of the news.
AT&T (T, $28.93, up $0.04)
T February 31 calls (T210219C00031000, $0.10, unchanged)
Entry Price: $0.40 (1/6/2021)
Exit Target: $0.80
Stop Target: None
Action: Lower resistance at $29-$29.25 was breached but held on the push to $29.07. Support at $28.75-$28.50 and the 200-day moving average.
These options expire next Friday and there is a chance these options continue to struggle. I would like to see a close above $29.50-$29.75 this week to keep the trade open.