MomentumOptions.com Pre-Market Update for 2/26/2021
Bears Return as Bond Yields Spike to One-Year Highs/ Profit Alerts (GE, AFL)
The stock market suffered its biggest losses of the month on Thursday as another spike in bond yields prompted traders to dump riskier assets, especially overbought Tech stocks. Specifically, the 10-year Treasury yield surged to a peak north of 1.6%, and its highest level since last February.
The Russell 2000 finished at 2,200 (-3.7%) after trading to an afternoon low of 2,196. Current and upper support at 2,200-2,175 was breached but held. A close below the latter would signal a continued backtest towards 2,150-2,125.
The Nasdaq ended at 13,119 (-3.5%) following the late day tumble to 13,066. Near-term and upper support at 13,100-13,000 was tripped but held on the close back below the 50-day moving average. A drop below the latter would indicate further weakness towards 12,900-12,800.
The S&P 500 closed at 3,829 (-2.5%) following the fade to 3,814 ahead of the final bell. Upper support at 3,825-3,800 was breached but held. A move below the latter and the 50-day moving average would indicate additional weakness towards 3,775-3,750.
The Dow settled at 31,402 (-1.8%) after bottoming 31,293. Current and upper support at 31,500-31,250 failed to hold. A close below the latter would signal a further pullback towards 31,000-30,750 and the 50-day moving average.
The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) extended its losing streak to six-straight sessions with the 52-week low plunging to a low of $136.61. Fresh and upper support from last March at $137-$136.50 was tripped but held. A move below the latter would signal further weakness towards $135.50-$135.
Lowered resistance is at $140-$140.50.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the first time in three sessions with the afternoon peak hitting 31.16. Prior and lower resistance from late January at 31-31.50 was breached but held. A close above the 32 level would indicate a retest towards the 34-36 area.
New support is at 26.50-26 and the 200-day moving average.
The iShares Russell Growth 1000 ETF (NYSE: IWF) fell for the seventh time in eight sessions following the second half tumble to $237.35. Current and upper support at $237.50-$237 was breached but held. A close below the latter and Tuesday’s monthly low at $237.26 would indicate a further backtest towards $235-$234.50.
Lowered resistance is at $241-$241.50 followed by $243.50-$244 and the 50-day moving average.
RSI remains in a downtrend with key support at 35 holding. A close below this level would suggest additional weakness towards 30-25 and levels from last March. Resistance is at 40-45.
The Financial Select Sector Spider Fund (NYSE: XLF) had its four-session winning streak snapped following the pullback to $32.85. Near-term and upper support at $33-$32.50 was tripped and failed to hold. A close below the latter would indicate continued weakness towards $32-$31.50.
Resistance is at $33-$33.50 with Thursday’s opening 52-week peak reaching $33.84.
RSI is back in a downtrend after stalling at key resistance at 75 and the January high. Key support is 70 failed to hold on the weakness afterwards. Continued closes below this level suggesting weakness towards 65-60.
Despite Thursday’s selloff, we were able to lock-in two more profitable trades. While yesterday’s action may have been a disappointment to bullish traders, the pullback was needed to take some fluff off the current overbought conditions. Even better, the portfolio is extremely light with only one open position and we don’t have much risk on the table. This will allow us a brief opportunity to relax and see how today and next week unfolds.
Today will be an important day for the major indexes, especially if there is continued weakness. I would love to see a continued pullback towards the 50-day moving averages for the other major indexes with Tech falling further further towards the 12,750-12,500 area. This might provide an ideal opportunity to start nibbling on fresh bullish positions as it will likely push volatility near 34-36 as I mentioned earlier.
However, we could also be looking at a deeper correction into March that may allow us to establish a few bearish setups over the near-term. In any event, let’s see how the action unfolds today and I will be able to spend the weekend looking for both bullish and bearish setups.
We remain on an incredible hot streak since mid-August as we have cashed in on 27 out of 28 winning trades. There is no need to force anything as we can let the action come to us.
Thank you to all who have signed up recently and for the continued support from my longer-term subscribers. Stay safe, enjoy the weekend, and I will chat again with you on Monday.
Momentum Options Play List
Closed Momentum Options Trades for 2021: 9-1 (90%). 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.
General Electric (GE, $12.76, down $0.36)
GE April 13 calls (GE210416C00013000, $0.75, down $0.15)
Entry Price: $0.60 (2/22/2021)
Exit Target: $1.20
Stop Target: 70 cents (Stop Limit)
Action: The Stop Limit at 70 cents was tripped with the options testing a low of 67 cents.
While disappointed we didn’t squeeze more out of this trade, we can look to possibly reenter a position when volatility settles. I would like to see a continued backtest towards the $12 level.
Aflac (AFL, $48.65, down $1.20)
AFL April 50 calls (AFL210416C00050000, $1.50, down $0.45)
Entry Price: $1.05 (2/19/2021)
Exit Target: $2.50 (Limit Order on half)
Stop Target: $1.70 (Stop Limit)
Action: Shares cleared $50 with the calls peaking at $2.10. However, the Stop Limit at $1.70 was tripped on the stock’s fade to $48.64 afterwards.
We could get another reentry point near the $47 level.
Pfizer (PFE, $33.82, up $0.07)
PFE March 36 calls (PFE210319C00036000, $0.20, unchanged)
Entry Price: $0.55 (2/10/2021)
Exit Target: $1.10
Stop Target: None
Action: Thursday’s low tapped $33.54 before a rebound and higher close. Current and upper support at $33.75-$33.50 was breached but held. Resistance is at $34-$34.25.