MomentumOptions.com Pre-Market Update for 3/1/2021
Bulls Rebound but Bears Get Weekly Win/ Trade Alert (PFE)
The stock market showed some strength on Friday following a choppy session while closing mixed. Tech and small-caps showed the most strength while the blue-chips and the broader market struggled throughout the session. Mostly better-than-expected economic news and corporate earnings helped bullish sentiment while fears of ongoing and rising interest rates remained in focus.
The Nasdaq tapped a midday high of 13,368 while finishing at 13,192 (+0.6%). Current and lower resistance at 13,300-13,400 and the 50-day moving average were cleared but levels that held. A close above the latter would signal a retest towards 13,500-13,600.
The Russell 2000 reached an afternoon peak of 2,232 before closing at 2,201 (+0.04%). Near-term and lower resistance at 2,225-2,250 was tripped but held. A move above the latter would suggest strength towards 2,275-2,300 with the current all-time high at 2,318. Below is a chart of the IWM.
The S&P 500 settled at 3,811 (-0.5%) following the fade to 3,789 shortly after the opening bell. Upper support at 3,800-3,775 was breached but held. A close below the latter and the 50-day moving average would indicate additional weakness towards 3,750-3,725.
The Dow ended at 30,932 (-1.5%) after tagging a morning low of 30,911. Current and upper support at 31,000-30,750 failed to hold. A close below the latter the 50-day moving average would signal a further fade towards 30,500-30,250.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was down for the third time in four sessions following the intraday fade to 25.23. Near-term and upper support at 25.50-25 was breached but held on the 2nd-straight close above the 200-day moving average. A close below the 25 level would indicate a retest towards 24-23.50 and the 50-day moving average.
Resistance is at 28-28.50 followed by 30.50-31.
The Wilshire 5000 Composite Index (NYSE: WLSH) was down for the second-straight session after testing an opening low of 40,168. Current and upper support at 40,500-40,250 and the 50-day moving average were breached but levels that held. A move below the latter would indicate ongoing risk towards 40,000-39,750.
Resistance at 40,750-41,000.
RSI (relative strength index) is showing signs of flatlining with lower resistance at 45-50 getting cleared but holding. A close above the latter would signal strength towards 55-60. Support is at 40-35 and levels from late October.
The Industrials Select Sector SPDR Fund (NYSE: XLI) extended its losing streak to two-straight sessions with the intraday low hitting $90.36. Near-term and upper support at $90.50-$90 failed to hold. A close below the latter would suggest additional weakness towards $89-$88.50 and the 50-day moving average.
Resistance is at $92-$92.50 followed by $93.50-$94 with the recent all-time peak at $93.66.
RSI is in a downtrend with upper support at 55-50 failing to hold. A close below the latter keeps downside risk towards 45-40 in play. Resistance is at 60.
Friday’s action was slightly encouraging but the final hour of trading saw a resumption of selling pressure, especially on the S&P 500. The VIX was on track to close below the 200-day moving average and was trading just above the 25 level before the last 10 minutes of action.
This is signaling Monday could be another choppy session. I was hoping there would be continued weakness across the board on Friday with volatility moving upwards towards the 35-37.50 area to create a possible “double top” and levels from late January.
From there a falling VIX would have been a bullish signal so we will have to see if this scenario plays out over the next few days. If the VIX closes above the 37.50 level, there is a chance a retest towards the 40 area and levels from late October comes into play.
I still remain slightly bullish over the longer-term but the near-term action remains muddled. I’m still focused on bullish trades and I will be covering possible trade setups over the next fews days.
At the top of my wish list for lower entry points are Western Union (WU) and General Electric (GE). I also have bearish trades on my Watch List and will cover them as well, if volatility blows past 40 this week.
Momentum Options Play List
Closed Momentum Options Trades for 2021: 9-2 (82%). 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.
Pfizer (PFE, $33.49, down $0.33)
PFE March 36 calls (PFE210319C00036000, $0.15, down $0.05)
Entry Price: $0.55 (2/10/2021)
Exit Target: $1.10
Stop Target: None
Action: Close the trade at current levels to save the remaining premium. The chart continues to look bearish for PFE with the 50-day moving average on track to fall below the 200-day moving average. This would form a death cross with the likelihood of shares falling towards the $32 level. We can revisit PFE when the chart looks better.