MomentumOptions.com Pre-Market Update for 3/4/2021
Nasdaq Closes Below 13,000
The stock market was choppy on Wednesday before closing lower as traders weighed optimism over widespread post-pandemic business reopenings versus another uptick in bond yields. Specifically, the yield on the benchmark 10-year Treasury note rebounded to close near the 1.5% level and weighed on Tech stocks.
Meanwhile, private payrolls missed expectations following a print of 117,000 in February and down from an upwardly revised gain of 195,000 payrolls in January. This also weighed on sentiment with volatility spiking back above a key level of resistance.
The Nasdaq tested an afternoon low of 12,995 before ending at 12,997 (-2.7%) and back below its 50-day moving average. Prior and upper support from late January at 13,000-12,900 was breached and failed to hold. A close below the latter would be an ongoing bearish development and would indicate further weakness towards 12,800-12,700.
The S&P 500 closed at 3,819 (-1.3%) with the late day low tapping 3,818. Near-term and upper support at 3,825-3,800 was breached and failed to hold. A drop below the latter and the 50-day moving average would suggest weakness towards 3,775-3,750.
The Russell 2000 settled on its session low of 2,207 (-1.1%). Upper support at 2,225-2,200 failed to hold. A move below the latter would suggest a retest towards 2,175-2,150. Below is a chart of the IWM.
The Dow finished at 31,270 (-0.4%) after tapping a low of 31,260 ahead of the closing bell. Current and upper support at 31,500-31,250 was tripped and failed to hold. A close below the latter would signal additional weakness towards 31,000-30,750 and the 50-day moving average.
Shares of Lyft (LYFT) jumped 8% while trading to a fresh 52-week high of $63.58 after raising first quarter earnings guidance. The company expects a loss of $135 million versus previous forecasts between $150-$145 million. The company attributed the improvement in its outlook to reduced operating expenses.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the 2nd-straight session after surging to a high of 26.79. Prior and lower resistance at 26.50-27 and the 200-day moving average was breached and held. A close above the latter would signal a retest towards 29-31.
Support is at 24-23.50 and the 50-day moving average.
The S&P 400 Mid Cap Index (NYSE: MID) was down for the second-straight session after closing on the session low of 2,507. Near-term and upper support at 2,500-2,475 was challenged but held. A move below the latter would indicate additional weakness towards 2,450-2,425 and the 50-day moving average.
Resistance is at 2,525-2,550 with the recent all-time high of 2,563
RSI (relative strength index) is back in a downtrend with key support at 50 holding. A move below this level would signal additional weakness towards 45 and the late January low. Resistance is at 55-60.
The Real Estate Select Sector SPDR Fund (NYSE: XLRE) fell for the second-straight session and for the fourth time in five with the late day low tagging $36.63. Upper support at $36.75-$36.50 and the 50-day moving average failed to hold. A close below the latter would suggest additional weakness towards $36.50-$36.25.
Resistance is at $37-$37.25.
RSI remains in a downtrend with key support at 40 failing to hold. Continued closes below this level would indicate weakness towards 35-30 and late October lows. Resistance is at 45-50.
The Nasdaq’s close below 13,000 was a slightly bearish signal and could lead to additional overall market weakness over the near-term. However, I do expect support levels from January to hold but I’m using “cheap” call options so that if they don’t the damage will be limited. There is a chance for a few bearish trades over the near-term but let’s see how the next few sessions play out.
There are market moving events today and tomorrow with Fed comments and the jobs report coming out.
I have updated our newest trade and I could have another recommendation as early as today so stay locked-and-loaded in case I take action.
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.
Western Union (WU, $23.88, up $0.20)
WU April 25 calls (WU210416C00025000, $0.45, up $0.07)
Entry Price: $0.45 (3/3/2021)
Exit Target: $0.90
Stop Target: None
Action: Shares traded to a high of $24.22 yesterday with lower resistance at $24-$24.25 getting cleared but holding. Rising support is at $23.75-$23.50.
The February peak reached $24.66 and a level that could be retested if shares can clear and hold the $24.25 level this week. The 52-week high is at $25.13 and why I really like this trade over the next 4-6 weeks.
These options have 43 days before expiration and my Price Target on the stock is $26-$26.50 on a breakout above the $25 level. This would get these call options to $1-$1.50 “in-the-money”.
General Electric (GE, $13.44, up $0.46)
GE April 13 calls (GE210416C00013000, $1.00, up $0.25)
Entry Price: $0.75 (3/1/2021)
Exit Target: $1.50
Stop Target: 80 cents (Stop Limit)
Action: Set an initial Stop Limit at 80 cents to start protecting profits and to avoid a loss.
Wednesday’s 52-week peak tagged $13.61 with fresh and lower resistance at $13.60-13.75 getting breached but holding. A move above the latter would signal a continued breakout towards $13.85-$14. Support is at $13.25-$13.10.