MomentumOptions.com Pre-Market Update for 3/9/2021
Tech Slides Into Correction Territory
The stock market settled mixed on Monday after Congress made strides over the weekend in passing another significant stimulus relief package while Treasury yields climbed higher to start the week. The blue-chips managed to set another all-time high while Tech stumbled into a correction territory, falling more than 10% from its recent record high from mid-February.
The Dow traded to an intraday lifetime high of 32,148 before closing at 31,802 (+1%). Current and lower resistance at 32,000-32,250 was cleared but held. A close above the latter would indicate additional momentum towards 32,500-32,750.
The Russell 2000 tested a midday peak of 2,233 before ending at 2,202 (+0.5%). Near-term and lower resistance at 2,200-2,225 was recovered. A move above the latter would signal ongoing strength towards 2,250-2,275. Below is a chart of the IWM.
The Nasdaq tagged a late day low of 12,599 while finishing at 12,609 (-2.4%). Current and upper support at 12,500-12,375 was breached but held. A move below the latter and last Friday’s low of 12,397 would suggest additional weakness towards 12,275-12,150 and levels from late November.
The S&P 500 kissed an afternoon low of 3,819 before settling at 3,821 (-0.5%) and back below its 50-day moving average. Near-term and upper support at 3,825-3,800 failed to hold. A drop below the latter would indicate a retest towards 3,775-3,750.
Shares of GameStop (GME) surged 41% after the company formed a Strategic Planning and Capital Allocation Committee that will include Chewy (CHWY) founder Ryan Cohen as chairperson. The committee said it will identify initiatives that can further accelerate the company’s transformation.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the fourth time in five sessions after testing of 28.39. Current and lower resistance at 28-28.50 and the 200-day moving average were breached but levels that held. A close above the 30 level would be a renewed bearish development for the market
Support is at 24.50-24 and the 50-day moving average.
The SPDR S&P 500 ETF (NYSE: SPY) fell for the fourth time in five sessions despite trading to an intraday high of $387.68. Near-term and lower resistance at $387.50-$388 was cleared but held. A close above the latter would indicate upside towards $389.50-$390.
The fade to $381.42 afterwards breached but held upper support at $381.50-$381 and the 50-day moving average.
RSI is in a slight downtrend with upper support at 45-40 holding. A close below the latter would suggest additional weakness towards 35 and the late October low. Resistance is at 50-55.
The Consumer Staples Select SPDR Fund (NYSE: XLP) was up for the second-straight session after trading to a high of $65.67. Near-term and lower resistance at $65.50-$66 was cleared but held. A close above the latter and the 50-day moving average would indicate additional strength towards $67-$67.50.
Support is at $64.50-$64 followed by $63.50 and the 200-day moving average.
RSI is in an uptrend after clearing and holding resistance at 50. Continued closes above this level would suggest upside towards 55-60. Support is at 45-40.
The mixed close on Monday is still signaling market volatility remains present with traders still favoring value stocks over Tech. However, a good sign is the VIX is making lower highs and lower lows but still needs a recovery of the 50-day moving average over the next session or two. If so, we could see a retest towards the 20 level over the near-term.
There are a couple of stocks on my Watch list that could be in play this week if near-term bottoms come in play. Specifically, the weakness in gold remains a top setup as the yellow metal closed below $1,700 an ounce yesterday. There is still risk towards the $1,600 level on continued weakness with last March lows near the $1,450 area. Additionally, a death cross has formed in the chart and is still signaling lower lows. With RSI near 25, conditions remain oversold. We just need to be patient over the next week or so to see when the bleeding will stop.
I have updated our current trades so let’s go check the tape.
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.
Ford Motor Company (F, $12.65, up $0.38)
F April 14 calls (F210416C00014000, $0.44, up $0.11)
Entry Price: $0.45 (3/8/2021)
Exit Target: $0.90
Stop Target: None
Action: Shares traded to a five-year high of $12.88 with fresh and lower resistance at $12.80-$13 getting breached but holding. Support is a $12.40-$12.30.
A close above $13 could lead to a breakout towards $13.25-$13.50. I have a longer-term price target of $15 for Ford and these options have 38 days before expiration.
Western Union (WU, $25.11, up $1.02)
WU April 25 calls (WU210416C00025000, $0.90, up $0.45)
Entry Price: $0.45 (3/3/2021)
Exit Target: $0.90, raise to $1.35 (closed half at $0.95 on 3/8/21)
Stop Target: 60 cents (Stop Limit)
Action: Raise the Exit Target from 90 cents to $1.35 on the other half of the trade. We closed HALF of the position at 95 cents yesterday to lock-in triple-digit profits.
Shares zoomed to an intraday high of $25.47 with the options peaking at $1.05. Fresh and lower resistance at $25.25-$25.50 was cleared but held. New support is at $25-$24.75.
RSI is signaling slightly overbought levels near 70 and why I wanted to close half the trade yesterday. However, I still think a push towards 75-80 could come before a possible pullback. The Stop Limit at 60 cents will protect our profit if momentum fades from here.
General Electric (GE, $14.17, up $0.57)
GE April 13 calls (GE210416C00013000, $1.55, up $0.40)
Entry Price: $0.75 (3/1/2021)
Exit Target: $2 (Limit Order on half)
Stop Target: $1, raise to $1.25 (Stop Limit)
Action: Raise the Stop Limit from $1 to $1.25.
Monday’s 3-year high reached $14.34 with the call options peaking at $1.68. Fresh and lower resistance at $14.30-$14.45 was cleared but held. A move above the latter would signal a continued breakout towards $14.50-$14.65. Rising support is at $14-$13.85.