MomentumOptions.com Pre-Market Update for 3/23/2021
Volatility Tumbles Back Below 20
The stock market showed overall strength on Monday with the small-caps slacking as Treasury yields pulled back. Specifically, the benchmark 10-year yield fell back below 1.7% after rising above this level last week.
Industrial stocks rallied following a report President Biden is looking at a $3 trillion infrastructure deal to boost the economy, well above previous expectations for around $2 trillion. Meanwhile, volatility tested a fresh 52-week low while closing back under a key level of support.
The Nasdaq closed at 13,377 (+1.2%) after tapping an second half high of 13,455. Current and lower resistance at 13,350-13,500 was cleared but held. A close above the latter and the 50-day moving average would suggest additional upside towards 13,600-13,750.
The S&P 500 tested to an intraday peak of 3,955 before ending at 3,940 (+0.7%). Near-term and lower resistance at 3,950-3,975 was breached but held. A move below the latter and the current all-time high at 3,960 would signal a breakout towards 4,000-4,025.
The Dow settled at 32,731 (+0.3%) with the afternoon high reaching 32,810. Prior and lower resistance at 32,750-33,000 was tripped but held. A pop above the latter would indicate further upside towards 33,000-33,250 with the current record high at 33,227.
The Russell 2000 tagged a morning low of 2,258 while finishing at 2,266 (-0.9%). Near-term and upper support at 2,275-2,250 failed to hold. A drop below the latter would suggest additional weakness towards 2,225-2,200 and the 50-day moving average. Below is a chart of the IWM.
Shares of Kansas City Southern (KSU) jumped 11% after the company agreed to be acquired by Canadian Pacific (CP) in a cash and stock transaction valued at roughly $29 billion, including debt. The deal values Kansas City Southern at $275 per share, representing a 23% premium from last Friday’s closing price.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was down for the second-straight session and for the ninth time in 10 sessions with the late day low tapping 18.87. Current and upper support at 19-18.50 was recovered. A close below the latter would indicate additional weakness towards 17.50-17.
Resistance is at 20-20.50 followed by 22-22.50.
The Invesco QQQ Trust (Nasdaq: QQQ) was up for the second-straight session after tapping a midday high of $320.74. Near-term and lower resistance at $320.75-$321.25 and the 50-day moving average were cleared but levels that held. A close above the latter would suggest further upside towards $322-$322.50.
Current support is at $318-$317.50 followed by $315.50-$315.
RSI (relative strength indicator) is in an uptrend after clearing and holding key resistance at 50. Continued closes above this level would indicate additional strength towards 55-60. Support is at 45-40.
The Materials Select Sector Spider Fund (NYSE: XLB) rebounded with the intraday high hitting $78.04. Current and lower resistance at $78-$78.50 was breached but held. A close above the latter would indicate a retest towards $79-$79.50 with the recent all-time high at $79.54.
Support is at $77-$76.50 followed by $75-$74.50 and the 50-day moving average.
RSI is in a slight uptrend with lower resistance at 60-65 holding. A close above the latter would suggest further upside towards 70-75 and the highs from early January. Support is at 55-50.
Monday’s action continues to favor the bulls although the Nasdaq needs to show continued momentum while clearing and holding its 50-day moving average today. More importantly, a close above last Tuesday’s monthly high at 13,620 would likely be a good signal a possible retest towards the 14,000 level could come into play by month end.
I have made an adjustment to one of our current trades and some key notes on the other two positions. With that said, I could have a new trade today if the bulls continue to show strength today. If I take action, I will send out a Text Alert.
Momentum Options Play List
Closed Momentum Options Trades for 2021: 14-2 (88%). 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.
International Game Tech (IGT, $18.34, down $0.21)
IGT April 20 calls (IGT210416C00020000, $0.65, down $0.15)
Entry Price: $0.95 (3/17/2021)
Exit Target: $1.90
Stop Target: None
Action: Monday’s low kissed $18.02 with current and upper support at $18.25-$18 getting breached but holding. Resistance remains at $18.75-$19.
It will be important for IGT to at least hold its 50-day moving average over the near-term or there would be risk towards $17-$16.50.
Altria Group (MO, $51.74, up $1.09)
MO April 47.50 puts (MO210416P00047500, $0.25, down $0.25)
Entry Price: $0.75 (3/16/2021)
Exit Target: $1.50
Stop Target: 15 cents (Stop Limit)
Action: Set a Stop Limit at 15 cents.
Shares tagged a two-year high of $51.72 with fresh and lower resistance at $51.50-$52 getting cleared and holding. Rising support is at $51-$50.50.
It appears to seem I got this trade wrong as there are now a number of layers of support that will impede shares from likely falling below $46.75 by mid-April and a level we need to see for this trade to be profitable.
I was hoping to see a close below $50 yesterday as shares remain extremely overbought with RSI closing above the 80 level. On that note, I could exit the trade today and revisit the story at a latter date. I will send out a Trade Alert if the Stop Limit trips, or if I decide to exit early, so we can save the remaining premium.
Ford Motor Company (F, $12.83, up $0.
F April 14 calls (F210416C00014000, $0.25, down $0.08)
Entry Price: $0.45 (3/8/2021)
Exit Target: $0.90
Stop Target: None
Action: Lower resistance is at $12.90-$13 was cleared but held for the third-straight session with the high hitting $12.93. Support remains at $12.60-$12.50.
These were “cheap” options at 45 cents but the pullback in the price could cause us to exit this trade early if shares fall $12.50-$12.40 this week. I still believe shares will eventually trade above $15, at some point, but we need momentum to return this week with a close above $13.25-$13.50 to see these options rebound.