MomentumOptions.com Pre-Market Update for 3/24/2021
Late Day Selling Pressure Returns
The stock market traded in a tight range on Tuesday before selling pressure returned in the final hour to give the victory to the bears. Rising coronavirus cases overseas prompted an extended lockdown in Germany while commentary from Fed Chair Powell and Treasury Secretary Yellen weighed on sentiment.
Powell and Yellen both stated more must be done to limit the damage from the coronavirus pandemic and to promote a full economic recovery. Meanwhile, volatility rose while clearing and holding a key level of resistance.
The Russell 2000 finished at 2,185 (-3.6%) and back below its 50-day moving average with the late day plunge reaching 2,175. Prior and upper support at 2,200-2,175 failed to hold. A close below the latter would likely lead to a further pullback towards 2,150-2,125. Below is a chart of the IWM.
The Nasdaq hit an afternoon low of 13,202 while closing at 13,227 (-1.1%). Current and upper support at 13,250-13,100 was breached and failed to hold. A drop below the latter would signal a retest towards 13,000-12,850.
The Dow tapped an intraday low of 32,356 before settling at 32,423 (-0.9%). New and upper support at 32,500-32,250 was failed to hold. A move below the latter would indicate a further fade towards 32,000-31,750.
The S&P 500 ended at 3,910 (-0.8%) after testing a low of 3,901. Current and upper support at 3,925-3,900 was tripped and failed to hold. A close below the latter would suggest additional weakness towards 3,875-3,850 and the 50-day moving average.
Shares of Dolphin Entertainment (DLPN) skyrocketed 236% after announcing the company has formed a new division which will be dedicated to designing, producing, releasing and promoting NFT’s, or non-fungible tokens, for itself and its clients within the film, television, music, gaming, epicurean, and technology industries.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the first time in three sessions after zooming to a late day peak of 21.58. Prior and upper resistance at 21.50-22 was cleared but held. A close above the latter would signal a retest towards 23-23.50.
Support remains at 20-19.50.
The S&P 400 Mid Cap Index (NYSE: MID) was down for the second-straight session after tapping a low of 2,520. Prior and upper support from the start of the month at 2,550-2,525 failed to hold. A move below the latter would indicate additional weakness towards 2,500-2,475 and the 50-day moving average.
Resistance is at 2,575-2,600.
RSI (relative strength index) is in an downtrend with key support at 45 holding. A close below this level would signal risk towards 40 and the late October low. Resistance is at 50-55.
The Financial Select Sector Spider Fund (NYSE: XLF) extended its losing streak to three-straight sessions following the pullback to $33.04. Prior and upper support at $33.25-$33 was tripped and failed to hold. A close below the latter would indicate continued weakness towards $32.75-$32.50.
Resistance is at $33.50-$33.75.
RSI remains in a downtrend after falling below key support at 50. Continued closes below this level suggesting weakness towards 45-40 and the late January lows. Resistance is at 55-60.
March has been a turbulent month in recent years and this year is no different. Historically, the month shows mid-month strength before late month weakness returns. True to form, the major indexes seemed to have peak last week and have since been in a downtrend.
The end of the month concludes next Wednesday so I wouldn’t be surprised to see continued weakness over the near-term. More importantly, the end of the quarter could also led to additional selling pressure with the Dow and the S&P 500 likely headed towards a retest of their 50-day moving averages.
I mentioned it would be important for the Nasdaq to recover its 50-day moving average yesterday and this level held for the second-straight session. Additionally, the small-caps failed to hold its 50-day moving average and was the weakest index on Tuesday.
I wanted to point this out because our two bullish trades continue to languish and I don’t mind holding on to our put position if the current trend continues. The good news is that April is typically a very bullish month for the market and there will likely be phenomenal setups to get long again late next week.
One sector could be the financials and why I highlighted XLF today as I would love to see a continued fade towards the $32 level. For the year, my track record is 14-2 (88% win rate), with four triple-digit winners, and four winning trades for March. However, I know some new subscribers that joined this month might be a tad discouraged given the current trading environment.
This is why I wanted to give a more detailed update this morning and how March can be a volatile month. Of course, April is not guaranteed to be a bullish month but I wanted to stress the importance of trying to be patient over the near-term.
This also means that while there may be some opportunities to make some short-term trades using put options, I’d rather not force the action as we wait to see how the next week unfolds. If you remain nervous, read this Market Outlook once again as it will help you into next week with the technical setup giving us a clearer picture on how April might unfold.
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, $17.12, down $1.22)
IGT April 20 calls (IGT210416C00020000, $0.30, down $0.35)
Entry Price: $0.95 (3/17/2021)
Exit Target: $1.90
Stop Target: None
Action: Tuesday’s low tapped $16.97 with prior and upper support at $17-$16.75 getting breached but holding. Lowered resistance is at $17.25-$17.50.
Altria Group (MO, $50.51, down $1.13)
MO April 47.50 puts (MO210416P00047500, $0.40, up $0.15)
Entry Price: $0.75 (3/16/2021)
Exit Target: $1.50
Stop Target: 15 cents (Stop Limit)
Action: Shares tagged a low of $50.33 near-term and upper support at $50.50-$50 getting breached but holding. Rising support is at $51-$50.50.
Ford Motor Company (F, $12.21, down $0.64)
F April 14 calls (F210416C00014000, $0.15, down $0.10)
Entry Price: $0.45 (3/8/2021)
Exit Target: $0.90
Stop Target: None
Action: Prior and upper support at $12.20-$12.10 was tripped but held on the fade to $12.12 yesterday. Lowered resistance is at $12.40-$12.50.