MomentumOptions.com Pre-Market Update for 3/26/2021
Bulls Snap Two-Session Slide
The stock market shrugged off a weak first half of trading to close higher on Thursday to snap a two-session losing streak. Better-than-expected news on jobless claims provided some relief as unemployment benefits dropped to a one-year low.
This was a positive sign that the U.S. economy is on the verge of stronger growth as the public health situation from the coronavirus improves. Meanwhile, volatility fell back below a major level of support after holding key resistance shortly after the opening bell.
The Russell 2000 showed the most strength after tagging a late day high of 2,190 while closing at 2,183 (+2.3%). Fresh and lower resistance at 2,175-2,200 was cleared and held. A close above the latter would indicate a retest towards 2,225-2,250 and the 50-day moving average. Below is a chart of the IWM.
The Dow settled at 32,619 (+0.6%) with the afternoon peak reaching 32,672. Near-term and lower resistance at 32,500-32,750 was recovered. A move above the latter would suggest further upside towards 33,000-33,250 with the current record high at 33,227.
The S&P 500 tested an intraday high of 3,919 before ending at 3,909 (+0.5%). Current and lower resistance at 3,900-3,925 was breached and held. A pop above the latter would signal another run towards 3,950-3,975 with the current all-time high at 3,960.
The Nasdaq finished at 12,977 (+0.1%) after tapping a second half high of 13,021. New and lower resistance at 13,000-13,150 was cleared but held. A close above the latter would indicate additional upside towards 13,250-13,400 and the 50-day moving average.
Shares of Nike (NKE) fell 3.4% following a report the company is facing a potential boycott in China related to accusations about forced labor in Xinjiang. Nike has previously said it won’t source products from Xinjiang due to labor concerns
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) snapped a two-session slide despite trading to a morning high of 23.55. Prior and upper resistance at 23-23.50 and the 50-day moving average were breached but levels that held.
The fade and close on the session low cleared and held upper support at 20-19.50. A move below the latter would signal another retest towards 19-18.50 with the monthly and 52-week low at 18.80.
The Spiders Dow Jones Industrial Average ETF (NYSE: DIA) was up for the second-straight session with the afternoon high hitting $326.62. Current and lower resistance at $326.50-$327 was cleared but held. A close above the latter would signal strength towards the $328.50-$329 area.
Support is at $324-$323.50 followed by $321-$320.50.
RSI is in a slight uptrend with key resistance at 60 holding. A move above this level would indicate strength towards 65-70 with the latter representing the monthly top. Support is at 55-50.
The iShares MSCI Emerging Markets ETF (NYSE: EEM) snapped a three-session slide after tapping an intraday high of $52.07. Current and lower resistance at $52-$52.50 was breached but held. A close above the latter would would signal further upside towards $53.50-$54.
Shaky support is at $51.50 with a close below this level likely leading to a further fade towards $50.50-$50 and levels from late December.
RSI is trying to curl higher with key resistance at 40 holding. A close above this level would signal strength towards 45-50 with the latter holding throughout the month. Support is at 35.
I mentioned on Tuesday the S&P 500, and possibly the Dow, would likely test their 50-day moving averages with the former doing so on Thursday. While yesterday’s action was slightly encouraging, the bulls won’t be out of the woods until the Nasdaq and the Russell 2000 can clear and hold their 50-day moving averages. A retreat on the major indexes today would likely indicate weakness into Monday’s open.
If this outcome plays out, Tech and the small-caps could test their monthly lows and would be a perfect scenario heading into month end on Wednesday. I mentioned April is typically a bullish month for the market, so if the monthly lows hold, we could see a nice rebound in the overall market with fresh all-time highs coming back into play as we head into the start of the first-quarter earnings season.
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.
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International Game Tech (IGT, $17.00, up $0.65)
IGT April 20 calls (IGT210416C00020000, $0.20, up $0.05)
Entry Price: $0.95 (3/17/2021)
Exit Target: $1.90
Stop Target: None
Action: Thursday’s low kissed $15.97 with key support at $16 holding. The rebound to $17.10 cleared and held lower resistance at $17-$17.25.
Earlier this month, shares made a four-day run from basically the same level to clear $20. These options still have three weeks before expiration and why I still like this trade going forward.
Altria Group (MO, $50.19, up $0.68)
MO April 47.50 puts (MO210416P00047500, $0.30, down $0.10)
Entry Price: $0.75 (3/16/2021)
Exit Target: $1.50
Stop Target: 15 cents (Stop Limit)
Action: Shares tested a high of $50.38 with lower resistance at $50.50-$51 getting breached but holding. Support is at $49.50-$49.
Ford Motor Company (F, $12.32, up $0.18)
F April 14 calls (F210416C00014000, $0.12, up $0.02)
Entry Price: $0.45 (3/8/2021)
Exit Target: $0.90
Stop Target: None
Action: Yesterday’s late day peak reached $12.35 with lower resistance at $12.30-$12.40 getting recovered. Support is at $12.10-$12 followed by $11.80-$11.70.