MomentumOptions.com Pre-Market Update for 3/30/2021
Selling Pressure Returns on Hedge Fund Liquidation
The stock market closed mostly lower on Monday following news of the sudden unwinding of positions by a major hedge fund. Specifically, Archegos Capital Management was forced into selling Chinese tech stocks and U.S. media firms on Friday and yesterday that caused some of the nervousness.
Bank stocks slumped after Credit Suisse (CS) warned that they could be hit with sizable losses from the positions that had to be liquidated. The blue-chips managed to escape the selling pressure but volatility jumped 10% and back above a key level of resistance.
The Dow ended at 33,171 (+0.3%) after tapping a fresh all-time high of 33,259. Unchartered territory and lower resistance at 33,250-33,500 was cleared but held. A close above the latter would signal additional momentum towards 33,750-34,000.
The S&P 500 settled at 3,871 (-0.1%) after trading to a morning low of 3,943. Near-term and upper support at 3,950-3,925 was breached but held. A move below the latter would indicate a further pullback towards 3,900-3,875.
The Nasdaq tagged an intraday low of 12,968 before finishing at 13,059 (-0.6%). Prior and upper support at 13,000-12,850 was tripped but held. A fade below the latter would signal a retest towards 12,750-12,600.
The Russell 2000 closed on its session low of 2,158 (-2.8%) and back below its 50-day moving average. Current and upper support at 2,175-2,150 was tripped and failed to hold. A drop below the latter would signal a retest towards 2,125-2,100 with the early March low at 2,085. Below is a chart of the IWM.
Shares of Houghton Mifflin Harcourt (HMHC) jumped nearly 19% after the company announced an agreement to divest its consumer publishing business, HMH Books & Media, to HarperCollins Publishers, a division of News Corp (NWSA), for $349 million.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the first time in three sessions with the intraday high hitting 21.60. Prior and lower resistance at 21.50-22 was cleared but held. A close above the latter would suggest a retest towards 23-23.50 and the 50-day moving average.
Support is at 20-19.50.
The iShares Russell Growth 1000 ETF (NYSE: IWF) fell for the fourth time in five sessions with the intraday low kissing $239.13. Current and upper support at $239.50-$239 was tripped but held. A move below the latter would indicate further weakness towards $237.50-$237.
Resistance is at $241.50-$242 followed by $243.50-$244 and the 50-day moving average.
RSI has leveled out with key support at 50 holding. A drop below this level would suggest additional weakness towards 45-40. Resistance is at 55-60.
The Technology Select Sector Spider Fund (NYSE: XLK) pulled back after testing a low of $130.98 and closing back below its 50-day moving average. Current and upper support at $131-$130.50 was breached but held. A move below the latter would signal weakness towards $128.50-$128.
Resistance is at $132.50-$133 followed by $134-$135.
RSI is in a slight downtrend with key support at 50 holding. A close below this level would signal a retest 45-40. Resistance is at 55.
There are two trading days left before March is in the books and I mentioned there could be some end of month selling pressure. It is also a shortened week with the market closed on Friday ahead of the Easter weekend. However, there will be a key report on employment as Good Friday this year isn’t considered a federal holiday.
It’s a fairly rare occurrence and it is only happened 12 times since 1980, with the last time occurring on 2015. This means traders will have to decide weather to stay long or short ahead of the three-day weekend with heightened volatility likely coming on Monday.
Momentum Options Play List
Closed Momentum Options Trades for 2021: 14-3 (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.
Utz Brands (UTZ, $25.01, up $0.65)
UTZ May 25 calls (UTZ210521C00025000, $1.65, up $0.47)
Entry Price: $1.45 (3/29/2021)
Exit Target: $2.90
Stop Target: None
Action: Monday’s peak reached $25.31 with prior and lower resistance at $25.25-$25.50 getting cleared but holding. Fresh support is at $25-$24.75 and the 50-day moving average.
International Game Tech (IGT, $16.04, down $1.38)
IGT April 20 calls (IGT210416C00020000, $0.10, down $0.15)
Entry Price: $0.95 (3/17/2021)
Exit Target: $1.90
Stop Target: None
Action: Shares closed on the session low of $16.04 with key support at $16 holding. Lowered resistance is at $16.25-$16.50.
Ford Motor Company (F, $12.15, down $0.15)
F April 14 calls (F210416C00014000, $0.07, down $0.03)
Entry Price: $0.45 (3/8/2021)
Exit Target: $0.90
Stop Target: None
Action: Yesterday’s low reached $12.06 with upper support at $12.10-$12 getting tripped but holding. Resistance is at $12.30-$12.40.