MomentumOptions.com Pre-Market Update for 4/5/2021
S&P 500 Clears 4,000 Level/ Trade Alert (F)
The stock market showed continued momentum on Thursday as the major indexes started off April with solid gains. Better-than-expected economic news and fresh details of President Biden’s $2.3 trillion infrastructure plan fueled bullish sentiment.
Technology led the surge higher with the Nasdaq clearing and holding a key level of resistance while the S&P 500 set another all-time closing high. The blue-chips are also on the verge of fresh record highs as volatility fell to its lowest level since February 2020.
The Nasdaq settled at 13,480 (+1.8%) after trading to a second half high of 13,487 while closing back above its 50-day moving average. Prior and lower resistance at 13,450-13,600 was cleared and held. A close above the latter would suggest additional momentum towards 13,650-13,800.
The Russell 2000 finished on its session peak of 2,253 (+1.5%). Prior and lower resistance at 2,250-2,275 was recovered. A move above the latter would signal additional upside towards 2,300-2,325. Below is a chart of the IWM.
The S&P 500 closed at 4,019 (+1.2%) with the new intraday record high hitting 4,020. Unchartered territory and lower resistance at 4,000-4,025 was cleared and held. A pop the latter would indicate ongoing strength towards 4,050-4,075.
The Dow made an late day run to 33,167 before ending at 33,153 (+0.5%). Near-term and lower resistance at 33,000-33,250 was recovered. A close above the latter and the all-time high of 33,259 would suggest a breakout towards 33,500-33,750.
Shares of Velodyne Lidar (VLDR) jumped 12% after the company announced a multi-year agreement with AGM Systems, which provides analysis of air and mobile mapping data.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) extended its losing streak to three-straight sessions after tapping a fresh 52-week low of 17.29. Upper support from February 2020 at 17.50-17 was breached and held. A close below the latter would indicate ongoing weakness towards 16-15.50.
Lowered resistance is at 18-18.50 followed by 19.50-20.
The S&P 400 Mid Cap Index (NYSE: MID) was up for the third-straight session after closing on the session high of 2,647. Prior and lower resistance at 2,625-2,650 was recovered. A move above the latter would indicate additional strength towards 2,675-2,700 with the mid-March double top all-time high at 2,682.
Fresh support is at 2,600-2,575 followed by 2,550-2,525 and the 50-day moving average.
RSI (relative strength index) is in an uptrend with key resistance at 60 holding. A move above this level would signal strength towards 65-70 and the latter holding since mid-February. Support is at 55-50.
The Dow Jones Transportation Average (NYSE: TRAN) rebounded with the intraday high hitting 14,754. Key resistance at 14,750 was breached but held. A close above this level would indicate additional momentum towards 14,850-15,000 and fresh all-time highs.
Current support is at 14,650-14,500.
RSI is in a slight uptrend with key resistance at 70 holding. A close above this level would signal additional strength towards 75-80 and the highs from last August. Support is at 60.
The stock market has ended April higher in 14 out of the past 15 years, and since 1950, it has been the second best month for stocks. Heading into the second quarter, sector leadership has moved strongly in favor of cyclical and value stocks, and away from Tech, for the most part. A lot of this has to do with the broad-based reopening of business across the U.S. economy.
The Energy, Financials and Industrials sectors have outperformed year-to-date, while last year’s winners such as the Technology and Communication Services sectors have lagged by comparison. While analysts believe this trend will continue this quarter, the strong moves in the Nasdaq (and small-caps) last week shouldn’t be ignored.
The first quarter earnings season will begin in the next week or so and the catalyst for higher highs and a breakout to continued all-time highs look good. The one warning sign of trouble ahead will be if the VIX starts to move back up and clears the 20 level. On that note, I could have new trades as early as today so stay locked-and-loaded in case I take action.
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, $25.00, up $0.21)
UTZ May 25 calls (UTZ210521C00025000, $1.50, unchanged)
Entry Price: $1.45 (3/29/2021)
Exit Target: $2.90
Stop Target: None
Action: Shares kissed a high reached $25.06 with lower resistance at $25-$25.25 getting cleared and holding. A close above the latter and last week’s peak at $25.31 should get the $26 area back in play. Support is at $24.75-$24.50 and the 50-day moving average.
International Game Tech (IGT, $16.85, up $0.80)
IGT April 20 calls (IGT210416C00020000, $0.10, unchanged)
Entry Price: $0.95 (3/17/2021)
Exit Target: $1.90
Stop Target: None
Action: Thursday’s high reached $17.12 with prior and lower resistance at $17-$17.25 getting cleared but holding. New support is at $16.50-$16.25.
The catalyst for this trade was the enormous call buying on the day we entered this position but momentum quickly faded afterwards. These options expire in 11 days so we will need to see some nice pin action and a recovery of the 50-day moving average early this week for this trade to have any chance of a comeback.
Ford Motor Company (F, $12.17, down $0.08)
F April 14 calls (F210416C00014000, $0.05, down $0.02)
Entry Price: $0.45 (3/8/2021)
Exit Target: $0.90
Stop Target: None
Action: Close the trade this morning to save the remaining premium.
The only catalyst that might help this trade would be this month’s earnings’s announcement which will come after these call options expire. Although the percentage loss looks nasty, these were cheap options that failed to rebound as shares remains in a tight trading range. If shares rebound in the month’s ahead, and can recover the $13 level, perhaps will will revisit Ford.