MomentumOptions.com Pre-Market Update for 4/7/2021

Bulls Take a Breather

8:00am (EST)

The stock market traded in a tighter range on Tuesday before ending slightly lower as Wall Street took a breather following Monday’s record-setting rally. The blue-chips and small-caps showed the most weakness despite a strong JOLTS report with job openings climbing 268,000 to 7,370,000 in February.

While this underscored the increasingly good news on the economic recovery and the labor market, Wednesday’s update from the Fed minutes may have also played a role in keeping traders cautious.

The Russell 2000 tagged an opening high of 2,280 before going out at 2,259 (-0.3%). Near-term and lower resistance at 2,275-2,300 was breached but held for the second-straight session. A close above the latter would suggest ongoing strength towards 2,325-2,350 with the mid-March record peak at 2,360. Below is a chart of the IWM.

The Dow traded to an afternoon low of 33,380 before closing at 33,430 (-0.3%). Fresh and upper support at 33,500-33,250 was breached and failed to hold. A move below the the latter would signal a further fade towards 33,000-32,750.

The Nasdaq finished at 13,698 (-0.1%) with the morning high hitting 13,776. Current and lower resistance at 13,750-13,900 was cleared but held. A close above the latter would indicate a retest towards 14,000-14,150 with the mid-February all-time peak at 14,175.

The S&P 500 tagged its fourth-straight all-time high after reaching 4,086 before settling slightly down at 4,073 (-0.1%). Near-term and lower resistance at 4,100-4,125 was challenged but held. A close the latter would suggest additional breakout potential towards 4,150-4,175.

Market Movers

Romeo Power (RMO) surged 60% after announcing a long-term supply agreement with Paccar (PCAR). However, Romeo Power recently noted that global demand for battery cells has sharply outpaced supply, which is driving a cell shortage and was the cause of the roughly 80% cut to their 2021 revenue target.

Volatility Index

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the second-straight session with the intraday peak hitting 18.30. Near-term and lower resistance at 18-18.50 was cleared and held. A close above the latter would indicate a retest towards 19.50-20.

Support is at 17.50-17 with last Friday’s 52-week low at 17.29.

Market Analysis

The Spiders Dow Jones Industrial Average ETF (NYSE: DIA) was down for the first time in three sessions with the afternoon low tapping $333.78. Current and upper support at $334-$333.50 was tripped but held. A close below the latter would signal weakness towards the $332.50-$332 area.

Resistance is at $335.50-$336 with Monday’s all-time top at $336.15.

RSI is in a slight downtrend with key support at 65 holding. A move below this level would indicate additional weakness towards 60-55. Key resistance is at 70 and a level that has been holding since last November.

Sector

The Health Care Select Sector SPDR Fund (NYSE: XLV) remains in a six-session trading range with the intraday low reaching $116.58. Near-term and upper support at $117-$116.50 failed to hold. A close below the latter would signal weakness towards $115.50-$115 and the 50-day moving average.

Resistance is at $117.50-$118 with the late January all-time high at $118.99.

RSI is in a slight downtrend with upper support at 55-50 holding. A close below the latter would indicate additional weakness towards 45-40 and levels from early March. Resistance is at 60-65.

Market Outlook

The market could be a bit more volatile in the afternoon once the Fed minutes are released as inflation worries are on the rise. This has led to some speculation that the Fed may be forced to temper its ultra-accommodative policy sooner than policymakers are predicting. The bond market will be the key in today’s late action with many traders focusing on the 10-year yield.

Momentum Options Play List

Closed Momentum Options Trades for 2021: 14-4 (78%). 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.

iShares MSCI Emerging Markets ETF (EEM, $54.37, up $0.30)

EEM May 55 calls (EEM210521C00055000, $1.00, up $0.05)

Entry Price: $1.00 (4/5/2021)
Exit Target: $2.00
Return: 0%
Stop Target: None

Action: Tuesday’s high touched $54.60 with prior and lower resistance from mid-March $54.50-$55 getting breached but holding. A close above the latter and the 50-day moving average would be a bullish development for additional upside towards $55.50-$56. Support is at $54-$53.50.

Utz Brands (UTZ, $25.81, up $0.30)

UTZ May 25 calls (UTZ210521C00025000, $1.90, up $0.15)

Entry Price: $1.45 (3/29/2021)
Exit Target: $2.90
Return: 31x%
Stop Target: $1.55 (Stop Limit)

Action: Set an initial Stop Limit at $1.55 to start protecting profits and to avoid a loss.

Shares tagged a high of $25.88 with prior and lower resistance at $25.75-$26 getting recovered. A close above the latter would likely signal additional strength towards $26.25-$26.50. Support remains at $25.25-$25 and the 50-day moving average.

International Game Tech (IGT, $17.20, up $0.67)

IGT April 20 calls (IGT210416C00020000, $0.10, unchanged)

Entry Price: $0.95 (3/17/2021)
Exit Target: $1.90
Return: -89%
Stop Target: None

Action: Yesterday’s peak hit $17.25 with lower resistance at $17.25-$17.50 getting kissed but holding. Slightly rising support is at $16.75-$16.50.