MomentumOptions.com Pre-Market Update for 4/8/2021
Fed Minutes Not Much Impact/ Profit Alert (UTZ)/ Trade Alert (IGT)
The stock market traded in a narrow range ahead of and after the latest meeting minutes from the Federal Reserve before closing mixed on Wednesday. The Fed noted the economy was far from achieving their broad-based goal of maximum employment, suggesting a sharper and more sustained rebound would be needed before policymakers begin to think about tightening.
The S&P 500 made a morning run to 4,083 while settling at a record close of 4,079 (+0.2%). Key resistance at 4,100 was challenged but held for the third-straight session. A move above this level would signal momentum towards 4,125-4,150.
The Dow tested an intraday low of 33,347 before finishing slightly higher at 33,446 (+0.1%). Near-term and upper support at 33,250-33,000 was challenged but easily held. A drop below the the latter would suggest a further pullback towards 32,750-32,500.
The Nasdaq ended at 13,688 (-0.1%) with the opening low reaching 13,653. Current and upper support at 13,600-13,450 was challenged but held. A close below the latter and the 50-day moving average would indicate a further fade towards 13,400-13,250.
The Russell 2000 closed at 2,223 (-1.6%) after tapping a late day low of 2,217. Near-term and upper support at 2,225-2,200 and the 50-day moving average were breached and failed to hold. A move below the latter would signal additional weakness towards 2,175-2,150. Below is a chart of the IWM.
Shares of FibroGen (FGEN) sank 43% after the FDA informed the company that it has tentatively scheduled a Cardiovascular and Renal Drug Advisory Committee on July 15th to review the new drug application for roxadustat. The drug is being developed for the treatment of anemia of chronic kidney disease in both dialysis-dependent and non-dialysis-dependent patients.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was down for the first time in three sessions following the intraday fade to 16.87 and fresh 52-week low. Upper support from February 2020 at 17-16.50 was breached but held. A close below the latter would signal ongoing weakness towards 15.50-15.
Resistance is at 18-18.50 followed by 19.50-20.
The SPDR S&P 500 ETF (NYSE: SPY) was up for the fourth time in five sessions after trading to a high of $406.96. Current and lower resistance at $406.50-$407 was cleared and held. A close above the latter and Tuesday’s all-time peak at $407.24 would indicate additional upside towards $408.50-$409.
Near-term support is at $405.50-$405 followed by $403.50-$403.
RSI (relative strength index) has flatlined with key resistance at 70 holding. A close above this level would suggest a run towards 75-80 and overbought territory from late August/ early September. Support is at 65-60.
The SPDR S&P Homebuilders ETF (NYSE: XHB) had its three-session winning streak snapped following the late day pullback to $71.90. Fresh and upper support at $72-$71.50 was breached but held. A close below the latter would signal additional weakness towards $70.50-$70.
Resistance is at $73-$73.50 with Tuesday’s all-time peak at $73.28.
RSI has rolled over with upper support at 65-60 holding. A close below the latter would suggest additional risk towards 55-50. Resistance is at 70-75 with the latter representing the January peak.
The current action is signaling the market is awaiting the start of first quarter earnings season next week with the major indexes remaining in a possible trading range until the numbers start to come out. The action in the VIX remains a bullish signal along with the pullback in the 10-year treasury yield.
Aside from Tech and the small-caps, the broader market is showing slightly overbought levels. With the Russell 2000 closing below its 50-day moving average, and Tech just 2% above this this technical indicator, there is also the chance of lower lows to end the week.
Regardless, the portfolio will be in great shape with only two open trades heading into next week’s action. If the bulls can hold near-term support levels, April is still looking good for higher highs. There wild card remains the VIX with a close above 20 signaling a possible near-term top.
Momentum Options Play List
Closed Momentum Options Trades for 2021: 15-4 (79%). 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.
Western Union (WU, $25.27, up $0.15)
WU May 26 calls (WU210521C00026000, $0.65, up $0.05)
Entry Price: $0.60 (4/7/2021)
Exit Target: $1.20
Stop Target: None
Action: Shares tested an opening high of $25.35 with current and lower resistance at $25.25-$25.50 getting recovered. Continued closes above $25.50 could lead to a breakout towards the $26-$26.50 area and levels from October 2019. Support is at $25-$24.75.
iShares MSCI Emerging Markets ETF (EEM, $53.57, down $0.80)
EEM May 55 calls (EEM210521C00055000, $0.65, down $0.35)
Entry Price: $1.00 (4/5/2021)
Exit Target: $2.00
Stop Target: None
Action: Wednesday’s low tapped $53.38 with upper support at $53.50-$53 getting breached but holding. Resistance is at $54-$54.50.
Utz Brands (UTZ, $25.28, down $0.53)
UTZ May 25 calls (UTZ210521C00025000, $1.65, down $0.25)
Entry Price: $1.45 (3/29/2021)
Exit Target: $2.90
Stop Target: $1.55 (Stop Limit)
Action: Shares traded to a high of $26.15 with the options tagging $2 before reversing course. The Stop Limit at $1.55 tripped on the fade to $25.18 afterwards with the calls touching a low of $1.54.
Although frustrating, we can look to reestablish a position if the 50-day moving average holds over the next few days.
International Game Tech (IGT, $16.40, down $0.80)
IGT April 20 calls (IGT210416C00020000, $0.05, down $0.05)
Entry Price: $0.95 (3/17/2021)
Exit Target: $1.90
Stop Target: None
Action: Close the trade this morning to save the remaining premium. We can revisit IGT once shares recover and hold $17.50 and the 50-day moving average.