MomentumOptions.com Pre-Market Update for 4/12/2021

Bulls Get Weekly Win Although Small-Caps Slack

8:00am (EST)

The stock market closed mostly higher on Friday despite a choppy open with the major indexes closing out a solid week of gains. Tech recovered earlier losses to trade in positive territory while the small-caps danced in the red for most of the session before edging slightly higher into the closing bell.

The strong showing remains a bullish development ahead of the official start for the first-quarter earnings season with record highs and previous resistance levels back in play. Traders seem to believe earnings will be much better than forecasts and will provide some justification of current valuation levels.

The Dow tagged an intraday and all-time high of 33,810 before settling at 33,800 (+0.9%). Unchartered territory and lower resistance at 33,750-34,000 was cleared and held. A close above the latter would suggest ongoing momentum towards 34,250-34,500.

The S&P 500 tapped a fresh record peak of 4,129 before going out at 4,128 (+0.8%). Fresh and lower resistance at 4,125-4,150 was cleared and held. A move above this level keeps upside towards 4,175-4,200 in focus.

The Nasdaq traded to an afternoon high of 13,905 while closing at 13,900 (+0.5%). Prior and lower resistance from early February at 13,850-14,000 was recovered. A close above the latter would indicate a possible run towards 14,100-14,250 with the all-time peak at 14,175.

The Russell 2000 tested an opening low of 2,231 before finishing at 2,243 (+0.04%) while holding its 50-day moving average for the second-straight session. Near-term and upper support at 2,225-2,200 was challenged but held. A close below the latter would signal a backtest towards 2,175-2,150. Below is a chart of the IWM.

Market Movers

FuboTV (FUBO) shares rallied nearly 12% following news it has acquired the exclusive live streaming rights to the Qatar World Cup 2022 Qualifying matches of the South American Football Confederation.

Volatility Index

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) fell for the third-straight session with the fresh 52-week low hitting 16.20. Upper support at 16.50-16 was breached but held. A move below the latter would indicate ongoing weakness towards 15.50-15.

Lowered resistance is at 17-17.50 followed by 18.50-19.

Market Analysis

The Wilshire 5000 Composite Index (NYSE: WLSH) was up for the sixth time in seven sessions with the intraday and new record high tapping 43,290. Uncharted territory and lower resistance at 43,250-43,500 was cleared and held. A move above the latter would indicate ongoing momentum towards 43,750-44,000.

Support is at 43,000-42,750.

RSI (relative strength index) is in an uptrend with key resistance at 70 holding. A close above this level would signal strength towards 75 and the high from January. Support is at 65-60.

Sector

The Spider S&P Retail ETF (NYSE: XRT) rose for the second-straight session with the late day peak reaching to $92.24. Prior and lower resistance from mid-March at $92-$92.50 was recovered. A close above the latter would suggest additional strength towards $93.50-$94.

Support is at $91.50-$91 followed by $90-$89.50.

RSI is in a uptrend with lower resistance at 60-65 getting cleared and holding. A close above the latter would suggest upside towards 70-75 and the March highs. Support is at 55-50.

Market Outlook

There could be some choppiness heading into midweek as the market awaits earnings from the Financial sector starting on Wednesday. Fastenal (FAST) is the only noteworthy name announcing before then on Tuesday morning. With that said, it appears there could be continued market momentum for another two weeks before a possible top. However, the tax deadline has moved into mid-May this year from April and usually when there is monthly weakness.

A good signal for market bullishness remains the VIX which could trade to and below the 15 level over the near-term. With the major indexes pushing all-time highs, it is typical to see volatility test the mid to low teens. A slight warning sign on when to lighten up bullish trades will be when the VIX closes back above the 19.50-20 area.

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, $25.19, up $0.14)

WU May 26 calls (WU210521C00026000, $0.60, up $0.05)

Entry Price: $0.60 (4/7/2021)
Exit Target: $1.20
Return: 0%
Stop Target: None

Action: Friday’s peak reached $25.20 with lower resistance at $25.25-$25.50 getting challenged but holding. The March 52-week high hit $25.73 and a level I would like to see cleared this week. Support is at $25-$24.75.

iShares MSCI Emerging Markets ETF (EEM, $53.55, down $0.46)

EEM May 55 calls (EEM210521C00055000, $0.65, down $0.20)

Entry Price: $1.00 (4/5/2021)
Exit Target: $2.00
Return: -35%
Stop Target: None

Action: Shares tagged a low of $53.37 with upper support at $53.50-$53 getting breached but holding. Resistance is at $54-$54.50 and the 50-day moving average.