MomentumOptions.com Pre-Market Update for 4/13/2021

Market Dips As Wall Street Awaits Earnings

8:00am (EST)

The stock market slipped on Monday as Wall Street awaits the start of the first-quarter earnings season that begins midweek. The losses were kept in check following comments from Fed Chairman Powell who reiterated that the central bank will continue to support the recovery until the job is done.

Powell also stressed that a rate increase this year would be highly unlikely and added that it will be a while before the economy gets to the place where the Federal Funds rate can be lifted.

The Russell 2000 closed at 2,233 (-0.4%) after tapping a morning low of 2,222. Near-term and upper support at 2,240-2,220 and the 50-day moving average were breached and levels that failed to hold. A move below the latter would indicate additional weakness towards 2,200-2,180. Below is a chart of the IWM.

The Nasdaq tested a first half low of 13,783 before ending at 13,850 (-0.4%). Current and upper support at 13,800-13,650 was breached but held. A close below the latter would suggest a continued fade towards 13,500-13,350.

The Dow finished at 33,745 (-0.2%) with the afternoon bottom hitting 33,665 (-0.2%). Near-term and upper support at 33,750-33,500 failed to hold. A drop below the latter would signal ongoing weakness towards 33,250-33,000.

The S&P 500 tagged a midday all-time high of 4,131 before settling a point lower at 4,127 (-0.02%). Unchartered territory and lower resistance at 4,130-4,155 was cleared but held. A move above the latter would indicate upside towards 4,175-4,200.

Market Movers

Shares of Nuance Communications (NUAN) soared 16% following news the company will be acquired by Microsoft (MSFT) for $56 per a share. The deal was an all-cash transaction valued at $19.7 billion, including Nuance’s net debt.

Volatility Index

The iPath S&P Vix Short-Term Futures (NYSE: VIX) was up for the first time in four sessions with the intraday peak reaching 17.91. Near-term and lower resistance at 17.50-18 was tripped but held. A move above the latter would suggest a retest towards 19-19.50.

Support is at 16.50-16 with last Friday 52-week low at 16.20.

Market Analysis

The Invesco QQQ Trust (Nasdaq: QQQ) had its three session winning streak snapped following the pullback to $334.73. Fresh and upper support at $335-$334.50 was breached but held. A close below the latter would indicate a further fade towards $333-$332.50.

Resistance is at $337-$337.50 with the mid-February all-time peak at $338.19.

RSI (relative strength indicator) has rolled over with upper support at 65-60 holding. A close below the latter would signal additional weakness towards 55-50. Key resistance is at 70 and a level that has been holding since early December.

Sector

The Energy Select Sector SPDR Fund (NYSE: XLE) extended its losing streak to three-straight sessions with the intraday low kissing $47.64. Current and upper support at $48-$47.50 was clipped and failed to hold. A close below the latter and the 50-day moving average would suggest additional weakness towards $46.50-$46.

Resistance is at $48.50-$49.

RSI remains in a downtrend with upper support at 45-40 failing to hold. A close below the latter would indicate additional weakness towards 35-30 and the late October lows. Resistance is at 50-55.

Market Outlook

With earnings on hold until Wednesday, this morning’s economic news concerning consumer price inflation could have some impact on today’s action. The consumer price index (CPI) is expected to rise by more than 2% year-over-year for the first time since February 2020, as prices begin to rise above last year’s pandemic-pressured levels. The NFIB Small Business Optimism Index is also due out ahead of the opening bell.

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, $25.10, down $0.08)

WU May 26 calls (WU210521C00026000, $0.55, down $0.05)

Entry Price: $0.60 (4/7/2021)
Exit Target: $1.20
Return: -8%
Stop Target: None

Action: Shares tested a low of $25.04 with upper support at $25-$24.75 getting challenged but holding. Resistance remains at $25.25-$25.50.

iShares MSCI Emerging Markets ETF (EEM, $53.23, down $0.32)

EEM May 55 calls (EEM210521C00055000, $0.55, down $0.10)

Entry Price: $1.00 (4/5/2021)
Exit Target: $2.00
Return: -45%
Stop Target: None

Action: Monday’s low touched $53.05 with upper support at $53.25-$52.75 failing to hold. Lowered resistance is at $53.50-$54.