MomentumOptions.com Pre-Market Update for 4/14/2021

Vaccine News Weighs on Market Momentum

8:00am (EST)

The stock market was mixed on Tuesday after U.S. federal health officials issued for a pause in the rollout of Johnson & Johnson’s (JNJ) coronavirus vaccine following concerns over rare blood clots in some individuals who received the shot. Consumer price inflation was also a little hotter than expectations although the rise was less pronounced when excluding volatile food and energy prices.

Despite the headlines, Tech showed strength while recovering the previous session losses with the broader market rising as well. The blue-chips and small-caps lagged while volatility inched slightly lower ahead of the “official” start to the first quarter earnings season.

The Nasdaq closed at 13,996 (+1.1%) after trading to an afternoon high of 14,011. Prior and lower resistance from mid-February at 14,000-14,150 was breached but held. A move above the latter and the current all-time peak at 14,175 would indicate strength towards 14,200-14,350.

The S&P 500 tested an all-time high of 4,148 while finishing at 4,141 (+0.3%). Unchartered territory and lower resistance at 4,150-4,175 was challenged but held. A close above the latter would suggest ongoing momentum towards 4,200-4,225.

The Russell 2000 tagged a midday low of 2,208 before ending at 2,228 (-0.2%). Prior and upper support at 2,225-2,200 was tripped but held. A drop below the latter would signal a further fade towards 2,175-2,150. Below is a chart of the IWM.

The Dow settled at 33,677 (-0.2%) with the intraday low tagging 33,545 (-0.2%). Near-term and upper support at 33,500-33,250 was challenged but held. A close below the latter would indicate a continued pullback towards 33,000-32,750.

Market Movers

Shares of Bally’s (BALY) dropped 10% after announcing an agreement with U.K. gambling company Gamesys Group that will combine the two companies in a deal valued at nearly $2.8 billion.

Volatility Index

The iPath S&P Vix Short-Term Futures (NYSE: VIX) fell for the fourth time in five sessions despite the opening peak reaching 17.86. Near-term and lower resistance at 17.50-18 was cleared but held for the second-straight session.

The fade to 16.43 afterwards breached but held upper support at 16.50-16. A close below last Friday’s 52-week low at 16.20 would signal weakness towards 15.50-15.

Market Analysis

The S&P 400 Mid Cap Index (NYSE: MID) had its three-session winning streak snapped following the intraday pullback to 2,652. Current and upper support at 2,675-2,650 failed to hold. A move below the latter would indicate additional weakness towards 2,625-2,600.

Key resistance is at 2,700 with the mid-March all-time high at 2,682 that was tagged in back-to-back sessions.

RSI (relative strength index) is in a slight downtrend with key resistance at 60 failing to hold. Continued closes below this level would signal weakness towards 55-50. Resistance is at 65-70.

Sector

The Communication Services Select Sector SPDR (NYSE: XLC) rebounded following the morning run to $77.16. Near-term and lower resistance at $77-$77.50 was tripped but held. A move above the latter and the recent all-time top at $77.39 would suggest a breakout towards $78.50-$79.

Support is at $76.50-$76 followed by $75-$74.50.

RSI has leveled out with lower resistance at 65-70 holding. A close above the latter would indicate additional upside towards 75 and the mid-February high. Support is at 60-55.

Market Outlook

Goldman Sachs Group (GS), JPMorgan Chase (JPM) and Wells Fargo (WFC) will kick off first-quarter earnings season this morning. Goldman is expected to report a profit of $10.22 a share on revenue of $12.6 billion while JPMorgan is forecast to earn $3.09 a share on $30.5 billion. Wells Fargo is estimated to do 70 cents a share on $17.5 billion.

All three stocks are just below their 52-week and all-time highs from mid-March and likely need a beat-and raise quarter for them to a make a run towards prior peaks. If so, the Financial sector could also help the major indexes keep their current momentum going.

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, $25.40, up $0.30)

WU May 26 calls (WU210521C00026000, $0.65, up $0.10)

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

Action: Tuesday’s late day peak reached $25.42 with lower resistance at $25.25-$25.50 getting recovered. Support is at $25.25-$25.

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

EEM May 55 calls (EEM210521C00055000, $0.60, up $0.05)

Entry Price: $1.00 (4/5/2021)
Exit Target: $2.00
Return: -40%
Stop Target: None

Action: Shares traded up to $53.64 with lower resistance is at $53.50-$54 getting cleared but holding. Support remains at $53.25-$52.75.