MomentumOptions.com Pre-Market Update for 4/16/2021
Bulls Continue to Push Record Highs
The stock market showed continued strength on Thursday as encouraging economic news and better-than-expected earnings pushed the major indexes towards new all-time highs and prior resistance levels. Specifically, a much stronger than expected report on consumer spending and a sharp improvement in the number of new jobless claims fueled bullish sentiment.
The Nasdaq tested a late day peak of 14,049 before ending at 14,038 (+1.3%). Prior and lower resistance from early February at 14,000-14,150 was recovered. A close above the latter and the all-time high at 14,175 would indicate additional strength towards 14,200-14,350.
The S&P 500 tapped another record high of 4,173 before settling at 4,170 (+1.1%). Fresh and lower resistance at 4,150-4,175 was cleared and held. A close the latter would suggest ongoing momentum towards 4,200-4,225.
The Dow traded to a new all-time high of 34,068 before finishing at 34,035 (+0.9%). Unchartered territory and lower resistance at 34,000-34,250 was breached and held. A pop above the latter would signal additional upside towards 34,250-34,500.
The Russell 2000 tagged an opening high of 2,264 before closing at 2,255 (+0.3%). Near-term and lower resistance at 2,250-2,275 was cleared and held. A close above the latter would indicate ongoing strength towards 2,300-2,325 with the mid-March record peak at 2,360. Below is a chart of the IWM.
Shares of Dell Technologies (DELL) added nearly 7%% after announcing an agreement on the planned spin-off of its 81% equity ownership interest in VMware (VMW). At the transaction closing, VMware will distribute a special cash dividend of $11.5-$12 billion to all VMware shareholders, including Dell Technologies. Based on the transaction, Dell Technologies would receive approximately $9.3-$9.7 billion and intends to use the net proceeds to pay down debt.
The iPath S&P Vix Short-Term Futures (NYSE: VIX) was down for the second time in three sessions after testing an intraday low of 15.94. Near-term and upper support at 16-15.50 was breached but held. A close below the latter would suggest weakness towards 15-14.50.
Resistance at 17-17.50 with a close above 18 being a slightly bearish signal.
The Spiders Dow Jones Industrial Average ETF (NYSE: DIA) was up for the second-straight session with the afternoon all-time peak reaching $340.72. Unchartered territory and lower resistance at $340.50-$341 was tripped but held. A close above the latter would signal ongoing strength towards the $342.50-$343 area.
Slightly rising support is at $339-$338.50 followed by $337-$336.50.
RSI is in a slight uptrend with key resistance at 75 holding. A move above this level would indicate additional upside towards 80 and prior peak from June 2020. Support is at 70-65.
The Materials Select Sector Spider Fund (NYSE: XLB) was also up for the second-straight session and for the fifth time in six with the intraday record high hitting $81.82. Fresh and lower resistance at $81.50-$82 was breached and held. A close above the latter would indicate momentum towards $83-$83.50.
Support is at $81-$80.50 followed by $79.50-$79.
RSI is in an uptrend with lower resistance at 65-70 getting cleared and holding. A close above the latter would suggest further upside towards 75 and the high from early January. Support is at 60-55.
A closer look at the major indexes are showing slightly overbought levels in the Dow and S&P 500 with relative strength above 70 for both. The Nasdaq and the Russell 2000 still have room to go so I would expect them to outperform over the near-term.
As far as our current trades, I still like them but have made an adjustment to Western Union. As far as new action, I like Archer-Daniels-Midland Company (ADM) and could have an update on getting in today or on Monday as shares could be on the verge of a breakout.
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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, $25.76, up $0.18)
WU May 26 calls (WU210521C00026000, $0.75, up $0.05)
Entry Price: $0.60 (4/7/2021)
Exit Target: $1.20
Stop Target: 62 cents (Stop Limit)
Action: Set an initial Stop Limit at 62 cents to start protecting profits and to avoid a loss.
Shares traded to another fresh 52-week high of $26.16 with the options reaching a peak of 96 cents. Longer-term and lower resistance at $26-$26.25 was cleared but held. A close above the latter would signal continued upside towards $26.50-$26.75. Rising support is at $25.50-$25.25.
I was a tad disappointed shares couldn’t hold the $26 level yesterday but hopefully they can today. I still think a run towards $26.50 is in the mix, and if reached, should get us a double from our entry price. However, I set a Stop Limit just in case shares fade from current levels.
iShares MSCI Emerging Markets ETF (EEM, $54.21, up $0.49)
EEM May 55 calls (EEM210521C00055000, $0.75, up $0.10)
Entry Price: $1.00 (4/5/2021)
Exit Target: $2.00
Stop Target: None
Action: Thursday’s intraday top reached $54.26 with near-term and lower resistance is at $54.25-$54.75 getting cleared but holding. A close above the latter and the 50-day moving average would be a bullish development. Rising support is at $53.50-$53.