MomentumOptions.com Pre-Market Update for 4/20/2021
Bears Get Rare April Win
The stock market retreated from last week’s record highs after trading in negative territory throughout Monday’s session. Some of the nervousness was attributed to a rise in the 10-year Treasury yield which topped 1.6% and the weekend plunge in Bitcoin.
Specifically, Bitcoin sank as much as 15% on Sunday, and other major coins like Ether also tumbled. Additionally, a busy week for first-quarter earnings caused a slight pause in the action as investors await the next round of results from a number of major companies.
The Russell 2000 finished at 2,232 (-1.6%) and back below its 50-day moving average with the morning low reaching 2,219. Prior and upper support at 2,225-2,200 was breached but held. A close below the latter would likely lead to a further pullback towards 2,175-2,150. Below is a chart of the IWM.
The Nasdaq hit an afternoon low of 13,842 while closing at 13,914 (1%). Near-term and upper support at 13,900-13,750 was tripped but held. A drop below the latter would signal a retest towards 13,650-13,500.
The S&P 500 ended at 4,163 (-0.5%) after testing a low of 4,150. Fresh and upper support at 4,150-4,125 was breached but held. A move below the latter would suggest additional weakness towards 4,100-4,075.
The Dow tapped an intraday low of 33,980 before settling at 34,077 (-0.4%). New and upper support at 34,000-33,750 was clipped but held. A close below the latter would indicate a further fade towards 33,500-33,250.
Shares of Peloton (PTON) fell 7% after the U.S. Consumer Product Safety Commission issued release over the weekend about the danger of the Peloton Tread+ exercise machine following multiple incidents of small children and a pet being injured.
The iPath S&P Vix Short-Term Futures (NYSE: VIX) rose for the first time in three sessions following the intraday bounce to 18.61. Prior and lower resistance from the start of the month at 18.50-19 was breached but held. A move above the latter would indicate additional strength towards 20-20.50 and the 50-day moving average.
Support is at 17.50-17.
The iShares Russell Growth 1000 ETF (NYSE: IWF) was down for just the second rime in 13 sessions with the first half low tapping $258.31. Fresh and upper support at $258.50-$258 was clipped but held. A move below the latter would suggest further risk towards $257-$256.50.
Resistance is at $261-$271.50 with last Friday’s all-time peak at $261.80.
RSI is in a downtrend with upper support at 65-60 holding. A close below the latter would suggest additional weakness towards 55-50 and levels from late March. Resistance is at 70-75.
The Industrials Select Sector SPDR Fund (NYSE: XLI) had its three session winning streak snapped a following the intraday pullback to $100.22. New and upper support at $100.50-$100 was breached but held. A close below the latter would indicate a retest towards $99-$98.50.
Resistance is at $101-$101.50 with last Friday’s record high at $101.80.
RSI is back in a slight downtrend with upper support at 65-60 holding. A close below the latter would indicate risk towards 55-50 in play. Key resistance is at 70 and a level that has been golding since early September.
Monday’s pullback was not too surprising given the slightly overbought levels I have been mentioning. However, the surge in volatility past 18 needs to be monitored. I still believe higher highs for the major indexes are in store for the rest of the month, and possibly into May, but a close above 20 would be the first sign to lighten up on bullish positions.
Our current positions held up well on Monday and there are possibly one or two more new trades that I have on my Watch List for this week. One of them is Ford (F) if shares fall below $12 and hold the $11.75-$11.50 area. The close below the 50-day moving average on Monday is still signaling some downside action so we need to be a tad patient before possibly taking action.
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.
Archer Daniels Midland Company (ADM, $59.29, down $0.16)
ADM May 60 calls (ADM210521C00060000, $1.20, down $0.10)
Entry Price: $1.15 (4/16/2021)
Exit Target: $2.30
Stop Target: None
Action: Monday’s low tapped $58.86 with upper support at $59-$58.50 getting breached but holding. Resistance is at $59.50-$60.
Western Union (WU, $26.15, up $0.
WU May 26 calls (WU210521C00026000, $0.90, up $0.10)
Entry Price: $0.60 (4/7/2021)
Exit Target: $1.20
Stop Target: 66 cents, raise to 72 cents (Stop Limit)
Action: Raise the Stop Limit from 66 cents to 72 cents.
Shares tagged a fresh 52-week high of $26.24 with current and lower resistance at $26-$26.25 getting cleared and holding. A close above the latter and would suggest continued strength towards $26.50-$26.75. Rising support is at $25.75-$25.50.
iShares MSCI Emerging Markets ETF (EEM, $54.15, down $0.20)
EEM May 55 calls (EEM210521C00055000, $0.70, down $0.10)
Entry Price: $1.00 (4/5/2021)
Exit Target: $2.00
Stop Target: None
Action: Shares traded down to $53.96 with upper support at $54-$53.50 getting tripped but holding. Resistance is at $54.50-$55 and the 50-day moving average.