MomentumOptions.com Pre-Market Update for 4/27/2021

Bulls Regain Momentum

8:00am (EST)

The stock market showed continued strength on Monday ahead of the busiest week for first-quarter earnings and the start of the Fed’s two-day policy meeting. For the S&P 500 companies that have reported results thus far, 84% have topped estimates and would represent the highest number recorded if this trend holds.

Wall Street is expecting the Federal Reserve will remain ultra-accommodative and is not really looking for any surprises or significant changes in the outlook versus March. Meanwhile, volatility was slightly higher despite the higher market close after failing to hold a key level of support for the sixth-straight session.

The Russell 2000 tested a midday high of 2,302 before closing at 2,298 (+1.2%). Prior and lower resistance from early March at 2,300-2,325 was breached but held. A rise above the latter would signal momentum towards 2,350-2,375 with the all-time peak at 2,360. Below is a chart of the IWM.

The Nasdaq tapped an intraday peak of 14,154 while finishing at 14,138 (+0.9%). Key resistance at 14,150 was cleared but held. A close above this level and the record high at 14,175 would indicate a breakout towards 14,250-14,400.

The S&P 500 made a run to 4,194 before ending at 4,187 (+0.2%). Key resistance at 4,200 was challenged but held for the second-straight session. A move above this level would suggest ongoing strength towards 4,225-4,250 and fresh record highs.

The Dow settled in the red at 33,981 (-0.2%) with the late day low tagging 33,941. Near-term and upper support at 34,000-33,750 failed to hold. A drop below the latter would signal weakness towards 33,500-33,250.

Market Movers

Proofpoint (PFPT) shares surged 31% after the company agreed to be acquired by Thoma Bravo for $176 a share in cash that values the company at roughly $12.3 billion. Proofpoint also reported better-than-expected first-quarter earnings and revenue but suspended its 2021 financial guidance.

Volatility Index

The iPath S&P Vix Short-Term Futures (NYSE: VIX) continued its seesaw action after testing a first half low of 16.87. Upper support at 17-16.50 was breached but held for the sixth-straight session.

The bounce to 18.17 afterwards cleared bit held lower resistance at 18-18.50.

Market Analysis

The Spiders Dow Jones Industrial Average ETF (NYSE: DIA) was down for the second time in three sessions with the low hitting $339.39. Current and upper support at $339.50-$339 was tripped but held. A close below the latter would signal weakness towards the $375.50-$337 area.

Resistance is at $341.50-$342 with the all-time peak from earlier this month at $342.43.

RSI is in a slight downtrend with key resistance at 60 holding. A move below this level would indicate additional weakness towards 55-50. Resistance is at 65-70.

Sector

The Dow Jones Transportation Average (NYSE: TRAN) tested a fresh all-time high of 15,257 before closing slightly lower. Unchartered territory and key resistance at 15,250 was breached but held. A close above this level would indicate additional momentum towards 15,350-15,500.

Current support is at 15,00-14,850. A close below 14,750 would signal a possible near-term top.

RSI has leveled out with upper support at 65-60 holding. A close below the latter would signal weakness strength towards 55-50 and early March lows. Key resistance is at 70.

Market Outlook

We were able to close another winning trade yesterday to get the track record to 17-4 for 2021 with a nice 52% winner. I’m still looking for a profit with our current position and would like to open another new trade this week. There are couple at the top of my list that have earnings this week so there may be an opportunity once the news is out of the way.

One of them is Good Year Tire & Rubber (GT) with numbers due out on Friday. The other is Levi Strauss (LEVI) if shares clear the $30 level. As usual, if I take action, I will send out a Trade Alert.

Momentum Options Play List

Closed Momentum Options Trades for 2021: 17-4 (81%). 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.

iShares MSCI Emerging Markets ETF (EEM, $54.70, up $0.07)

EEM May 55 calls (EEM210521C00055000, $0.80, unchanged)

Entry Price: $1.00 (4/5/2021)
Exit Target: $2.00
Return: -20%
Stop Target: None

Action: Shares tested an intraday day high of $54.75 with prior and lower resistance from early March at $54.75-$55.25 getting breached but holding. Support is at $54.25-$53.75 and the 50-day moving average.