MomentumOptions.com Pre-Market Update for 5/12/2021

Nasdaq Recovers Early Losses

8:00am (EST)

The stock market showed continued weakness on Tuesday with all of the major indexes down for the session as inflation fears remained a key concern. However, the Nasdaq’s recovery from an intraday 2% pullback into positive territory was a slight silver-lining.

It remains to been seen if the recovery off the lows was a temporary head fake but we will find out quickly with Wednesday’s update on the Consumer Price Index. This economic news provides a snapshot of prices paid by consumers for retail goods and will likely set the tone for a market recovery or another round of fresh lows.

The Nasdaq tested a morning low of 13,107 before ending at 13,389 (-0.1%). Prior and upper support from mid-March at 13,250-13,100 was breached but held. A close below the latter would signal further weakness towards 13,000-12,850.

The Russell 2000 settled at 2,206 (-0.3%) after tapping a first half low of 2,157. Upper support from late April at 2,175-2,150 was tripped but held. A move below the latter would indicate a further fade towards 2,125-2,100. Below is a chart of the IWM.

The S&P 500 tagged an intraday low of 4,111 while closing at 4,152 (-0.9%). Prior and upper support from early April at 4,125-4,100 was breached but held. A drop below the latter would suggest ongoing weakness towards 4,050-4,075.

The Dow finished at 34,269 (-1.4%) with the morning low kissing 34,075. Fresh and upper support at 34,250-34,000 was violated but held. A close below the latter would signal a retest towards 33,750-33,500.

Market Movers

Shares of Roblox (RBLX) surged 21% despite missing Wall Street’s earnings expectations. The company reported a loss of 46 cents a share on revenue just below $387 million versus forecasts for a profit of 13 cents and $504 million in sales.

Volatility Index

The Volatility Index (VIX) was up for the second-straight session after surging to a high of 23.73. Early March and lower resistance at 23.50-24 and the 200-day moving average were breached but levels that held. A close above the latter would indicate further upside towards 25.40-26.

Fresh support is at 21.50-21 followed by 20-19.50 and the 50-day moving average.

Market Analysis

The Invesco QQQ Trust (Nasdaq: QQQ) was down for the second-straight session after touching a low of $319.02. New and upper support at $319.50-$319 was breached but held. A close below the latter level would indicate additional weakness towards $318-$317.50.

Resistance is at $325.50-$326 and the 50-day moving average.

RSI (relative strength indicator) is trying to level out with key support at 40 holding. A close below this level would signal additional weakness towards 35-30 and levels from early March. Resistance is at 45-50.

Sector

The iShares MSCI Emerging Markets ETF (NYSE: EEM) also fell for the second-straight session after tapping an intraday low of $52.66. Prior and upper support from late March at $53-$52.50 was breached but held. A close below the latter would would signal further weakness towards $51.50-$51.

Resistance is at $54-$54.50 and the 50-day moving average.

RSI is in a downtrend with upper support at 45-40 holding. A close below the latter would signal weakness towards 35 and the March low. Resistance is at 50.

Market Outlook

The VIX closed above 20 for the first time in 30 trading sessions, or for the first time since late March. It was a slightly bullish signal the index held its 200-day moving average but a close above this level would like lead to more nervousness and lower lows for the market.

Futures were also lower after midnight by roughly 1% and ahead of the CPI report due out at 8:30am, an hour before the market opens. It will be hard for the talking heads to spin a terrible report as it will confirm inflation is coming sooner rather than latter. Additionally, middle East tensions remain high and could also be a factor in today’s action.

Momentum Options Play List

Closed Momentum Options Trades for 2021: 17-5 (77%). 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, $25.50, down $0.30)

WU June 26 calls (WU210618C00026000, $0.60, down $0.10)

Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -8%
Stop Target: None

Action: Tuesday’s low tapped $25.33 with upper support is at $25.50-$25.25 getting breached but holding. Resistance remains at $25.75-$26.

Intel (INTC, $55.04, down $0.93)

INTC June 60 calls (INTC210618C00060000, $0.45, down $0.15)

Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -31%
Stop Target: None

Action: Shares tested a low of $54.30 with prior and upper support from late January at $54.50-$54 getting breached but holding. Lowered resistance is at $55.50-$56.

Utilities Select Sector SPDR Fund (XLU, $65.89, down $0.82)

XLU June 69 calls (XLU210618C00069000, $0.35, down $0.20)

Entry Price: $0.65 (5/3/2021)
Exit Target: $1.30
Return: -46%
Stop Target: None

Action: Shares had their 3-session winning streak snapped on the pullback to $65.43. Current and upper support at $65.50-$65 was breached but held. Resistance is at $66-$66.50.