MomentumOptions.com Pre-Market Update for 5/14/2021

Bulls Snap Three-Session Losing Streak

8:00am (EST)

The stock market bounced back on Thursday to snap a three-session slide despite rising producer prices. Specifically, the Producer Price Index came in above expectations with April gains of 0.6% for the headline and 0.7% for the core.

The market seemed willing to assume the inflation surge may be transitory but something to keep an eye on. The rebound wasn’t enough to offset the previous session losses and the major indexes are still showing heavy losses for the week.

The Russell 2000 tested a morning peak of 2,185 before ending at 2,170 (+1.7%). Fresh and lower resistance at 2,175-2,200 was cleared but held. A close above the latter would signal ongoing strength towards 2,225-2,250 and the 50-day moving average. Below is a chart of the IWM.

The Dow traded up to 34,181 before closing at 34,021 (+1.3%). New and lower resistance at 34,000-34,250 was cleared and held. A move above the latter would indicate additional upside towards 34,500-34,750.

The S&P 500 settled at 4,112 (+1.2%) after making an intraday run to 4,131. Current and lower resistance at 4,125-4,150 was breached but held. A pop above the latter would signal a retest towards 4,175-4,200.

The Nasdaq finished at 13,124 (+0.7%) with the high hitting 13,247. Near-term and lower resistance at 13,250-13,400 was cleared but held. A move above the latter would suggest additional strength towards 13,500-13,650 and the 50-day moving average.

Market Movers

Shares of Sonos (SONO) rose 7% after announcing better-than-expected numbers. The company reported a profit of 31 cents a share on revenue of $333 million versus forecasts for a loss of 22 cents on sales of $248 million. Sonos also raised it 2021 outlook for revenue to $1.625-$1.675 billion from $1.525-$1.575 billion.

Volatility Index

The Volatility Index (VIX) fell for the first time in four sessions despite tapping an opening high of 28.93. Lower resistance from late February at 28.50-29 was cleared but held.

The tumble to 22.23 afterwards breached upper support at 22.50-22 but a level that held. The close back below the 200-day moving average was a slightly bullish signal heading into today’s session.

Market Analysis

The Spider Small-Cap 600 ETF (NYSE: SLY) traded to an intraday high of $94.68. Near-term and lower resistance at $94.50-$95 was breached but held. A close above the latter and the 50-day moving average would be a more bullish development with additional strength towards $96-$96.50.

Shaky support is at $93-$92.50.

RSI (relative strength indicator) is back in an uptrend with lower resistance at 45-50 getting recovered. A move above the latter would suggest additional upside risk towards 55-60. Key support is at 40.

Sector

The Technology Select Sector Spider Fund (NYSE: XLK) rose for the first time in four sessions after testing a high of $134.24. Fresh and lower resistance at $134-$134.50 was tripped but held. A move above the latter would suggest a retest towards $135.50-$136 and the 50-day moving average.

Support is at $132.50-$132 followed by $131-$130.50.

RSI is in a slight uptrend with key resistance at 40 holding. Continued closes above this level would signal strength towards 45-50. Support is at 35-30.

Market Outlook

The major indexes failed to recover Wednesday’s highs with the candlesticks showing an inside day on the charts. This is a short-term price pattern obviously but can indicate consolidation or lower price volatility. Futures were up after midnight and it will be important for the major indexes to continue making higher highs during today’s session. Otherwise, lower lows could come into play with continued weakness into next week.

The Dow and S&P 500 held their 50-day moving average despite this week’s pullback and it would be nice to see the Tech and the small-caps recover theirs ahead of the weekend. An extended rally ahead of the weekend could get the VIX back towards 20 and would also be an ongoing bullish development.

Momentum Options Play List

Closed Momentum Options Trades for 2021: 17-6 (74%). 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, $24.70, up $0.14)

WU June 26 calls (WU210618C00026000, $0.35, unchanged)

Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -46%
Stop Target: None

Action: Yesterday’s peak reached $24.93 with current and lower resistance at $24.75-$25 getting cleared but holding. A close above $25.25 and the 50-day moving average would be a better indication of a near-term bottom. Support is at $24.50-$24.25.

Intel (INTC, $54.01, up $0.39)

INTC June 60 calls (INTC210618C00060000, $0.35, unchanged)

Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -46%
Stop Target: None

Action: Lower resistance at $54-$54.50 was recovered on Thursday’s bounce to $54.39. However, I would like to see a close back above $56 over the near-term to ensure the recent selling pressure has abated. Key support remains at $53.50 and the 200-day moving average.

Utilities Select Sector SPDR Fund (XLU, $65.59, up $1.24)

XLU June 69 calls (XLU210618C00069000, $0.35, up $0.15)

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

Action: Shares tagged a high of $65.98 with current and lower resistance at $65.50-$66 getting recovered. Support remains at $65-$64.50 and the 50-day moving average.