MomentumOptions.com Pre-Market Update for 5/17/2021

Volatility Closes Back Below 20

8:00am (EST)

The stock market showed continued strength on Friday but still posted a weekly loss following three days of heavy selling pressure to start the week. Slightly better earnings results and dip buying drove bullish sentiment and led to a drop in volatility.

Specifically, the volatility index closed back below the 20 level and was a bullish development following a spike above its 200-day moving average in back-to-back sessions.

The Russell 2000 settled at 2,224 (+2,5%) after tapping an afternoon high of 2,226. Prior and lower resistance at 2,225-2,250 was cleared but held. A move above the latter and the 50-day moving average would suggest additional upside towards 2,275-2,300. Below is a chart of the IWM.

The Nasdaq traded to an intraday peak of 13,460 before closing at 13,429 (+2.3%). Fresh and lower resistance at 13,400-13,550 was recovered. A close above the latter and the 50-day moving average would indicate ongoing strength towards 13,600-13,750.

The S&P 500 soared to an intraday peak of 4,183 while finishing at 4,173 (+1.5%). Current and lower resistance at 4,175-4,200 was cleared but held. A close above the latter would signal further upside towards 4,225-4,250 with the current all-time peak at 4,238.

The Dow ended at 34,382 (+1.1%) with the intraday high hitting 34,454. Near-term and lower resistance at 34,250-34,500 was breached and held. A pop above the latter would suggest a retest towards 34,750-35,000 with last Monday’s record peak at 35,091.

Market Movers

Shares of Disney (DIS) slipped nearly 3% following mixed earnings. The company reported a profit of 79 cents a share versus forecasts of 27 cents while revenue of $15.6 billion fell shy of estimates of $15.9 billion. Disney Plus paid subscribers came in above 103 million, up from 33 million last year. RSI is signaling oversold levels after falling below 30.

Volatility Index

The Volatility Index (VIX) was down for the second-straight session after testing a late day low of 18.66. Prior and upper support at 19-18.50 and the 50-day moving average were recovered.

Lowered resistance is at 19.50-20. A close back above 22 would signal a retest towards 23.50-24 and the 200-day moving average.

Market Analysis

The Spiders Dow Jones Industrial Average ETF (NYSE: DIA) was up for the second-straight session with the intraday peak reaching $344.93. Current and lower resistance at $344.50-$345 was tripped but held. A close above the latter would signal ongoing strength towards the $346.50-$347 area.

Support is at $342-$341.50 followed by $340.50-$340.

RSI is in an uptrend with lower resistance at 55-60 getting cleared and holding. A move above the latter would indicate additional strength towards 65-70. Support is at 50-45.

Sector

The SPDR Gold Shares (NYSE: GLD) showed continued strength with the high hitting $172.70. Near-term and lower resistance at $172.50-$173 was recovered. A close above $173.50 and the 200-day moving average would signal additional strength towards $175-$175.50.

Support is at $172-$171.50 followed by $170-$169.50.

RSI is in an uptrend with lower resistance at 65-70 getting cleared and holding. A close above the latter would signal upside towards 75-80 and overbought levels from last July. Support is at 60-55.

Market Outlook

The bulls did well in keeping the current momentum going on Friday, especially with volatility closing back below 20 and the 50-day moving average. I mentioned this would be a bullish development heading into the new week but I also said I wanted to see Tech and the small-caps recover their 50-day moving averages over the near-term.

Both indexes are less than 1% away from recovering these key hurdles. What we don’t want to see is a test to these levels and then a pullback. For the Dow and S&P 500, a close back above 34,500 and 4,200, respectively, would likely signal another run towards all-time highs.

The regular June options have 32 days before expiration and I still like all of our current trades. There are a couple of new trades I like with one of them being Utz Brands (UTZ). Shares have been in nasty downtrend after peaking just above the $30 level to start the month. Prior support from early March at $22 held last Thursday. The company recently reported a penny miss on earnings but reiterated 2021 earnings of 70-75 a share versus forecasts of 67 cents. If I take action today, or tomorrow, I will send out a New Trade Alert.

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, $24.86, up $0.16)

WU June 26 calls (WU210618C00026000, $0.30, down $0.05)

Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -54%
Stop Target: None

Action: Friday’s high tagged $25.08 with current and lower resistance at $25-$25.25 getting cleared but holding. A close above the latter and the 50-day moving average would be a more bullish development of a near-term bottom. Support is at $24.75-$24.50.

Intel (INTC, $55.49 up $1.48

INTC June 60 calls (INTC210618C00060000, $0.40, up $0.10)

Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -38%
Stop Target: None

Action: Shares tested an afternoon high of $55.85 with new and lower resistance at $55.50-$56 getting breached but holding. Support is at $55-$54.50 followed by $53.50 and the 200-day moving average.

Utilities Select Sector SPDR Fund (XLU, $65.91, up $0.32)

XLU June 69 calls (XLU210618C00069000, $0.35, unchanged)

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

Action: Friday’s peak reached $66.32 with near-term and lower resistance at $66-$66.50 getting tripped but holding. Rising support is at $65.50-$65 followed by $64.50 and the 50-day moving average.