MomentumOptions.com Pre-Market Update for 5/18/2021
Small-Caps Show Continued Strength
8:00am (EST)
The stock market trended lower throughout Monday’s session but showed some late day strength with the small-caps recovering to end slightly higher. While there was some profit taking following two days of solid gains to end last week, volatility held a key level of resistance to keep the bullish thesis intact.
The Nasdaq closed at 13,379 (-0.4%) after trading to an afternoon low of 13,265. Current and upper support 13,250-13,100 was breached but held. A move below the latter would indicate additional weakness towards 13,000-12,850.
The S&P 500 settled at 4,163 (-0.3%) with the intraday low tapping 4,142. Near-term and upper support at 4,150-4,125 was tripped but held. A close below the latter would signal a further pullback towards 4,100-4,075 and the 50-day moving average
The Dow ended at 33,327 (-0.2%) after tagging a low of 34,176. Current and upper support at 34,250-34,000 was breached but held. A move below the latter would likely lead to a further fade towards 33,750-33,500 and the 50-day moving average
The Russell 2000 finished at 2,227 (+0.1%) despite the morning low hitting 2,197. Upper support at 2,200-2,175 was triggered but held. A drop below the latter would suggest a retest towards 2,150-2,125. Below is a chart of the IWM.
Market Movers
Shares of Peabody Energy (BTU) surged 32% on no specific news. The breakout above the $7 level and close at $8.60 sets up a possible run towards two-year resistance near the $10 area.
Volatility Index
The Volatility Index (VIX) was up for the first time in three sessions with the intraday peak reaching 21.58. Current and lower resistance at 21.50-22 was cleared but held. A pop above 22 would indicate a retest towards 23.50-24 and the 200-day moving average.
Support is at 19.50-19 and the 50-day moving average.
Market Analysis
The SPDR S&P 500 ETF (NYSE: SPY) has its two-session winning streak snapped following the pullback to $413.36. Current and upper support at $413.50-$413 was clipped but held. A move below the latter would suggest additional weakness towards $411.50-$411.
Resistance is at $416.50-$417 followed by $418.50-$419.
RSI (relative strength index) has flatlined with key support at 50 holding. A close below this level would signal further weakness towards 45-40. Resistance is at 55-60.
Sector
The Consumer Staples Select SPDR Fund (NYSE: XLP) was down for the first time in three sessions with the intraday low hitting $70.66. Current and upper support at $70.50-$70 was challenged but held. A close below the latter would signal additional weakness towards $69-$68.50 and the 50-day moving average.
Resistance is at $71-$71.50 with the prior Monday’s all-time peak at $71.64.
RSI showing signs of rolling over with key support at 60 holding. A close below this level would suggest downside pressure towards 55-50. Resistance is at 65-70.
Market Outlook
Retail earnings will be in focus throughout the week with Home Depot (HD), Macy’s (M) and Walmart (WMT) announcing numbers ahead of this morning’s opening bell. Two of the three, excluding Macy’s are Dow components and could have some impact on how today’s session unfolds.
I would still like to see the Nasdaq and the Russell 2000 clear and hold their 50-day moving averages today or by tomorrow’s close. The VIX is still hinting at lower lows with the 50-day moving average remaining in a downtrend despite the spike above 20 yesterday.
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, $24.89, up $0.03)
WU June 26 calls (WU210618C00026000, $0.35, up $0.05)
Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -46%
Stop Target: None
Action: Yesterday’s peak reached $25.04 with current and lower resistance at $25-$25.25 getting cleared but holding for the second-straight session. A close above the latter and the 50-day moving average would be a more bullish development for continued strength. Support remains at $24.75-$24.50.
Intel (INTC, $55.33, down $0.02)
INTC June 60 calls (INTC210618C00060000, $0.35, down $0.05)
Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -46%
Stop Target: None
Action: Monday’s low kissed $54.76 with support at $55-$54.50 getting split but holding. Resistance is at $55.50-$56.
Utilities Select Sector SPDR Fund (XLU, $65.37, down $0.54)
XLU June 69 calls (XLU210618C00069000, $0.25, down $0.10)
Entry Price: $0.65 (5/3/2021)
Exit Target: $1.30
Return: -62%
Stop Target: None
Action: Shares tested a low of $65.27 with current and upper support at $65.50-$65 failing to hold. Resistance is at $66-$66.50.
