MomentumOptions.com Pre-Market Update for 5/25/2021

Nasdaq Recovers 50-Day Moving Average

8:00am (EST)

The stock market showed continued strength on Monday with Technology leading momentum as concerns over inflation were put on the back burner, at least temporarily. The gains help pushed the major indexes towards the top of their recent trading ranges and helped recover some of last week’s losses.

The Nasdaq tested an intraday high of 13,708 before closing at 13,661 (+1.4%). Near-term and lower resistance at 13,600-13,750 and the 50-day moving average were cleared and held. A move above the latter would suggest a retest towards 13,850-14,000.

The S&P 500 settled at 4,197 (+1%) after tapping an afternoon peak of 4,209. Key resistance at 4,200 was breached but held. Continued closes above this level would indicate additional strength towards 4,225-4,250 with the recent the all-time high at 4,238.

The Dow traded to a high of 34,472 while finishing at 34,393 (+0.5%). Current and and lower resistance at 34,250-34,500 was cleared and held. A pop above the latter would signal ongoing strength towards 34,750-35,000 with the lifetime peak at 35,091.

The Russell 2000 ended at 2,227 (+0.5%) with the second half top hitting 2,237. Lower resistance at 2,225-2,250 was reclaimed. A close above the latter and the 50-day moving average would be a more bullish development with additional upside towards 2,275-2,300. Below is a chart of the IWM.

Market Movers

Virgin Galactic (SPCE) shares surged 27% after the company completed its third spaceflight and the first ever over the weekend. The stock’s price target was also raised to $27 from $18 with the analyst maintaining a Market Perform rating.

Volatility Index

The Volatility Index (VIX) extended its losing streak to three-straight sessions after tapping an intraday low of 18.38. Prior and upper support at 19-18.50 and the 50-day moving average were recovered.

Lowered resistance is at 19.50-20.

Market Analysis

The Spider Small-Cap 600 ETF (NYSE: SLY) was up for the third-straight session with the intraday peak reaching $96.47. Near-term and lower resistance at $96-$96.50 was cleared and held. A close above the latter would be an ongoing bullish signal with additional strength towards $97.50-$98 and the monthly high at $97.79.

Support is at $95.50-$95 and the 50-day moving average.

RSI (relative strength indicator) is in trying to curl higher with lower resistance at 55-60 getting challenged but holding. A move above the latter would indicate additional upside towards 65-70 and prior levels from mid-March. Key support is at 50.

Sector

The iShares PHLX Semiconductor ETF (Nasdaq: SOXX) was up for the third time in four sessions following the intraday trip to $426.79. Near-term and lower resistance at $426.50-$427 was breached but held. A close above the latter would signal further strength towards the $429-$430 area.

Fresh support is at $422-$421.50 and the 50-day moving average followed by $419.50-$419.

RSI is back in an uptrend with lower resistance at 55-60 getting cleared and holding. A close above the latter would suggest additional strength towards 65-70 with the latter representing the early February top. Support is at 50-45.

Market Outlook

The action yesterday’s was an encouraging development for the major indexes, especially Tech, along with the close below 20 and the 50-day moving average in the VIX. It would be an aded bonus if the small-caps can make a continued move higher this week.

As far as second-quarter earnings, the retail sector will be in focus with AutoZone (AZO), Nordstrom (JWN) and Urban Outfitters (URBN) reporting numbers today and various other companies throughout the week. In economic news, new home sales could have an impact on today’s action.

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.

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Marathon Oil (MRO, $11.97, up $0.37)

MRO July 12 calls (MRO210716C00012000, $0.95, up $0.15)

Entry Price: $0.85 (5/24/2021)
Exit Target: $1.70
Return: 12%
Stop Target: None

Action: Shares tagged a high of $12.03 with lower resistance at $12-$12.25 getting breached but holding. Support is at $11.75-$11.50.

MRO has remained in a 19-session trading range between $11-$12 with both levels getting stretched over this time frame. I’d like to see a close above $12.50 this week that would signal a possible breakout towards $13-$13.25. The 52-week peak is at $13.29 with a chance for a run towards $15 coming into play by mid-July on a close above this level.

Western Union (WU, $24.70, up $0.13)

WU June 26 calls (WU210618C00026000, $0.20, unchanged)

Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -69%
Stop Target: None

Action: Yesterday’s peak reached $24.81 with lower resistance at $24.75-$25 getting cleared but holding for the second-straight session. Support remains at $24.50-$24.25.

Intel (INTC, $56.96, up $0.88)

INTC June 60 calls (INTC210618C00060000, $0.45, up $0.05)

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

Action: Shares kissed a high of $57.39 with prior and lower resistance at $57-$57.50 getting tripped but holding. A close above $58 would be a better signal for a run towards the $60 area and the 50-day moving average. Rising support is at $56.50-$56.

Utilities Select Sector SPDR Fund (XLU, $66.04, down $0.12)

XLU June 69 calls (XLU210618C00069000, $0.25, down $0.05)

Entry Price: $0.65 (5/3/2021)
Exit Target: $1.30
Return: -62%
Stop Target: None

Action: Monday’s high hit $66.59 before the slightly lower close. Near-term and lower resistance at $66.50-$67 was breached but held. The fade to $66 afterwards held upper support is at $66-$65.50.