MomentumOptions.com Pre-Market Update for 5/27/2021

Small-Caps Snap Back

8:00am (EST)

The stock market rebounded on Wednesday with the small-caps leading the charge higher and the blue-chips struggling. Some of the strength came after a few Federal Reserve officials helped ease worries about higher inflation.

A dip in bond yields continues to be positive for Technology as the 10-year Treasury note is pushing two-week lows. Key resistance levels remain in play with Wall Street eyeballing the personal consumption report due out on Friday.

The Russell 2000 traded to an afternoon peak of 2,250 while settling at 2,249 (+2%). Prior and lower resistance at 2,225-2,250 was cleared and held along with the 50-day moving average. A move above the latter would signal additional upside towards 2,275-2,300. Below is a chart of the IWM.

The Nasdaq closed at 13,738 (+0.6%) after tapping a midday high of 13,750. Prior and lower resistance at 13,700-13,850 was recovered. A pop above the latter would signal momentum towards 14,000-14,150 with the late April all-time peak at 14,211.

The S&P 500 made an afternoon run to 4,202 before finishing just below 4,196 (+0.2%). Key resistance at 4,200 was cleared but held for the third-straight session. Continued closes above this level would be a more bullish development with upside strength towards 4,225-4,250 and the all-time high at 4,238.

The Dow added 10 points to end at 34,323 (+0.03%) after testing a morning high of 34,409. Key resistance at 34,500 was challenged but held. A close above this level would suggest a retest towards 34,750-35,000 with the all-time high from earlier this month at 35,091.

Market Movers

Shares of Dick’s Sporting Goods (DKS) zoomed 17% after announcing blowout first-quarter numbers. The company reported a profit $3.79 a share on revenues of $2.9 billion. Analysts had penciled-in earnings of $1.12 a share on sales of $2.2 billion.

Volatility Index

The Volatility Index (VIX) was down for the third time in four sessions with the low hitting 17.91. Current and upper support at 17.50-17 was reclaimed. A close below the latter would signal additional weakness towards 16-15.50.

Resistance is at 18.50-19 and the 50-day moving average.

Market Analysis

The SPDR S&P 500 ETF (NYSE: SPY) traded in a tight range with the intraday high reaching $419.61. Current and lower resistance at $419.50-$420 was clipped but held. A move below the latter would suggest additional strength towards $421.50-$422.

Support is at $418-$417.50 followed by $416-$415.50.

RSI (relative strength index) has flatlined with key resistance at 60 holding. A close above this level would signal further upside towards 65-70. Support is at 55-50.

Sector

The Energy Select Sector SPDR Fund (NYSE: XLE) was up for the third time in four sessions with the intraday high tapping $52.26. Current and lower resistance at $52-$52.50 was cleared and held. A close above the latter would suggest another run towards $53.50-$54.

Support is at $51.50-$51 followed by $50.50-$50 and the 50-day moving average.

RSI is trying to curl higher with lower resistance at 55-60 holding. A close above the latter would indicate additional strength towards 65-70 and prior highs from earlier this month. Support is at 50 and a level that has been holding since late April.

Market Outlook

The near-term outlook remains bullish with the small-caps recovering their 50-day moving average and volatility continuing to ease. I’m expecting a possible flat session for today ahead of Friday’s update on another update on inflation.

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.

Marathon Oil (MRO, $11.90, up $0.24)

MRO July 12 calls (MRO210716C00012000, $0.85, up $0.10)

Entry Price: $0.85 (5/24/2021)
Exit Target: $1.70
Return: 0%
Stop Target: None

Action: Shares remain in a tight trading range with Wednesday’s peak tagging $11.96. Key resistance at $12 was challenged but held. Continued closes above this level would signal a retest towards $12.25-$12.50. Support is at $11.75-$11.50.

Western Union (WU, $24.50, up $0.21)

WU June 26 calls (WU210618C00026000, $0.15, unchanged)

Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -77%
Stop Target: None

Action: Yesterday’s high reached $24.51 with lower resistance at $24.50-$24.75 getting recovered. Support is at $24.25-$24.

Intel (INTC, $56.92, up $0.05)

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: Shares traded to a high $57.23 with lower resistance at $57.25-$57.75 getting challenged but holding. Support remains at $56.50-$56.

Utilities Select Sector SPDR Fund (XLU, $65.25, up $0.01)

XLU June 69 calls (XLU210618C00069000, $0.10, down $0.05)

Entry Price: $0.65 (5/3/2021)
Exit Target: $1.30
Return: -85%
Stop Target: None

Action: Shares traded down to $65.06 with upper support at $65-$64.50 holding. A close below the latter will likely force us out of the trade. Lowered resistance at $65.50-$66.