MomentumOptions.com Pre-Market Update for 6/18/2021
Tech Shows Strength Despite Continued Pullback
The stock market was mostly lower on Thursday following the Federal Reserve’s latest monetary policy decision with Tech avoiding the selloff. The major indexes made a decent rebound off the midday bottom but the technical damage pushed lower lows and are threatening the gains for June.
The Russell 2000 was down for the fourth-straight session after tagging an intraday low of 2,264 before settling at 2,287 (-1.2%). Prior and upper support at 2,275-2,250 was breached but held. A drop below the latter would suggest additional weakness towards 2,225-2,200 and the 50-day moving average. Below is a chart of the IWM.
The Dow also extended its losing streak to four-straight after hitting a low of 33,626 while ending at 33,823 (-0.6%). Upper support from mid-May at 33,750-33,500 was tripped but held. A close below the latter and last month’s low at 33,473 would indicate downside risk towards 33,250-33,000.
The S&P 500 closed at 4,221 (-0.04%) after tumbling to a midday low of 4,196. Key support at 4,200 was breached but held. A close below this level would signal a further slide towards 4,175-4,150 and the 50-day moving average.
The Nasdaq went out at 14,161 (+0.9%) with the intraday high kissing 14,196. Key resistance at 14,200 was challenged but held. A close above this level and the late April all-time peak at 14,211 would be a bullish development for a possible breakout towards 14,350-14,500.
The iShares Silver Trust (SLV) dropped nearly 5% following the selloff in silver which closed at $25.86, down $1.96, or 7%. The 200-day moving average was breached but held and represents prior levels from late April.
I had mentioned at the beginning of the week SLV needed to clear and hold the $26.25 level to maintain momentum and the selloff could be providing an opportunity to get in a bullish trade at lower levels. However, shares will need to clear the $24.50 level before we can entertain this idea. RSI is near 30 and levels from late March that signaled previous oversold sentiment.
The Volatility Index (VIX) was down for the first time in four sessions despite tapping a higher high at 19.22. Current and lower resistance at 19-19.50 and the 50-day moving average were breached but levels that held for the second-straight session.
Support remains at 17-16.50.
The iShares Russell Growth 1000 ETF (NYSE: IWF) snapped a two-session slide after trading to an all-time peak of $264.84. Unchartered territory and lower resistance at $264.50-$265 was breached but held. A move above the latter would indicate further upside towards $267-$267.50.
Rising support is at $262.50-$262 followed by $260.50-$260.
RSI is in an uptrend with key resistance at 65 getting cleared and holding. Continued closes above this level would suggest strength towards 70 and the mid-April high. Support is at 60.
The Spider S&P Retail ETF (NYSE: XRT) was down for the third time in four sessions following the pullback to $92.41. Near-term and upper support at $92.50-$92 was breached but held. A close below the latter and the 5o-day moving average would suggest a further slide towards $91-$90.50.
Resistance is at $94.50-$95.
RSI is back in a downtrend with key support at 50 failing to hold. Continued closes below this level would indicate weakness towards 45-40 and levels from mid-May. Resistance is at 55-60.
The market remains on shaky ground until earnings season starts and even then, companies will need to report stellar earnings with a rosy outlook for the rest of 2021. I continue to talk about volatility which has remained between 15-20 for 17-straight sessions, or since May 25th.
Key resistance levels have held on the upside for the major indexes, with the S&P 500 the only one able to set new all-time highs. However, this week’s action has pushed lower lows with key support levels coming into play. To say the action has been frustrating is an understatement.
The good news is a lot of stocks have fallen 10%-20% so a breakout rally will allow us to get into some bullish positions. On the flip side, if there is a pending selloff, or major correction, we can finally start opening up bearish trades.
I have only recommended one bearish trade all year long but my track record in down markets is just as good in uptrends. On that note, the portfolio remains very light with cheaper option premiums because I believe you should always try to have some open trades at all times. However, we are also trying to preserve capital while trying to be patient. Don’t worry the home runs will come.
We might have to wait another week or two but the technical setups have clearly been outlined as I have been writing about DAILY. Take some time to enjoy Father’s Day weekend and relax as we let the action come to us instead of forcing things. Thank you for the continued support and please know I’m working just as hard while waiting for this choppiness to play out.
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Closed Momentum Options Trades for 2021: 18-9 (67%). 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.
Ford Motor (F, $14.77, down $0.25)
F August 18 calls (F210820C00018000, $0.32, down $0.03)
Entry Price: $0.55 (6/9/2021)
Exit Target: $1.10
Stop Target: None
Action: Shares tapped a low of $14.58 with prior and upper support at $14.75-$14.50 getting triggered but holding. Resistance remains at $15-$15.25.
Tencent Music Entertainment Group (TME, $15.25, down $0.10)
TME July 17 calls (TME210716C00017000, $0.27, down $0.05)
Entry Price: $0.60 (6/9/2021)
Exit Target: $1.20
Stop Target: None
Action: Shares traded down to $15.06 with current and upper support at $15.25-$15.50 getting breached but holding. Resistance remains at $15.50-$15.75.