MomentumOptions.com Pre-Market Update for 6/22/2021
Bulls Rebound, Recover Prior Losses
The stock market surged on Monday as traders focused on the Financial and Energy sectors that are poised to benefit from a broader economic recovery. Specifically, the Energy sector (XLE) jumped 4% while the Financial sector (XLF) rallied 2.3% with all of the major sectors showing strength.
The major indexes had their best session in three months following last week’s hawkish signals from the Fed and updated monetary policies. Meanwhile, volatility eased despite setting a higher high on the open.
The Russell 2000 traded to an afternoon peak of 2,289 while finishing at 2,286 (+2.2%). Fresh and lower resistance at 2,275-2,300 was cleared and held on the close back above the 50-day moving average. Continued closes above the latter would indicate a retest towards 2,325-2,350 with the March record high at 2,360. Below is a chart of the IWM.
The Dow settled at 33,876 (+1.8%) after tagging an intraday high of 33,908. Prior and lower resistance at 33,750-34,000 was recovered. A move above the latter and the 50-day moving average would suggest additional strength towards 34,250-34,500.
The S&P 500 made a second half run to 4,226 before ending at 4,224 (+1.4%) and back above its 50-day moving average. Near-term and lower resistance at 4,225-4,250 was cleared but held. A pop above the latter and the all-time high at 4,257 would be a renewed bullish development with breakout potential towards 4,275-4,300.
The Nasdaq closed at 14,141 (+0.8%) after trading to a high of 14,150. Current and lower resistance at 14,050-14,200 was reclaimed. A close above the latter and the late April all-time peak at 14,211 would signal momentum towards 14,350-14,500.
Shares of Lydall (LDL) skyrocketed 85% after agreeing to be acquired by Unifrax. Lydall shareholders will receive $62.10 in cash for each share outstanding, valuing the deal at approximately $1.3 billion. The transaction, which has been approved by the boards of both companies, is expected to close in the second half of 2021.
The Volatility Index (VIX) tagged an opening high of 21.82 before sinking 13%. Prior and lower resistance from mid-May at 21.50-22 was breached but held.
The fade to 17.81 afterwards breached and held upper support 18-17.50 on the close back above the 50-day moving average. However, a close below 17 is needed to confirm volatility has settled back down.
The Invesco QQQ Trust (Nasdaq: QQQ) rebounded with the high reaching $344.69. Near-term and lower resistance at $344.50-$345 was cleared but held. A close above the latter level would indicate a retest towards $346-$346.50 with last Thursday’s record peak at $346.38.
Support is at $343.50-$343 followed by $340.50-$340.
RSI (relative strength indicator) is back in an uptrend with lower resistance at 60-65 getting cleared and holding. A close above the latter would suggest additional strength towards 70-75 and overbought levels from September 2020. Support is at 55-50.
The Communication Services Select Sector SPDR (NYSE: XLC) was up for the second time in three sessions with the intraday peak hitting $79.26. Near-term and lower resistance at $79-$79.50 was cleared and held. A move above the latter would indicate upside towards $80.50-$81 with last Tuesday’s lifetime top at $80.55.
Support is at $78.50-$78 followed by $77.50-$77 and the 50-day moving average.
RSI is in an uptrend with lower resistance at 55-60 getting cleared and holding. A close above the latter would signal additional strength towards 65-70 and levels from mid-February. Support is at 50-45.
It remains to be seen if the bulls will show continued strength this week but the choppy action remains difficult to trade with the VIX back below the 20 level. Despite this being a historically weak week for stocks following June expiration, yesterday’s action was somewhat bullish. However, a dead-cat bounce can’t be ruled out if the market closes lower today.
Aside from Fed speak, which starts today, earnings remain light and will be this way into early July. There are a few notable names announcing on Wednesday with Patterson Companies (PDCO), H.B. Fuller Company (FUL), KB Home (KBH), Steelcase (SCS) and Winnebago Industries (WGO) providing updates.
Momentum Options Play List
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.
AT&T (T, $28.93, up $0.28)
T July 28 puts (T210716P00028000, $0.30, down $0.20)
Entry Price: $0.55 (6/18/2021)
Exit Target: $1.10
Stop Target: None
Action: Monday’s rebound tapped $28.95 with lower resistance at $28.75-$29 getting recovered. Shaky support is at $28.50-$28.25 and the 200-day moving average.
Ford Motor (F, $14.78, up $0.26)
F August 18 calls (F210820C00018000, $0.25, down $0.02)
Entry Price: $0.55 (6/9/2021)
Exit Target: $1.10
Stop Target: None
Action: Shares traded up to $14.90 with prior and lower resistance at $14.75-$15 getting reclaimed. Support is at $14.50-$14.25.
Tencent Music Entertainment Group (TME, $15.11, up $0.02)
TME July 17 calls (TME210716C00017000, $0.25, down $0.02)
Entry Price: $0.60 (6/9/2021)
Exit Target: $1.20
Stop Target: None
Action: Shares tested a low of $14.68 before rebounding to settle slightly higher. Prior and upper support at $14.75-$14.50 was breached but held. Resistance remains at $15.25-$15.50.