MomentumOptions.com Pre-Market Update for 6/25/2021
Bulls Show Continued Momentum
The stock market showed continued strength on Thursday after President Biden announced a bipartisan $1.2 infrastructure deal. The plan includes $579 billion in new spending over eight years for roads, bridges, rail, broadband internet, water and sewer pipes, and electric vehicles.
Economic news also helped sentiment after the Commerce Department said the economy grew at a 6.4% clip last quarter, unrevised from the previous estimate from May. Volatility set another new low but failed to hold a key level of support.
The Russell 2000 extended its winning streak to 4-straight after ending on its session high of 2,333 (+1.3%). Prior and lower resistance at 2,325-2,350 was cleared and held. A close above the latter and the mid-March all-time high at 2,360 would signal momentum towards 2,375-2,400. Below is a chart of the IWM.
The Dow tested a late day high of 34,233 while closing at 34,196 (+1%) and just below its 50-day moving average. Lower resistance at 34,000-34,250 was recovered. A pop above the latter would suggest additional strength towards 34,500-34,750.
The Nasdaq was up for the fourth-straight session after finishing at 14,369 (+0.7%) with the intraday record high hitting of 14,414. Unchartered territory and fresh resistance at 14,400 was cleared but held. Continued closes above this level would suggest ongoing strength towards 14,500-14,650.
The S&P 500 settled at 4,266 (+0.6%) while tagging a new all-time peak of 4,271. New and lower resistance at 4,250-4,275 was cleared and held. A move above the latter keeps upside towards 4,300-4,325 in play.
Shares of Rite Aid (RAD) sank 14% after announcing first-quarter numbers. The company reported a profit of 38 cents a share on revenue of $6.16 billion. Forecasts were for a profit of 22 cents a share on sales of $6.21 billion.
The Volatility Index (VIX) extended its losing streak to four-straight sessions after kissing a 52-week low of 14.19. Fresh and upper support 14.50-14 was breached but held. A close below the latter would indicate additional weakness towards 13.50-13.
Resistance remains at 16.50-17 followed by 18-18.50 and the 50-day moving average.
The Spider Small-Cap 600 ETF (NYSE: SLY) was up for the fourth-straight session with the intraday high reaching $98.73. Prior and lower resistance at $98.50-$99 was cleared and held. A close above the latter would indicate additional strength towards $100-$100.50 with the all-time high from earlier this month at $100.94.
Rising support is at $98-$97.50 followed by $96.50-$96 and the 50-day moving average.
RSI (relative strength indicator) remains 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 and levels from early March. Support is at 50-45.
The Materials Select Sector Spider Fund (NYSE: XLB) rebounded following the intraday run to $82.60. Near-term and lower resistance at $82.50-$83 was breached but held. A move above the latter would suggest a retest towards $84-$84.50 and the 50-day moving average.
Support is at $82-$81.50.
RSI is back in a slight uptrend with key resistance at 40. A close above this level would signal further upside towards 45-50. Support is at 35-30.
The market could end the week on a high note after the Federal Reserve Board released the results of its annual bank stress tests after yesterday’s closing bell. Of the 23 largest banks tested, all of them remained well above their risk-based minimum capital requirements. This clears the way for additional buybacks and raised dividends and should help the Financial stocks going forward.
The one slight concern remains volatility which remains trapped between the 15-20 area after failing to hold the former for the second-straight session. Typically, when the stock market is making new all-time highs, the VIX should be trading in the low teens and possibly single-digits.
This trading range could continue for another week or so and into the start of the second-quarter earnings season which begins in early July. This will be the next major catalyst that will support continued all-time highs, or a possible pullback from current levels.
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.
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AT&T (T, $28.79, up $0.14)
T July 28 puts (T210716P00028000, $0.30, down $0.05)
Entry Price: $0.55 (6/18/2021)
Exit Target: $1.10
Stop Target: None
Action: Yesterday’s peak reached $28.84 with lower resistance at $28.75-$29 and the 200-day moving average getting recovered. Key support is at $28.50.
Ford Motor (F, $15.26, down $0.16)
F August 18 calls (F210820C00018000, $0.33, down $0.05)
Entry Price: $0.55 (6/9/2021)
Exit Target: $1.10
Stop Target: None
Action: Shares tagged a low of $15.15 with current and upper support at $15.25-$15 getting clipped but holding. Resistance remains at $15.50-$15.75.
Tencent Music Entertainment Group (TME, $15.65, up $0.42)
TME July 17 calls (TME210716C00017000, $0.25, up $0.05)
Entry Price: $0.60 (6/9/2021)
Exit Target: $1.20
Stop Target: None
Action: Shares traded up to $15.65 with lower resistance at $15.50-$15.75 getting breached and holding. Support is at $15.25-$15.