MomentumOptions.com Pre-Market Update for 6/28/2021
Dow Regains 50-Day Moving Average
The stock market closed out a solid week with the S&P 500 hitting a fresh record high on Friday as weaker-than-expected inflation news eased worries over tapering expectations by the Federal Reserve. Specifically, personal consumption expenditures showed inflation rose less than expected in May with the core PCE rising 3.4% year-over-year, matching expectations.
The blue-chips showed the most strength while Tech lagged following a slight uptick in treasury yields. Meanwhile, volatility eased but failed to close below a key level of support for the third-straight session.
The Dow settled at 34,433 (+0.7%) and back above its 50-day moving average after trading to an intraday high of 34,501. Key resistance at 34,500 was cleared but held. A close above this level would indicate momentum towards 34,750-35,000 with the early May all-time peak 35,091.
The S&P 500 tested an afternoon record high of 4,286 while ending at 4,280 (+0.3%). Unchartered territory and lower resistance at 4,275-4,300 was cleared and held. A pop above the latter would suggest additional upside towards 4,325-4,350.
The Russell 2000 was up for the 5th-straight session after reaching a peak of 2,350 before finishing at 2,334 (+0.03%). Key resistance at 2,350 was kissed but held. Continued closes above this level and the all-time high at 2,360 from mid-March would lead to a possible breakout towards 2,375-2,400. Below is a chart of the IWM.
The Nasdaq had its four-session winning streak snapped following the slight pullback to 14,337 and close at 14,360 (-0.1%). Fresh and upper support at 14,350-14,200 was tripped but held. A close below the latter would signal a further fade towards 14,050-13,900.
Shares of Virgin Galactic (SPCE) rallied nearly 39% after receiving Federal Aviation Administration approval for a full commercial launch license that will allow the company to fly customers to space. This follows an extensive review of data gathered from its late May launch that confirmed the test performed well against all flight objectives.
The Volatility Index (VIX) fell for the fifth-straight session with the intraday low hitting 15.21. Upper support 15.50-15 was breached but held. A close below the latter would indicate a retest towards 14.50-14 with last Thursday’s 52-week low at 14.19.
Resistance remains at 16.50-17 followed by 18-18.50 and the 50-day moving average.
The Spiders Dow Jones Industrial Average ETF (NYSE: DIA) was up for the second-straight session and for the fourth time in five with the high reaching $344.98. Prior and lower resistance at $344.50-$345 was breached but held. A close above the latter would signal additional strength towards the $347-$347.50 area.
New support is at $343.50-$343 followed by $342-$341.50 and the 50-day moving average.
RSI is in a uptrend with lower resistance at 55-60 getting recovered. A move above the latter would indicate strength towards 65-70 and prior levels from early May. Support is at 50-45.
The Financial Select Sector Spider Fund (NYSE: XLF) extended its winning streak to five-straight sessions after trading to an intraday peak of $37.03 while closing back above its 50-day moving average. Prior and lower resistance at $37-$37.50 was cleared but held. A close above the latter would indicate additional strength towards $38.50-$39 with the all-time peak from earlier this month at $38.60.
Rising support is at $36.50-$36.
RSI remains in an uptrend with key resistance at 50 getting reclaimed. Continued closes above this level would suggest upside towards 55-60. Support is at 45-40.
There are three trading days left in June with the Nasdaq up nearly 5% and the Russell 2000 higher by 3%. The S&P 500 is up 4% while the Dow is down 97 points for the month. Much of the action came last week before the prior Friday selloff but highlights the continued market choppiness.
More importantly, volatility continued to trade between 15-20 with both the bulls and bears having trouble holding these levels. While they have breached, and the bears briefly enjoyed a one day stay above 20, it remains a frustrating market despite the return to all-time highs.
I have talked about the upcoming 2Q earnings season being a catalyst to provide a clearer trend but we will have to wait and see. The 50-day moving averages remain in solid uptrends but could rollover if earnings disappoint. It will be important for companies to provide solid results with a rosy outlook to support current valuations and higher highs for the market.
With that said, the portfolio remains somewhat light as we try to navigate the current choppiness. I still like all of our trades, especially the MRO position we opened on Friday. However, the July options are expiring mid-month and this will be an important week for two of our current positions, T & TME. If they don’t show progress this week, we could close them early and roll into better setups.
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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.
Marathon Oil (MRO, $14.07, up $0.22)
MRO August 15 calls (MRO210820C00015000, $0.75, up $0.05)
Entry Price: $0.70 (6/25/2021)
Exit Target: $1.40
Stop Target: None
Action: Shares finally cleared and held key resistance at the $14 level with Friday’s high hitting $14.10. Continued closes above this level and the 52-week peak at $14.16 would be a bullish development with additional upside towards $14.25-$14.50. Support is at $13.75-$13.50.
Our first trade in MRO returned 104% and I have previously mentioned shares could test two-year resistance at $16.50-$17 if $14 was cleared and held for several sessions. We only need a quick trip towards the $15 level to catch another triple-digit return and we have nearly two months for shares to make a breakout towards the $17 area. If achieved, the trade could make upwards of 200%.
AT&T (T, $28.89, up $0.10)
T July 28 puts (T210716P00028000, $0.25, down $0.05)
Entry Price: $0.55 (6/18/2021)
Exit Target: $1.10
Stop Target: None
Action: Friday’s high tapped $28.95 with key resistance at $29 getting challenged but holding. Support is at $28.75-$28.50 and the 200-day moving average.
Ford Motor (F, $15.19, down $0.07)
F August 18 calls (F210820C00018000, $0.31, down $0.02)
Entry Price: $0.55 (6/9/2021)
Exit Target: $1.10
Stop Target: None
Action: Shares traded to a late day low of $15.18 with current and upper support at $15.25-$15 failing to hold. Resistance remains at $15.50-$15.75.
A close above $16 should get momentum flowing back into the stock and these are August options. I still like this trade going forward as long as shares remain above the $14.50 level.
Tencent Music Entertainment Group (TME, $15.79, up $0.14)
TME July 17 calls (TME210716C00017000, $0.28, up $0.03)
Entry Price: $0.60 (6/9/2021)
Exit Target: $1.20
Stop Target: None
Action: Friday’s peak reached $16.10 with the calls tagging 36 cents. Prior and lower resistance at $16-$16.25 was cleared but held. A close above the latter and the 50-day moving average would be a more bullish development. Support is at $15.75-$15.50.
RSI has cleared 50 and a level that had been holding since late May. It will be important for shares to show continued strength this week to keep us in the position. A drop back below $15.50 will likely force us out of the position to save the remaining premium.