MomentumOptions.com Pre-Market Update for 7/7/2021

Tech Stays Strong Despite Overall Pullback

8:00am (EST)

The stock market was mostly lower to start the shortened week following China’s regulatory crackdown to tame the country’s internet industry. A number of U.S. listed Chinese stocks were hammered and soured bullish sentiment despite the broader market and Tech setting another round of all-time highs.

Traders also took profits as Wall Street prepares for the Federal Reserve’s policy minutes this afternoon and will be looking for clues on when quantitative easing might be tapered. Meanwhile, volatility spiked 9% after falling the prior three sessions but held a key level of resistance.

The Russell 2000 finished at 2,274 (-1.4%) with the midday low hitting 2,256. Prior and upper support at 2,275-2,250 failed to hold. A close below the latter and the 50-day moving average would suggest a retest towards 2,225-2,220. Below is a chart of the IWM.

The Dow ended at 34,577 (-0.6%) after bottoming at 34,358. Upper support at 34,500-34,250 was breached but held. A close below the latter and the 50-day moving average would likely lead to a further fade towards 34,000-33,750.

The S&P 500 closed at 4,343 (-0.2%) despite tapping a lifetime high of 4,356. Fresh and upper support at 4,325-4,300 was tripped but held on the backtest to 4,314 afterwards. A drop below the latter would signal a further retest towards 4,275-4,250.

The Nasdaq settled at 14,663 (+0.2%) with the record high tagging 14,687. Fresh resistance at 14,650 was cleared and held. Continued closes above this level would indicate additional momentum towards 14,850-15,000.

Market Movers

Shares of Kraton (KRA) jumped nearly 15% on news of a possible acquisition target and is exploring its options, including a potential sale of the company.

Volatility Index

The Volatility Index (VIX) snapped a three-session slide after surging to a afternoon high of 17.94. Prior and lower resistance at 18-18.50 was challenged but held. A close above the latter and the 50-day moving average would be a slightly bearish development with upside risk towards 19.50-20.

New support is at 16.50-16 followed by 15-14.50.

Market Analysis

The Spider Small-Cap 600 ETF (NYSE: SLY) was down for the second-straight session with the intraday low reaching $95. Prior and upper support at $95-$94.50 was kissed but held on the close back below the 50-day moving average. A move below the latter would indicate additional weakness towards $93.50-$93.

Resistance is at $96.50-$97.

RSI (relative strength indicator) is in a downtrend with key support at 40 holding. A close below this level would suggest additional weakness towards 35-30 and levels from September 2020. Resistance is at 45-50.

Sector

The Consumer Staples Select SPDR Fund (NYSE: XLP) was down for the second time in three sessions with the session low kissing $69.31. Prior and upper support at $69.50-$69 was breached but held. A close below the latter would signal additional weakness towards $68.50-$68.

Resistance is at $71-$71.50 and the 50-day moving average with the early June all-time peak at $71.69.

RSI is in a downtrend with key support at 50 failing to hold. Continued closes below this level would suggest downside pressure towards 45-40. Resistance is at 55-60.

Market Outlook

The small-caps and blue-chips avoided some serious technical damage by holding their 50-day moving averages on Tuesday but remain the market’s weak spots. In a perfect world, all of the major indexes would be making all-time highs in unison with volatility falling to the low teens.

We haven’t seen this and why the market remains a little frustrating to trade at the present moment. The VIX has also remained between the 15-20 area for 30 trading sessions, excluding the one day mid-June close above the latter. While these levels have been stretched, it will be nice to see back-to-back closes below or above these levels.

The good news is that we will likely see this scenario play out during the upcoming earnings season and when a clearer trend will emerge across the board. Until then, we just have to continue to grind it out while staying a bit more patient.

Momentum Options Play List

Closed Momentum Options Trades for 2021: 18-11 (62%). 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.

Himax Technologies (HIMX, $15.43, up $0.69)

HIMX August 20 calls (HIMX210820C00020000, $0.50, up $0.15)

Entry Price: $1.00 (6/30/2021)
Exit Target: $2.00
Return: -50%
Stop Target: None

Action: Monday’s peak reached $15.60 with lower resistance at $15.50-$15.75 getting cleared but failing to hold. Support is at $15.25-$15.

Canoo (GOEV, $9.12, up $0.04)

GOEV August 10 calls (GOEV210820C00010000, $0.80, unchanged)

Entry Price: $1.10 (6/30/2021)
Exit Target: $2.20
Return: -27%
Stop Target: None

Action: Shares traded down to $8.93 before settling slightly higher. Upper support at $9-$8.75 was tripped but held. Resistance is at $9.25-$9.50.

Marathon Oil (MRO, $13.21, down $0.64)

MRO August 15 calls (MRO210820C00015000, $0.40, down $0.20)

Entry Price: $0.70 (6/25/2021)
Exit Target: $1.40
Return: -43%
Stop Target: None

Action: Monday’s low hit $13.17 with prior and upper support at $13.25-$13 failing to hold. Lowered resistance is at $13.50-$13.75.

Ford Motor (F, $14.50, down $0.43)

F August 18 calls (F210820C00018000, $0.15, down $0.05)

Entry Price: $0.55 (6/9/2021)
Exit Target: $1.10
Return: -72%
Stop Target: None

Action: Key support at $14.50 was breached but held on the tumble to $14.39. Resistance is at $14.75-$15.