MomentumOptions.com Pre-Market Update for 7/19/2021
Selling Pressure Accelerates Into Closing Bell/ Profit Alert (JNPR)
The stock market showed continued weakness on Friday despite an unexpected increase in retail sales which rebounded 0.6% last month. Energy was the weakest sector after giving back 2.8% and 7.9% for the week.
Tech and the small-caps remained in four-session funks as the major indexes closed lower for the first time in four weeks. Volatility was higher for the second-straight session after closing above a key level of resistance.
The Russell 2000 tested a late day low of 2,160 before closing at 2,163 (-1.2%). Prior and upper support from mid-May at 2,175-2,150 failed to hold. A close below the latter would suggest ongoing weakness towards 2,125-2,100. Below is a chart of the IWM.
The Dow tagged a low of 34,647 before finishing at 34,687 (-0.9%). Key support at 34,750 was breached and failed to hold. Continued closes below this level would likely lead to additional weakness towards 34,500-34,250 and the 50-day moving average.
The Nasdaq ended at 14,427 (-0.8%) with the low hitting 14,413. Upper support at 14,450-14,300 failed to hold. A close below the latter would indicate additional weakness towards 14,150-14,000 and the 50-day moving average.
The S&P 500 settled at 4,327 (-0.8%) after falling to afternoon low of 4,322. Near-term and upper support at 4,325-4,300 was triggered but held. A drop below the latter would signal a further fade towards 4,275-4,250 and the 50-day moving average.
Shares of Maxar Technologies (MAXR) traded to a high of $36.38 before closing 2% higher. The stock was initiated with an Overweight rating and $50 price target.
The Volatility Index (VIX) rose for the second-straight session and for the third time in four after tapping a high of 18.70. Lower resistance at 18.50-19 was breached but held. A move above the latter would suggest a retest towards 20-20.50.
Fresh support is at 18-17.50 and the 50-day moving average.
The Spiders Dow Jones Industrial Average ETF (NYSE: DIA) settled lower despite tagging an all-time high of $350.74. Unchartered territory and lower resistance at $350.50-$351 was cleared but held. A close above the latter would signal additional strength towards the $353-$353.50 area.
Support is $346-$345.50 followed by $343.50-$343 and the 50-day moving average.
RSI is back in a downtrend with upper support at 55-50 failing to hold. A move below the latter would indicate weakness towards 45-40 and prior levels from late June. Key resistance is at 60.
The Communication Services Select Sector SPDR (NYSE: XLC) extended its losing streak to four-straight sessions with the late day low kissing $80.76. Near-term and upper support at $81-$80.50 failed to hold. A move below the latter would indicate downside risk towards $79.50-$79 and the 50-day moving average.
Resistance is at $81.50-$82.
RSI remains in a downtrend with key support at 50 holding. A close below this level would signal additional weakness towards 45-40 and levels from mid-May. Resistance is at 55-60.
Friday’s action into the close was likely a result of the regular July options expiring. In any event, this will be a very important week for the market with a heavy slate of earnings coming into focus.
As far as our current trades, we were stopped out of JNPR with a nice profit but our other trades are still struggling. The August options have 33 days before expiration so we still have ample time for a recovery in most of them to get back some premium and perhaps still make a profit.
It is rare I have a number of losing trades at once but when it happens, it usually means a major trend reversal could be coming. It certainly appears the major indexes are getting top heavy but it is possible for higher highs to come back into play.
The VIX continues to trade between the 15-20 area and there has been only once close above the latter in 39 trading sessions. The VIX has also come close to settling below 15 but hasn’t done so since February 2020. I have mentioned for weeks once we get back-to-back closes below 15, or above 20, it would be a great indicator to continue to buy call options, or possibly switching to put options.
I believe once the uptrend channels start to crack there will be tremendous downside pressure.
I’m expecting to have 1-2 new trades this week, and likely one on the VIX if there is a close above the 20 level.
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.
GoDaddy (GDDY, $85.01, up $0.83)
GDDY August 97.50 calls (GDDY210820C00097500, $0.35, up $0.10)
Entry Price: $1.20 (7/7/2021)
Exit Target: $2.40
Stop Target: None
Action: Shares snapped a four-session slide with the intraday high reaching $86.21. New and lower resistance at $86-$86.50 was tripped but held. Support is at $84.50-$84.
Juniper Networks (JNPR, $27.61, down $0.46)
JNPR August 28 calls (JNPR210820C00028000, $1.00, down $0.25)
Entry Price: $0.70 (7/7/2021)
Exit Target: $1.40 (closed half at $1.05 on 7/14)
Stop Target: $1.05 (Stop Limit)
Action: The Stop Limit at $1.05 on the other half of the position was triggered into Friday’s closing bell.
We can look to possibly get back into a new trade if shares make a retest towards the 50-day moving average and hold this level.
Himax Technologies (HIMX, $14.01, down $0.28)
HIMX August 20 calls (HIMX210820C00020000, $0.10, down $0.05)
Entry Price: $1.00 (6/30/2021)
Exit Target: $2.00
Stop Target: None
Action: Friday’s low tagged $13.86 with prior and upper support at $14-$13.75 getting breached but holding. Lowered resistance is at $14.25-$14.50.
Earnings are due out in early August and shares tend to make dramatic moves after the announcement. The July low also reached $13.86 so I’m hoping a temporary double-bottom has formed. If not, there could be further weakness towards $13.25 and the 50-day moving average.
Canoo (GOEV, $8.49, down $0.33)
GOEV August 10 calls (GOEV210820C00010000, $0.40, down $0.05)
Entry Price: $1.10 (6/30/2021)
Exit Target: $2.20
Stop Target: None
Action: Shares tagged a low of $8.45 with upper support at $8.50-$8.25 failing to hold. Resistance is at $8.75-$9 and the 50-day moving average.
Marathon Oil (MRO, $11.75, down $0.49)
MRO August 15 calls (MRO210820C00015000, $0.10, down $0.05)
Entry Price: $0.70 (6/25/2021)
Exit Target: $1.40
Stop Target: None
Action: Friday’s low reached $11.69 with prior and upper support from late May at $11.75-$11.50 getting breached but holding. Lowered resistance is at $12-$12.25.
Shares are at oversold levels with earnings due out August 4th. I’m expecting a blowout quarter with shares making a dramatic turnaround over the next few weeks. However, there is risk towards $11 if $11.50 fails to hold this week.
Ford Motor (F, $13.61, down $0.40)
F August 18 calls (F210820C00018000, $0.06, down $0.02)
Entry Price: $0.55 (6/9/2021)
Exit Target: $1.10
Stop Target: None
Action: Fresh and upper support at $13.75-$13.50 failed to hold on Friday’s fade to $13.58. Resistance is at $14-$14.25 and the 50-day moving average.
Earnings are due out July 28th with shares also at oversold levels. The 50-day moving average remains in a solid uptrend and there have been some nice rebounds when RSI has dipped towards the 35 area. On that note, I would like to see a recovery above $14 this week.