MomentumOptions.com Pre-Market Update for 7/21/2021

Volatility Closes Back Below 20

8:00am (EST)

The stock market rebounded on Tuesday following upbeat earnings news and revived economic optimism. Specifically, second-quarter numbers have topped forecasts with over 90% of the 56 companies on the S&P 500 reporting better-than-expected results thus far.

All 11 major sectors in the S&P 500 closed higher with Industrials and Financials leading the charge with gains of 2.8% and 2.5%, respectively. Meanwhile, volatility simmered after recovering a key level of support.

The Russell 2000 snapped a five-session slide after reaching an intraday peak of 2,206 while settling at 2,194 (+3%). Key resistance at 2,200 was cleared but held. Continued closes above this level would suggest a retest towards 2,225-2,250. Below is a chart of the IWM.

The Dow closed at 34,511 (+1.6%) after trading to an afternoon high of 34,621. Key resistance at 34,500 was recovered on the close back above the 50-day moving average. Continued closes above these levels would be a renewed bullish development for a run towards 34,750-35,000 with the all-time peak from early May at 35,091.

The Nasdaq tapped a high of 14,555 before finishing at 14,498 (+1.6%). Current and key resistance at 14,500 was cleared but held. A close above this level keeps another run towards 14,650-14,800 in play with the recent lifetime top at 14,803.

The S&P 500 tagged a high of 4,336 before ending at 4,323 (+1.5%). Lower resistance at 4,325-4,350 was breached but held. A move above the latter would indicate additional upside towards 4,375-4,400 with last Wednesday’s record high at 4,393.

Market Movers

Shares of NeuroMetrix (NURO) skyrocketed 208% after the company said its Quell transcutaneous electric nerve stimulator received “Breakthrough Designation” status from the FDA to treat fibromyalgia symptoms in adults, a form of chronic pain that affects up to 15 million people.

Volatility Index

The Volatility Index (VIX) fell for the first time in four sessions with the intraday low hitting 19.37. Current and upper support at 19.50-19 was recovered on the close back below the 20 level and the 200-day moving average. A drop below 19 would indicate additional weakness towards 18.50-18 and the 50-day moving average.

Resistance is at 20-20.50 followed by 21.50-22.

Market Analysis

The iShares Russell Growth 1000 ETF (NYSE: IWF) rebounded after trading to a high of $277.46. Lower resistance at $277-$277.50 was cleared but held. A move above the latter would suggest upside towards $279-$279.50 with last Wednesday’s all-time peak at $280.37.

Support is at $275.50-$275 followed by $273-$272.50.

RSI is back in an uptrend with key resistance at 60 getting cleared and holding. Continued closes above this level would suggest strength towards 65-70. Support is at 55-50.

Sector

The Materials Select Sector Spider Fund (NYSE: XLB) snapped a two-session slide with the intraday high hitting $80.83. New and lower resistance at $80.50-$81 was breached but held. A move above the latter would suggest a retest towards $82.50-$83.

Shaky support is at $79.50-$79.

RSI is back in a slight uptrend with key resistance at 40 getting cleared but holding. Continued closes above this level would signal further upside towards 45-50. Support is at 35-30.

Market Outlook

Tuesday’s rebound was kinda surprising, but then again it wasn’t, as traders came in and bought the dip, once again. Today will be a better indicator if yesterday’s action was a dead cat bounce or a return to fresh all-time highs over the near-term.

The fact the VIX closed back below 20 tends to support the bulls as this level has held for two months, aside from two trading sessions. I have been talking about the range bound action between 15-20 for awhile and why it has been difficult to get a true reading on the fear index. It will be important, however, to see a close back below the 50-day moving average if the bulls want to keep momentum.

Momentum Options Play List

Closed Momentum Options Trades for 2021: 19-11 (63%). 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, $27.91, up $0.12)

T August 27 puts (T210820P00027000, $0.33, down $0.09)

Entry Price: $0.42 (7/19/2021)
Exit Target: $0.85
Return: -21%
Stop Target: None

Action: Shares traded to a high of $28.18 with lower resistance at $28-$28.25 getting cleared but holding. Support is at $27.75-$27.50.

GoDaddy (GDDY, $84.39, up $1.09)

GDDY August 97.50 calls (GDDY210820C00097500, $0.30, up $0.05)

Entry Price: $1.20 (7/7/2021)
Exit Target: $2.40
Return: -75%
Stop Target: None

Action: Tuesday’s peak reached $85.09 with current and lower resistance at $85-$85.50 getting cleared but failing to hold. Support is at $84-$83.50 and the 50-day moving average.

Himax Technologies (HIMX, $13.38, down $0.52)

HIMX August 20 calls (HIMX210820C00020000, $0.10, unchanged)

Entry Price: $1.00 (6/30/2021)
Exit Target: $2.00
Return: -90%
Stop Target: None

Action: Shares fell for the sixth-straight session after trading down to $13.17. Upper support at $13.25-$13 and the 50-day moving average were breached but levels that held for the second-straight session. Resistance is at $13.75-$14.

Canoo (GOEV, $8.51, up $0.18)

GOEV August 10 calls (GOEV210820C00010000, $0.30, unchanged)

Entry Price: $1.10 (6/30/2021)
Exit Target: $2.20
Return: -73%
Stop Target: None

Action: Yesterday’s high hit $8.64 with lower resistance at $8.50-$8.75 getting recovered. Support is at $8.25-$8.

Marathon Oil (MRO, $11.34, up $0.22)

MRO August 15 calls (MRO210820C00015000, $0.08, unchanged)

Entry Price: $0.70 (6/25/2021)
Exit Target: $1.40
Return: -89%
Stop Target: None

Action: Shares snapped a five session slide with the intraday high reaching $11.51. Fresh and lower resistance at $11.50-$11.75 was breached but held. Support is at $11.25-$11.

Ford Motor (F, $13.91, up $0.63)

F August 18 calls (F210820C00018000, $0.07, up $0.02)

Entry Price: $0.55 (6/9/2021)
Exit Target: $1.10
Return: -88%
Stop Target: None

Action: Tuesday’s high tagged $13.96 with lower resistance at $13.75-$14 getting recovered. Support is at $13.50-$13.25.