MomentumOptions.com Pre-Market Update for 7/22/2021

Prior Resistance Levels in Focus

8:00am (EST)

The stock market showed continued strength on Wednesday following upbeat earnings from two blue-chips companies along with a rise in yields. Specifically the 10-year Treasury yield rose to nearly 1.3% after tapping a five-month low on Monday while stabilizing on Tuesday.

The drop in rates caught Wall Street by surprise and remains a possible sign of a slowing economy due to the new coronavirus variant. The gains helped recover the losses from Monday for all of the major indexes.

The Russell 2000 led the rally for the second-straight session after closing at 2,234 (+1.8%) with the high at 2,236. Prior and lower resistance at 2,225-2,250 was cleared and held. A move above the latter and the 50-day moving average would suggest a retest towards 2,275-2,300. Below is a chart of the IWM.

The Nasdaq traded to a high of 14,633 before finishing at 14,631 (+0.9%). Lower resistance at 14,500-14,650 was recovered. A pop above the latter would indicate another run towards 14,850-15,000 with the recent all-time peak at 14,803.

The S&P 500 topped out at 4,359 before ending at 4,358 (+0.8%). Key resistance at 4,350 was cleared and held. Continued closes above this level keeps additional upside towards 4,375-4,400 in play with last week’s record high at 4,393.

The Dow settled at 34,681 (+0.8%) following the late day bounce to 34,708. Key resistance at 34,750 was breached and held. Continued closes above this level would signal another push towards 35,000 with the record peak from early May at 35,091.

Market Movers

Shares of NeuroMetrix zoomed another 107%, extending Tuesday’s 208% surge, after the company announced that its Quell device has received Breakthrough Designation from the FDA for treating the symptoms of fibromyalgia in adults. Fibromyalgia is a form of chronic pain that affects up to 15 million people.

Shares closed at $3.26 on Monday with yesterday’s peak hitting $38.67. The stock has been on my Biotech radar for months, but unfortunately, it does not trade options.

Volatility Index

The Volatility Index (VIX) was down for the second-straight session after testing a low of 17.81. Fresh and upper support at 18-17.50 and the 50-day moving average was tripped and held. A move below the latter would suggest weakness towards 16.50-16.

Resistance is at 19.50-20 followed by 21-21.50.

Market Analysis

The Wilshire 5000 Composite Index (NYSE: WLSH) showed continued strength with the peak reaching 45,469. Lower resistance at 45,250-45,500 was cleared and held. A move above the latter would indicate additional momentum towards 45,750-46,000 with this month’s record high at 45,800.

Support is at 45,000-44,750 followed by 44,500-44,250 and the 50-day moving average.

RSI (relative strength index) is in an uptrend with lower resistance at 55-60 getting cleared and holding. A close above the latter could lead to another trip toward 65-70 and the highs from earlier this month. Key support is at 50.

Sector

The Financial Select Sector Spider Fund (NYSE: XLF) extended its winning streak to two-straight sessions after trading to an intraday peak of $36.78. Prior and lower resistance at $36.50-$37 was recovered. A close above the latter and the 50-day moving average would indicate additional strength towards $37.50-$38 with the all-time peak from early June at $38.60.

Rising support is at $36-$35.50.

RSI is 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.

Market Outlook

The 16 level on the VIX has been holding for the past 12 sessions following the July 6th close. If the bulls can clear this level by today or Friday’s closing bell, it should confirm another round of fresh all-time highs.

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.

International Game Tech (IGT, $20.42, up $1.02)

IGT August 22 calls (IGT210820C00022000, $0.80, up $0.28)

Entry Price: $0.70 (7/21/2021)
Exit Target: $1.40
Return: 14%
Stop Target: None

Action: Wednesday’s peak reached $20.52 with new and lower resistance at $20.50-$20.75 getting cleared but holding. Support is at $20-$19.75.

Shares were extremely oversold on Monday’s pullback and why I like this trade. I would like to see a continued run towards $22 by the end of the week and prior support levels.

If recovered, shares should continue to show strength for a retest towards $23.50 and the 50-day moving average. This would be enough to get us a triple-digit winner, if achieved, as the options would be at least $1.50 in-the-money.

AT&T (T, $27.90, down $0.01)

T August 27 puts (T210820P00027000, $0.33, unchanged)

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

Action: Shares traded to a high of $28.30 before ending slightly lower. Key resistance at $28.25 and the 200-day moving average were cleared but levels that held. Support remains at $27.75-$27.50.

There is risk/ reward to this trade with earnings out ahead of today’s opening bell. My original reason for getting into the position was the technical “death cross” setup and the downward sloping 50-day moving average.

The company has topped or matched forecasts over the past four quarters with Wall Street looking for a profit of 79 cents on revenue north of $42 billion. A miss on either number, or lowered guidance going forward, would likely be good news for us. However, earnings are always tricky to trade.

Shares fell below $27 in late February and where I would like to see them open this morning. A move above $29 could force us to reevaluate the position.

GoDaddy (GDDY, $85.43, up $1.04)

GDDY August 97.50 calls (GDDY210820C00097500, $0.30, unchanged)

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

Action: Wednesday’s peak hit $85.76 with near-term and lower resistance at $85.50-$86 getting breached but holding. Rising support is at $85-$84.50.

Himax Technologies (HIMX, $13.98, up $0.60)

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 snapped a six-session slide with the high kissing $14.04. Fresh and lower resistance at $14-$14.25 was cleared but held. Support is at $13.75-$13.50 and the 50-day moving average.

Canoo (GOEV, $8.74, up $0.23)

GOEV August 10 calls (GOEV210820C00010000, $0.35, up $0.05)

Entry Price: $1.10 (6/30/2021)
Exit Target: $2.20
Return: -68%
Stop Target: None

Action: Yesterday’s high tagged $8.79 with lower resistance at $8.75-$9 getting breached but holding. Support is at $8.50-$8.25.

Marathon Oil (MRO, $11.87, up $0.53)

MRO August 15 calls (MRO210820C00015000, $0.10, up $0.02)

Entry Price: $0.70 (6/25/2021)
Exit Target: $1.40
Return: -86%
Stop Target: None

Action: Shares topped out at $12.05 with new and lower resistance at $12-$12.25 getting cleared but holding. Support is at $11.75-$11.50.

Ford Motor (F, $14.19, up $0.28)

F August 18 calls (F210820C00018000, $0.08, up $0.01)

Entry Price: $0.55 (6/9/2021)
Exit Target: $1.10
Return: -85%
Stop Target: None

Action: Wednesday’s high reached $14.34 with lower resistance at $14.25-$14.50 and the 50-day moving average getting breached but holding. Rising support is at $14-$13.75.