MomentumOptions.com Pre-Market Update for 8/3/2021

Blue-Chips Hit Fresh High on Overall Pullback

8:00am (EST)

The stock market was mostly lower on Monday and the first trading session for August following slightly weaker-than-expected economic news. Specifically, the ISM manufacturing index dropped -1.1 points to 59.5 in July versus forecasts for a print of 60.8 while construction spending edged up just 0.1% in June.

The pullback still kept the major indexes near-the top of their recent trading ranges with the blue-chips setting a new record high. Meanwhile, volatility eased higher following the choppy session but held a key level of resistance.

The Nasdaq was the only index that showed strength after reaching a peak of 14,770 before ending at 14,681 (+0.1%). Current and lower resistance at 14,700-14,850 was cleared but held. A close above the latter and last Monday’s all-time high at 14,863 gets a push towards 15,000-15,150 back in focus.

The Russell 2000 closed at 2,215 (-0.5%) with the late day low hitting 2,212. Near-term and upper support at 2,225-2,200 failed to hold. A move below the latter would suggest a retest towards 2,150-2,125. Below is a chart of the IWM.

The Dow finished at 34,838 (-0.3%) despite tapping a lifetime high of 35,192. Key resistance at 35,150 was tripped but held. Continued closes above this level would indicate additional strength towards 35,250-35,500.

The S&P 500 settled at 4,387 (-0.2%) with the afternoon low kissing 4,384. Upper support at 4,375-4,350 was challenged but held. A close below the latter would signal a further fade towards 4,325-4,300 and the 50-day moving average.

Market Movers

Shares of Australia’s Afterpay (AFTPF) surged 30% after agreeing to be acquired by Square (SQ) in an all-stock deal worth $29 billion.

Volatility Index

The Volatility Index (VIX) was up for the second-straight session with the midday high reaching 19.87. Lower resistance at 19.50-20 was breached but held. A close above the latter would indicate additional upside towards 21.50-22 and the 200-day moving average.

Support remains at 18-17.50 and the 50-day moving average.

Market Analysis

The Invesco QQQ Trust (Nasdaq: QQQ) was up for the third time in four sessions after tagging a high of $366.88. Current and lower resistance at $366.50-$367 was cleared but held. A close above the latter would indicate a retest towards $368.50-$369 with last Monday’s all-time peak at $368.89.

Support is at $364-$363.50 followed by $360.50-$360.

RSI (relative strength indicator) has leveled out with lower resistance at 65-70 getting challenged but holding. A close above the latter would suggest additional strength towards 75-80 and prior overbought levels from early July. Support is at 60-55.

Sector

The Consumer Discretionary Select Spiders (NYSE: XLY) rebounded with the intraday high tapping $182.38. Near-term and lower resistance at $182-$182.50 was tripped but held. A close above the latter would likely suggest a retest towards $183.50-$184 with the recent all-time top at $184.69.

Support is at $180.50-$180 followed by $179-$178.50.

RSI is back in a slight uptrend with lower resistance at 55-60 holding. A close above the latter would signal strength towards 65-70 and levels from mid-June. Support is at 50-45.

Market Outlook

Once again, we will be watching the VIX today to see if the 20 level holds. Here is a look at the key earnings for today.

Before the open: Bausch Health Companies (BHC), Clorox (CLX), Discovery Communications (DISCA), Eli Lilly & Co. (LLY), Nikola (NKLA), Pitney Bowes (PBI), Ralph Lauren (RL), Sealed Air (SEE), TopBuild (BLD), Under Armour (UAA), Warner Music Group (WMG), and Zebra Technologies (ZBRA).

After the close: Activision Blizzard (ATVI), Amgen (AMGN), Big 5 Sporting Goods (BGFV), Container Store Group (TCS), Denny’s (DENN), Green Dot (GDOT), Herbalife Nutrition (HLF), Jazz Pharmaceuticals (JAZZ), Lattice Semiconductor (LSCC), Match Group (MTCH), Noodles & Company (NDLS), Paycom Software (PAYC), Public Storage (PSA), Radian Group (RDN), Tanger Factory Outlet (SKT), and Veeco Instruments (VECO).

Momentum Options Play List

Closed Momentum Options Trades for 2021: 19-15 (56%). 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.

Cisco Systems (CSCO, $55.45, up $0.08)

CSCO August 57 calls (CSCO210820C00057000, $0.72, up $0.02)

Entry Price: $0.65 (7/29/2021)
Exit Target: $1.30
Return: 10%
Stop Target: None

Action: Shares extended their winning streak to three-straight sessions after testing a fresh 52-week peak of $55.94 with the options peaking at 90 cents. Lower resistance at $55.50-$56 was cleared but held. A close above the latter would be a bullish signal for a breakout towards $57-$57.50. Support remains at $55-$54.50.

International Game Tech (IGT, $18.98, up $0.23)

IGT August 22 calls (IGT210820C00022000, $0.30, up $0.05)

Entry Price: $0.70 (7/21/2021)
Exit Target: $1.40
Return: -57%
Stop Target: None

Action: Shares snapped a four-session slide with Monday’s high hitting $19.67. Lower resistance at $19.50-$19.75 was cleared but held. Support remains at $18.75-$18.50.

Earnings are due out before this morning. I would like to see a close above $21.50 on a better-than-expected quarter. If shares tumble below $18.25-$18 we could be forced to exit the position.

GoDaddy (GDDY, $85.00, up $1.15)

GDDY August 97.50 calls (GDDY210820C00097500, $0.20, up $0.05)

Entry Price: $1.20 (7/7/2021)
Exit Target: $2.40
Return: -84%
Stop Target: None

Action: Prior and lower resistance at $85.50-$86 was cleared but held on the run to $ 85.91 yesterday. Support is at $84.50-$84 and the 50-day moving average.

Earnings are due out after Wednesday’s close.

Canoo (GOEV, $7.99, down $0.14)

GOEV August 10 calls (GOEV210820C00010000, $0.10, down $0.05)

Entry Price: $1.10 (6/30/2021)
Exit Target: $2.20
Return: -91%
Stop Target: None

Action: Shares remain in a seven-session trading range with Monday’s low tapping $7.97. Key support at $8 failed to hold by a penny. Resistance is at $8.25-$8.50.