MomentumOptions.com Pre-Market Update for 8/5/2021

Tech Stays Strong on Market Weakness

8:00am (EST)

The stock market was mostly lower on Wednesday following a slowdown in job growth last month while mixed earnings also weighed on sentiment. ADP reported private payrolls were up only 330,00 in July, missing expectations for a gain of 500,000. Meanwhile, the 692,000 rise in June was lowered to 680,000.

On the earnings front, General Motors (GM) fell nearly 9%, highlighting the uncertainty facing global automakers due to the supply chain disruption. Surprisingly, volatility was nearly unchanged after trading in a tighter range while holding key resistance levels.

The Nasdaq tested an intraday high of 14,812 before settling at 14,780 (+0.1%). Key resistance at 14,850 was challenged but held. A close above this level and the recent record high at 14,863 would indicate strength towards 15,000-15,150.

The Russell 2000 finished at 2,196 (-1.2%) with the low reaching 2,195 ahead of the closing bell. Upper support at 2,200-2,175 failed to hold. A move below the latter would suggest a retest towards 2,150-2,125 with the July low at 2,107. Below is a chart of the IWM.

The Dow traded to a late day low of 34,790 before ending at 34,792 (-0.9%). Current and upper support at 35,000-34,750 failed to hold. A drop below the latter would suggest a retest towards 34,500-34,250 and the 50-day moving average.

The S&P 500 tapped a low of 4,400 before finishing at 4,402 (-0.5%). Near-term and upper support at 4,400-4,375 was kissed but held. A fade below the latter would likely lead to additional weakness towards 4,350-4,325.

Market Movers

Shares of Robinhood Markets (HOOD) zoomed 50% while tagging a high of intraday high of $85. Trading was halted for volatility several times with the gains bringing its weekly return to more than 100+%. It appears the stock has become the latest meme play as options become available to trade.

Volatility Index

The Volatility Index (VIX) tested an intraday high of 18.90 before settling slightly in the red. Lowered resistance at 18.50-19 was cleared but held. A close above the latter would suggest a retest towards 20-20.50.

The pullback to 17.67 afterwards recovered upper support at 18-17.50. A close below 17.25 and the 50-day moving average would be a more bullish development going forward.

Market Analysis

The Spider Small-Cap 600 ETF (NYSE: SLY) was down for the third time in four sessions with the afternoon low reaching $93.94. Current and upper support at $94-$93.50 failed to hold. A move below the latter would indicate additional weakness towards $93-$92.50.

Support is at $95-$95.50 followed by $96-$96.50 and the 50-day moving average.

RSI (relative strength indicator) is back in a downtrend with upper support at 45-40 holding. A close below the latter would suggest additional weakness towards 35-30 and levels from mid-July. Key resistance is at 50.

Sector

The SPDR S&P Homebuilders ETF (NYSE: XHB) retreated despite tagging a morning peak of $76.74. Lower resistance at $76.50-$77 was cleared but held.

Upper support at $75.50-$75 was approached but held on the backtest to $75.67 afterwards.

RSI is back in a downtrend with key support at 60 failing to hold. Continued closes below this level would signal downside risk towards 55-50. Resistance is at 65.

Market Outlook

A closer look at the charts show the major indexes have been range bound for nine-straight sessions with the small-caps being more volatile than the others.

Momentum Options Play List

Closed Momentum Options Trades for 2021: 20-16 (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.

Juniper Networks (JNPR, $28.55, down $0.50)

JNPR September 30 calls (JNPR210917C00030000, $0.50, down $0.10)

Entry Price: $0.55 (8/3/2021)
Exit Target: $1.10
Return: -9%
Stop Target: None

Action: Fresh and upper support at $28.50-$28.25 was kissed but held on the session low. There is retest potential towards $28-$27.75 on a close below the latter. Resistance is at $28.75-$29.

Smith & Wesson Brands (SWBI, $24.93, down $0.31)

SWBI September 30 calls (SWBI210917C00030000, $0.80, down $0.10)

Entry Price: $0.85 (8/3/2021)
Exit Target: $1.70
Return: -6%
Stop Target: None

Action: Current and upper support at $25-$24.75 and the 50-day moving average failed to hold the pullback to $24.61. Resistance is at $25.25-$25.50.

International Game Tech (IGT, $18.10, down $1.02)

IGT August 22 calls (IGT210820C00022000, $0.15, down $0.10)

Entry Price: $0.70 (7/21/2021)
Exit Target: $1.40
Return: -78%
Stop Target: None

Action: Prior and upper support at $18-$17.75 was challenged but held with the session low reaching $18.06. A close below the latter and the 200-day moving average will likely force us to close the position. Lowered resistance is at $18.25-$18.50.

GoDaddy (GDDY, $83.50, down $0.55)

GDDY August 97.50 calls (GDDY210820C00097500, $0.15, down $0.05)

Entry Price: $1.20 (7/7/2021)
Exit Target: $2.40
Return: -89%
Stop Target: None

Action: Close the trade this morning to save the remaining premium. Shares were below $80 in after-hours last night after the company missed earnings.