MomentumOptions.com Pre-Market Update for 8/12/2021

Inflation Eases as Market Maintains Momentum

8:00am (EST)

The stock market was mostly higher on Wednesday following news U.S. inflation growth may have peaked. Specifically, the consumer price index increased 0.5% last month after rising 0.9% in June, the largest drop for inflation data in 15 months.

This helped ease concerns about the potential for runaway inflation with the broader market and the blue-chips setting another round of record highs. Tech struggled after falling for the third time in four sessions while volatility eased for the first time in three sessions.

The Dow finished at 35,484 (+0.6%) after tapping a record high of 35,501. Fresh and key resistance at 35,500 was cleared but held. A close above this level would indicate additional upside towards 35,750-36,000.

The Russell 2000 ended at 2,250 (+0.5%) and the session peak. Key resistance at 2,250 was recovered. Continued closes above this level and the 50-day moving average would suggest a retest towards 2,275-2,300. Below is a chart of the IWM.

The S&P 500 kissed a lifetime high of 4,449 shortly after the opening bell before settling at 4,447 (+0.3%). New resistance at 4,450 was challenged but held for the second-straight session. A pop above this level would signal ongoing strength towards 4,475-4,500.

The Nasdaq closed at 14,765 (-0.2%) after trading to an intraday low of 14,692. Key support at 14,750 was breached but held. A close below this level would likely lead to a further pullback towards 14,650-14,500.

Market Movers

Shares of Doximity (DOCS) jumped 33% following better-than-expected earnings. The company reported a profit of 11 cents a share on revenue of nearly $73 million versus forecasts of 7 cents and $36 million, respectively.

Doximity provides professional networking and telehealth tools for medical professionals.

Volatility Index

The Volatility Index (VIX) fell to its lowest level since mid-July after trading down to 15.87. Prior and upper support at 16-15.50 was tripped but held. A close below the latter would be a bullish signal for the overall market with further weakness towards 15-14.50.

Resistance is at 17-17.50 and the 50-day moving average.

Market Analysis

The Invesco QQQ Trust (Nasdaq: QQQ) was down for the third time in four sessions after tagging a low of $364.84. Current and upper support at $365-$364.50 was breached but held. A close below the latter would indicate additional weakness towards $363-$362.50.

Resistance is at $368-$368.50 with last Thursday’s all-time peak at $369.91.

RSI (relative strength indicator) is in a downtrend after failing to hold key support at 60. Continued closes below this level would suggest additional weakness towards 55-50 and prior levels from late July. Resistance is at 65-70.

Sector

The Utilities Select Spider Fund (NYSE: XLU) was up for the second-straight session after trading to an all-time high of $68.44. Fresh and lower resistance at $68-$68.50 was cleared and held. A move above the latter would suggest additional strength towards $69.50-$70.

Rising support is at $67.50-$67.

RSI is in an uptrend with key resistance at 70 holding. A close above this level would suggest ongoing strength towards 75-80 and levels from mid-April. Support is at 65-60.

Market Outlook

The Producer Prices Index comes into focus this morning and will likely set the tone for today’s action. Producer prices measure the prices paid to producers as opposed to prices on the consumer level and is expected to come in at 0.6%.

The VIX is back at mid-July levels after hitting an August low and once again faces another key test at 15. For new subscribers, I have continually mentioned over the past few months, it would be a very bullish signal for the market if we can get continued closes below this level. Although this level was breached several times in late June and early July, the bulls have not been able to get a close below 15 since February 2020.

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.

JetBlue Airways (JBLU, $15.83, up $0.33)

JBLU September 14 puts (JBLU210917P00014000, $0.27, down $0.06)

Entry Price: $0.40 (8/9/2021)
Exit Target: $0.80
Return: -32%
Stop Target: None

Action: Shares hit a high of $15.86 with prior and lower resistance at $15.75-$16 getting recovered. Support is at $15.50-$15.25.

Juniper Networks (JNPR, $28.40, up $0.18)

JNPR September 30 calls (JNPR210917C00030000, $0.40, unchanged)

Entry Price: $0.55 (8/3/2021)
Exit Target: $1.10
Return: -27%
Stop Target: None

Action: Yesterday’s peak reached $28.55 with lower resistance at $28.50-$28.75 getting cleared but holding. Support is at $28.25-$28.

Smith & Wesson Brands (SWBI, $24.71, down $0.08)

SWBI September 30 calls (SWBI210917C00030000, $0.60, down $0.05)

Entry Price: $0.85 (8/3/2021)
Exit Target: $1.70
Return: -29%
Stop Target: None

Action: Shares remain in a seven-session trading range following the pullback to $24.07. Upper support at $24.25-$24 was breached but held. Resistance remains at $25-$25.25 and the 50-day moving average.

International Game Tech (IGT, $19.95, up $0.07)

IGT August 22 calls (IGT210820C00022000, $0.15, unchanged)

Entry Price: $0.70 (7/21/2021)
Exit Target: $1.40
Return: -79%
Stop Target: None

Action: Shares were up for the fifth-straight session with the intraday high reaching $20.04. Near-term and lower resistance at $20-$20.25 was cleared but held. Support is at $19.75-$19.50.