MomentumOptions.com Pre-Market Update for 8/13/2021
Dow/ S&P 500 Hit Third-Straight Record Closes
The stock market showed continued strength on Thursday despite underwhelming economic news with producer prices coming in hotter than expected. The PPI for July jumped 7.8%, a record high, while initial claims fell 12,000 to 375,000, matching expectations.
The action was slightly choppy with the major indexes trading on both sides of the ledger and the small-caps failing to keep pace into the closing bell. The slow grind higher remains a bullish signal over the near-term with volatility slipping for the second-straight session.
The Nasdaq snapped a two-session slide after testing a late day high of 14,824 while ending at 14,816 (+0.4%). Key resistance at 14,900 easily held. A close above this level and the recent lifetime top at 14,896 would indicate a breakout towards 15,000-15,150.
The S&P 500 hit a record high of 4,461 before finishing at 4,460 (+0.3%). Key resistance at 4,450 was cleared and held. Continued closes above this level would suggest additional momentum towards 4,475-4,500.
The Dow tagged an all-time peak of 35,510 while closing at 35,499 (+0.04%). Current and key resistance at 35,500 was cleared but held for the second-straight session. A close above this level would be a bullish signal for additional gains towards 35,750-36,000.
The Russell 2000 traded to a morning low of 2,232 while going out at 2,244 (-0.3%). Key support at 2,225 was challenged but held. A move below this level would signal another fade towards 2,200-2,175. Below is a chart of the IWM.
Shares of Palantir (PLTR) rose 11% after topping Wall Street’s expectations. The company reported a profit of four cents a share on revenue of $375 million versus forecasts for three cents and $353 million, respectively.
Palantir also said it added 20 new customers in the second quarter with total customers up 13% quarter-over-quarter.
The Volatility Index (VIX) tested a low of 15.49 with prior and upper support at 15.50-15 getting breached but holding. A move below the latter would suggest a further backtest towards 14.50-14 with the late June 52-week low at 14.10.
Lowered resistance is at 16-16.50 followed by 17-17.50 and the 50-day moving average.
The S&P 400 Mid Cap Index (NYSE: MID) had its two-session winning streak snapped following the pullback to 2,724. Current and upper support at 2,725-2,700 was tripped but held. A close below the latter and the 50-day moving average would signal further weakness towards 2,675-2,650.
Resistance is at 2,750-2,775 with the all-time high from early May at 2,780.
RSI (relative strength index) has rolled over with upper support at 55-50 holding. A move below the latter would suggest weakness towards 45-40 and levels from mid-July. Resistance is at 60-65.
The Materials Select Sector Spider Fund (NYSE: XLB) also fell for the first time in three session with the intraday low hitting $85.60. Near-term and upper support at $86-$85.50 was breached but held. A move below the latter would suggest a retest towards $84.50-$84.
Resistance is at $86.50-$87.
RSI is back in a slight downtrend with upper support at 65-60 holding. A close below the latter would indicate further downside towards 55-50 with the latter holding since mid-July. Resistance is at 70-75.
The Dow is up 291 points for the week; the S&P 500 is higher by 24 points; the Nasdaq is down 19 points; and the Russell 2000 is off 3 points. Futures were slightly lower after midnight so the weekly win between the bulls and bears is still up for grabs.
I talked about a slower grind higher this week on tight action with higher record highs and key support levels holding remaining bullish setups for the major indexes. An old Wall Street adage is never to short a dull market and the action could remain this way for another week or so.
Unfortunately, tight trading ranges are not great news for options as time decay becomes an important factor. The good news is we only have one August position in play and a few open trades for September. The one thing I don’t like is the fact the September options are expiring on the 17th as the third Thursday is occurring mid-month.
It is also another reason I haven’t opened a few more positions this week as I want to target October for newer trades. However, we need to see if one final breakout is coming for the Nasdaq, and higher highs are in store for the small-caps.
My forecasts from early July and more in-depth research on the charts has penciled-in Dow 36,000; S&P 4,500-4,525; and the Nasdaq clearing the 15,000 level. I’ve also said if the VIX can get continued closes below the 15 level that there is a good chance the 13.50 area comes into play.
If all of these scenarios play out by month end, or into September, that is when I would expect the market to take a breather with a possible 5%-10% pullback afterwards.
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.
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JetBlue Airways (JBLU, $15.60, down $0.23)
JBLU September 14 puts (JBLU210917P00014000, $0.30, up $0.03)
Entry Price: $0.40 (8/9/2021)
Exit Target: $0.80
Stop Target: None
Action: Thursday’s low kissed $15.38 with upper support at $15.50-$15.25 getting breached but holding. Resistance is at $15.75-$16.
Juniper Networks (JNPR, $28.50, up $0.10)
JNPR September 30 calls (JNPR210917C00030000, $0.40, unchanged)
Entry Price: $0.55 (8/3/2021)
Exit Target: $1.10
Stop Target: None
Action: Shares tapped a high of $28.51 with lower resistance at $28.50-$28.75 getting cleared and holding. Support remains at $28.25-$28.
Smith & Wesson Brands (SWBI, $24.61, down $0.10)
SWBI September 30 calls (SWBI210917C00030000, $0.55, down $0.05)
Entry Price: $0.85 (8/3/2021)
Exit Target: $1.70
Stop Target: None
Action: Upper support at $24.50-$24.25 was breached but held on the fade to $ 24.47 yesterday. Resistance is at $25-$25.25 and the 50-day moving average.
International Game Tech (IGT, $20.12, up $0.16)
IGT August 22 calls (IGT210820C00022000, $0.15, unchanged)
Entry Price: $0.70 (7/21/2021)
Exit Target: $1.40
Stop Target: None
Action: Shares extended their winning streak to six-straight sessions with the high tagging $20.13. Near-term and lower resistance at $20-$20.25 was cleared and held. Support is at $19.75-$19.50.
The close above $20 was slightly bullish but these options expire a week from today. I would like to see a close above $20.75-$21 today.
There was heavy volume in these options and the 23 call strike yesterday so there is still a slight chance we can recover some more of the premium next week. However, if shares close below $19 today, or Monday, we will likely have to close the position.