MomentumOptions.com Pre-Market Update for 8/19/2021
Fed Minutes Rock Wall Street
The stock market was cautious throughout Wednesday’s session and into the Federal Reserve’s July meeting minutes before a selloff ensued following a potential shift in monetary policy.
The minutes hinted central bankers will consider reducing the Fed’s mortgage-backed purchase program, likely by the end of the year, but also suggested interest rates could still stay near zero for some time. The latter comments didn’t matter as sellers emerged to push the major indexes lower for the second-straight session.
The Dow ended at 34,960 (-1.1%) with the low kissing 34,943. Key support at 35,000 failed to hold. Continued closes below this level will likely lead to a retest towards 34,750-34,500 and the 50-day moving average.
The S&P 500 tested a low of 4,397 before finishing at 4,400 (-1.1%). Crucial support at 4,400 was breached but held by a quarter-point. A close below this level would signal additional weakness towards 4,375-4,350 and the 50-day moving average.
The Nasdaq tumbled to a late day low of 14,516 before closing at 14,525 (-0.9%). Current and upper support at 14,650-14,500 and the 50-day moving average failed to hold. A move below the latter would signal additional risk towards 14,350-14,200.
The Russell 2000 settled at 2,158 (-0.8%) with the afternoon low reaching 2,157. Prior and upper support at 2,175-2,150 was breached and failed to hold. A close below the latter would suggest ongoing weakness towards 2,125-2,100 with the July low at 2,107. Below is a chart of the IWM.
Shares of Lowe’s (LOW) jumped nearly 10% after posting better-than-expected numbers. The company reported a profit of $4.25 a share on revenue of $27.6 billion versus forecasts for $4.00 a share on sales of $26.8 billion.
The Volatility Index (VIX) was up for the fourth-straight session after soaring to a high of 21.64. Prior and lower resistance at 21.50-22 was cleared and held. A move above the latter would signal strength towards 23-23.50.
Fresh support is at 21-20.50 and the 200-day moving average.
The iShares Russell Growth 1000 ETF (NYSE: IWF) fell for the second-straight session with the low reaching $278.82. Prior and upper support at $279-$278.50 was tripped but held. A move below the latter would suggest a further slide towards $277-$276.50.
Resistance is at $280-$280.50 with the late July all-time peak at $284.47.
RSI is in a downtrend key support at 50 failing to hold. Continued closes below this level would suggest weakness towards 45-40 and levels from mid-May. Resistance is at 55-60.
The Real Estate Select Sector SPDR Fund (NYSE: XLRE) has its five-session winning streak snapped following the pullback to $46.33. Upper support at $46.50-$46 was breached and failed to hold. A close below the latter would suggest additional weakness towards $45.50-$45 and the 50-day moving average.
Key resistance is at $47 with the all-time high from earlier this month at $47.01.
RSI is back in a downtrend with key support at 50 holding. A close below this level would suggest weakness towards 45 and the mid-May low. Resistance is at 55-60.
The VIX closed above 20 for the first time in 21 trading sessions and for just the the third time in 61 trading sessions. The previous two times saw the VIX close back below this level the very next day and signaled near-term tops. I have said continued closes above 20 would indicate a possible trend change so today will be an important test for the bears.
Personally, I would like to see a deeper pullback in the market with the VIX making higher highs as it would be a clear signal to continue adding bearish positions. After a rough two months, we are getting better setups with our current trades and I’m looking for this trend to continue.
With that said, I could have 1-2 new trades today if this scenario continues to play out. In the meantime, I have set a Stop Limit on JBLU and WU has started off strong. I’m hoping JDSU can continue to show strength despite the current environment and I would like to see SWBI recover the $24 level this week. If I take additional action, I will send out a Trade Alert, so stay locked-and-loaded.
Momentum Options Play List
Closed Momentum Options Trades for 2021: 20-17 (54%). 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.
Western Union (WU, $21.91, down $0.42)
WU September 22 puts (WU210917P00022000, $0.70, up $0.15)
Entry Price: $0.55 (8/17/2021)
Exit Target: $1.10
Stop Target: None
Action: Shares tested a low of $21.89 with longer-term and upper support at $22-$21.75 failing to hold. Lowered resistance is at $22.25-$22.50.
JetBlue Airways (JBLU, $14.53, down $0.23)
JBLU September 14 puts (JBLU210917P00014000, $0.52, up $0.04)
Entry Price: $0.40 (8/9/2021)
Exit Target: $0.80
Stop Target: 42 cents (Stop Limit)
Action: Set an initial Stop Limit at 42 cents to start protecting profits and to avoid a loss.
Wednesday’s low tapped $14.49 with upper support at $14.50-$14.25 getting breached but holding. Lowered resistance is at $14.75-$15.
Juniper Networks (JNPR, $28.83, up $0.43)
JNPR September 30 calls (JNPR210917C00030000, $0.45, up $0.15)
Entry Price: $0.55 (8/3/2021)
Exit Target: 1.10
Stop Target: None
Action: Shares snapped a two-session slide with the 52-week high reaching $29.43 and the calls trading up to 60 cents. Fresh and lower at $29.25-$29.50 was breached but held. Support is at $28.50-$28.25.
Smith & Wesson Brands (SWBI, $23.31, down $0.63)
SWBI September 30 calls (SWBI210917C00030000, $0.30, down $0.10)
Entry Price: $0.85 (8/3/2021)
Exit Target: $1.70
Stop Target: None
Action: Wednesday’s low hit $23.28 with upper support at $23.50-$23.25 failing to hold. Resistance is at $23.75-$24.