MomentumOptions.com Pre-Market Update for 8/20/2021
Market Mixed on Jobs Data
The stock market was mixed on Thursday with the broader market and Tech showing strength as new claims for unemployment benefits fell to a 17-month low. Initial claims for state unemployment benefits fell 29,000 to 348,000 versus forecasts for a print of 363,000.
It represented the fourth-straight weekly decline while sending claims to their lowest level since mid-March 2020. The four-week moving average fell to 19,000 to 377,750, also a 17-month low. The news wasn’t much help for the blue-chips and the small-caps with the latter falling for the sixth-straight session.
The S&P 500 settled at 4,405 (+0.1%) after trading to an intraday high of 4,418. Key resistance at 4,425 was challenged but held. A move back above this level would suggest a possible retest towards 4,400-4,475 with the recent all-time peak at 4,480.
The Nasdaq tapped a midday high of 14,610 while ending at 14,541 (+0.1%). Fresh and lower resistance at 14,650-14,850 was also challenged but held. A close above the latter and the prior Monday’s record high of 14,890 would be a bullish signal for a run towards 15,000-15,150.
The Dow tapped a low of 34,690 before finishing at 34,894 (-0.2%). Key support at 34,750 and the 50-day moving average were breached but levels that held. A close below the latter would be a bearish development for additional weakness towards 34,500-34,250 and levels from mid-July.
The Russell 2000 tested a low of 2,122 while closing at 2,132 (-1.2%). Prior and upper support from mid-July at 2,125-2,100 was breached but held on the close back below the 200-day moving average. A drop below the 2,100 level and the July low at 2,107 would signal a further slide towards 2,075-2,050 and levels from late March. Below is a chart of the IWM.
Shares of Macy’s (M) surged nearly 20% after announcing quarterly results. The company reported a profit of $1.29 a share on revenue of $5.65 billion versus forecasts of 14 cents and $4.98 billion, respectively.
The company also reinstated its regular quarterly dividend of 15 cents a share and authorized a $500 million share repurchase program.
The Volatility Index (VIX) was up for the fourth-straight session after jumping to a high of 24.74. Prior and lower resistance from last month at 24.50-25 was breached but held. A move above the latter and the July 19th high of 25.09 would indicate upside risk towards 27-27.50.
Support remains at 21-20.50 and the 200-day moving average.
The Wilshire 5000 Composite Index (NYSE: WLSH) was down for the fourth-straight session with the intraday low hitting 45,204. New and upper support at 45,250-45,000 and the 50-day moving average were tripped but levels that held. A close below the latter would likely suggest weakness towards 44,750-44,500 and levels from mid-July.
Resistance is at 45,500-45,750.
RSI (relative strength index) remains in a downtrend with upper support at 45-40 failing to hold. A close below the latter would likely signal weakness down to 35-30 and levels from last October. Resistance is at 50-55.
The Technology Select Sector Spider Fund (NYSE: XLK) rebounded despite tapping a low of $151.21. Prior and upper support from mid-July at $151.50-$151 was tripped but held. A close below the latter would suggest weakness towards $150-$149.50 and the 50-day moving average.
Resistance is at $154.50-$155 with the August 10th all-time peak at $154.72.
RSI is back in an uptrend with lower resistance at 55-60 holding. A move above the latter would signal strength towards 65-70. Key support is at 50.
The VIX closed above 20 in back-to-back sessions for the first time since May 21st and 20th. It also stayed above this level in the two previous sessions. Given the uncertainty ahead of Fed speak next week and the Jackson Hole meeting later this month, volatility could remain elevated heading into the weekend and to start next week.
On that note, it will be crucial for the bulls to continue to hold key support levels while keeping the small-caps from breaching its July low. If volatility clears 25 today, there is a good chance the recent selling pressure accelerates.
Futures were mildly lower late last night and economic news is light for today. While there was opening weakness yesterday, the bulls managed to hold down the fort. If there is a continued rebound, I have made a number of adjustments to our current trades so please take notice.
I’m hoping we can get three quick triple-digit returns ahead of the weekend and we nearly had one yesterday with JBLU. There is also the chance I could add another new trade today if the bears get aggressive 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.
Rite Aid (RAD, $15.14, down $0.44)
RAD September 15 puts (RAD210917P00015000, $1.00, up $0.22)
Entry Price: $0.82 (8/19/2021)
Exit Target: $1.65
Stop Target: None
Action: Shares traded a low of $14.93 with current and upper support at $15-$14.75 getting breached but holding. Resistance is at $15.25-$15.50.
A death-cross formed in late July with the 50-day moving average falling below the 200-day moving average. This is typically a bearish signal for lower lows. Shares traded near $16 on Wednesday and key resistance from late July with this level holding. This is why I wanted to get us into this trade as the prior rebound from July came off a low of $13.36.
The July 15th low reached $13.22 and I think shares could do a retest towards $13.25 over the near-term. If so, these put options will be $1.75 “in-the-money” for a quick 30-day or less double-up.
If shares fall below $13.22, there is a good chance a further fade towards $12.25-$12 comes into play and levels from last December. If reached, these put options would be worth $2.75-$3 for a gain of over 200%.
Western Union (WU, $21.67, down $0.24)
WU September 22 puts (WU210917P00022000, $0.90, up $0.20)
Entry Price: $0.55 (8/17/2021)
Exit Target: $1.10, raise to $1.65 (Limit Order on half)
Stop Target: 70 cents (Stop Limit)
Action: Raise the Exit Target from $1.10 to $1.65 with a Limit Order on half. Yesterday’s high reached 96 cents. Set an initial Stop Limit 70 cents to start protecting profits and to avoid a loss.
Thursday’s low reached $21.50 with prior and upper support from late January at $21.75-$21.50 failing to hold. Lowered resistance is at $22-$22.25.
A death-cross has officially formed in the stock, as well, with the 50-day moving average falling below the 200-day moving average. I think shares could test $20.25-$20 on continued weakness and levels from last November. Shares are signaling oversold levels, however, with RSI closing below 30 and why we now have a Stop Limit in place.
JetBlue Airways (JBLU, $14.11, down $0.42)
JBLU September 14 puts (JBLU210917P00014000, $0.70, up $0.18)
Entry Price: $0.40 (8/9/2021)
Exit Target: $0.80, raise to $1.00 (Limit Order on half)
Stop Target: 42 cents, raise to 52 cents (Stop Limit)
Action: Raise the Exit Target from 80 cents to $1.00 with a Limit Order on half. Yesterday’s high hit 79 cents. Raise the Stop Limit at 42 cents to 52 cents to further protect profits.
Yesterday’s low tagged $13.96 with key support at $14 getting breached but holding. A close below this level and the July 19th low of $13.93 reopens downside risk towards $13.75-$13.50 and levels from last November. Lowered resistance is at $14.25-$14.50.
Juniper Networks (JNPR, $29.02, up $0.19)
JNPR September 30 calls (JNPR210917C00030000, $0.55, up $0.10)
Entry Price: $0.55 (8/3/2021)
Exit Target: $1.10
Stop Target: None
Action: Shares tapped another 52-week high of $29.67 with the calls trading up to 70 cents. Fresh and lower at $29.50-$29.75 was breached but held. Rising support is at $28.75-$28.50.
Smith & Wesson Brands (SWBI, $23.17, down $0.14)
SWBI September 30 calls (SWBI210917C00030000, $0.30, unchanged)
Entry Price: $0.85 (8/3/2021)
Exit Target: $1.70
Stop Target: None
Action: Thursday’s low reached $22.88 with upper support at $23-$22.75 holding. Resistance is at $23.25-$23.50.