MomentumOptions.com Pre-Market Update for 8/24/2021
Nasdaq, S&P 500 Back at Record Highs
The stock market showed continued strength on Monday after the Food and Drug Administration officially approved Pfizer’s (PFE) coronavirus vaccine. Mixed data, including better-than-expected housing numbers versus softer PMIs appeared to have little impact on stocks.
Energy led sector strength after jumping nearly 4% with oil stocks showing strong gains. Meanwhile, volatility fell for the second-straight session after closing back below a key level of support.
The Russell 2000 traded to a late day peak of 2,211 while settling at 2,208 (+1.9%). Fresh and lower resistance at 2,200-2,225 was cleared and held. A move above the latter would be a bullish development for another run at 2,250-2,275 and the 50-day moving average. Below is a chart of the IWM.
The Nasdaq extended its winning streak to three-straight sessions after finishing at 14,942 (+1.6%) while testing an all-time intraday high of 14,963. Key resistance at 14,850 was breached and held. Continued closes above this level keeps upside momentum towards 15,000-15,150 in focus.
The S&P 500 ended at 4,479 (+0.9%) with the record high hitting 4,489. Prior and lower resistance at 4,450-4,475 was recovered. Continued closes above the latter would indicate ongoing strength towards 4,500-4,525.
The Dow tapped a high of 35,428 while closing at 35,335 (+0.6%). Near-term and lower resistance at 35,250-35,500 was reclaimed. A move above the latter and the all-time top at 35,631 would suggest additional strength towards 35,750-36,000.
Shares of Trillium Therapeutics (TRIL), a clinical stage immuno-oncology company developing innovative therapies for the treatment of cancer, skyrocketed 188% following news it will be acquired by Pfizer (PFE). Under the terms of the deal, Pfizer will acquire all outstanding shares of Trillium not already owned for an implied equity value of $2.26 billion, or $18.50 per share.
The Volatility Index (VIX) was down for the second-straight session with the low hitting 16.95. Prior and upper support at 17-16.50 was breached but held on the close back below the 50-day moving average. A move below the latter reopens downside potential towards 15.50-15.
Lowered resistance is at 17.50-18 followed by 19-19.50.
The S&P 400 Mid Cap Index (NYSE: MID) tagged an afternoon high of 2,703. Key resistance at 2,700 was tripped but held on the close back above the 50-day moving average. A close above the former would signal further strength towards 2,725-2,750 with the all-time high from early May at 2,780.
Support is at 2,675-2,650.
RSI (relative strength index) remains in an uptrend after clearing and holding key resistance at 50. Continued closes above this level would signal strength towards 65-60 and levels from earlier this month. Support is at 45-40.
The Consumer Staples Select SPDR Fund (NYSE: XLP) was down for the first time in three sessions with the low reaching $72.50. Current and upper support at $72.50-$72 was kissed but held. A close below $71.50 would signal weakness towards $71-$70.50 and the 50-day moving average.
Resistance is at $73-$73.50 last Tuesday’s all-time peak at $73.25.
RSI is showing signs of rolling over after failing to hold key support at 60. Continued closes below this level would indicate downside action towards 55-50. Resistance is at 65-70 with the latter holding since early April.
We closed two bearish trades yesterday that puts us on a three-trade winning streak but I was disappointed the gains weren’t bigger. The action from Friday and Monday diminished some of the bearishness in the market from last week along with the VIX closing back below key support levels.
The buy-the-dip mentality has typically come on pullbacks of 5% for the S&P and the 2% slide was short lived with the index back at all-time highs. The VIX stayed above 20 for two-sessions but that was it. The good news though is that any profit is better than a loss and it was a good feeling to unload some of our September positions as they expire in a little over three weeks.
The regular October options have over seven weeks before they expire and what we will likely be using for new trades going forward. With that said, I still like all of our current September positions although SWBI has been a struggle.
The webinar I did to start the month showed the Nasdaq making a run past 15,000-15,250; the Dow making a push towards 35,500-36,000; and the S&P possibly trading up to 4,550-4,600 over the near-term. I also showed the possibility of the VIX testing the 13.50 area – providing the bulls can get continued closes below the 15 level.
The Fed update this weeks remains a slight wildcard but I’m sure they will likely delay tapering until the economy is truly out of the woods. At some point, there will be a major correction but we will have to be patient and trade what the market gives us in the meantime.
Momentum Options Play List
Closed Momentum Options Trades for 2021: 22-17 (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.
Keurig Dr Pepper (KDP, $35.06, up $0.24)
KDP October 36 calls (KDP211015C00036000, $0.55, up $0.05)
Entry Price: $0.55 (8/23/2021)
Exit Target: $1.10
Stop Target: None
Action: Lower resistance at $35-$35.25 and the 50-day moving average were cleared and held on the run to $35.15 yesterday. Support is at $34.75-$34.50.
A close above $35.50 would be a bullish signal for a retest towards $36-$37 with the current 52-week peak at $37.11. If shares do make fresh record highs between now and mid-October, these options will easily double from current levels.
Rite Aid (RAD, $16.69, up $0.65)
RAD September 15 puts (RAD210917P00015000, $0.40, down $0.20)
Entry Price: $0.82 (8/19/2021)
Exit Target: $1.65
Stop Target: None
Action: Shares traded to a high of $16.92 with prior and lower resistance at $16.75-$17 getting cleared but holding. Fresh support is at $16.25-$16 and the 50-day moving average.
Juniper Networks (JNPR, $29.22, up $0.15)
JNPR September 30 calls (JNPR210917C00030000, $0.45, unchanged)
Entry Price: $0.55 (8/3/2021)
Exit Target: $1.10
Stop Target: None
Action: Monday’s peak reached $29.40 with lower resistance at $29.25-$29.50 getting breached but holding. A close above $29.75 and last Thursday’s 52-week high at $29.67 should get a run past $30 in play. Rising support is at $29-$28.75.
Smith & Wesson Brands (SWBI, $23.63, up $0.13)
SWBI September 30 calls (SWBI210917C00030000, $0.25, unchanged)
Entry Price: $0.85 (8/3/2021)
Exit Target: $1.70
Stop Target: None
Action: Shares rose for the second-straight session with the high reaching $23.80. Lower resistance at $23.75-$24 was cleared but held. Support is at $23.50-$23.25.