MomentumOptions.com Pre-Market Update for 8/25/2021

Nasdaq Closes Above 15,000

8:00am (EST)

The stock market showed continued strength on Tuesday as better-than-expected economic news fueled bullish sentiment ahead of the much-anticipated Jackson Hole Symposium later in the week. Specifically, new home sales rose 1% to 708,000 in July following the -2.6% drop to 701,000 in June to snap a string of three-straight monthly declines.

The gains pushed Tech and the broader market to another round of all-time highs with the small-caps showing the most strength for the third-straight session. Volatility traded in a tighter range while closing slightly higher but held a key level of resistance.

The Russell 2000 closed 2,230 (+1%) with the intraday peak tapping 2,232. Prior and lower resistance from earlier this month at 2,225-2,250 was reclaimed. A close above the latter and the 50-day moving average would indicate additional strength towards 2,275-2,300. Below is a chart of the IWM.

The Nasdaq tagged a record high of 15,034 before settling at 15,019 (+0.5%). Unchartered territory and lower resistance at 15,000-15,150 was cleared and held. A pop above the latter would be an ongoing bullish development for upside towards 15,200-15,350.

The S&P 500 tested a lifetime high of 4,492 while ending at 4,486 (+0.2%). Fresh and new resistance at 4,500 was challenged but held. A close above this level would suggest additional momentum towards 4,525-4,550.

The Dow finished at 35,445 (+0.1%) after making an afternoon run to 35,366. Key resistance at 35,500 was also challenged but easily held. A close back above this level and the recent all-time peak at 35,631 would signal a breakout towards 35,750-36,000.

Market Movers

Shares of Best Buy (BBY) rallied 8% after announcing earnings. The company reported a profit of $2.98 on revenue of $11.85 billion versus forecasts of $1.85 and $11.49 billion, respectively. This represented second-quarter sales growth of 20% and operating income growth of 40% compared to last year.

Volatility Index

The Volatility Index (VIX) was up for the first time in three sessions after trading to a high of 17.51. Key resistance at 17.50 and the 50-day moving average were breached but levels that held. A move above the latter would suggest a retest towards 18.50-19.

Support is at 17-16.50 followed by 15.50-15.

Market Analysis

The Spider Small-Cap 600 ETF (NYSE: SLY) was up for the third-straight session with the afternoon high reaching $95.97. Fresh and lower resistance at $95.50-$96 was cleared and held on the close back above the 50-day moving average.

Support is at $95-$94.50 followed by $93.50-$93.

RSI (relative strength indicator) is in an uptrend with key resistance at 50 getting cleared and holding. Continued closes above this level would indicate additional strength towards 55-60 and levels from early June. Support is at 45-40.

Sector

The Dow Jones Transportation Average (NYSE: TRAN) tested a high of 14,820 while extending its winning streak to three-straight sessions. Lower resistance at 14,750-15,000 was cleared but held on the close back above the 50-day moving average. A pop above the latter would indicate additional upside towards the 15,250-15,500 area.

Support is at 14,500-14,250.

RSI is has flatlined with key support at 50 holding. A close back below this level would signal weakness towards 45-40 and levels from earlier this month. Resistance is at 55-60.

Market Outlook

The technical outlook remains bullish over the near-term with the major indexes at, or near, record highs. The Dow appears to be on track to join the S&P 500 and the Nasdaq in returning to record peaks with the small-caps rebound off last week’s lows also a bullish signal. However, I would like to see volatility trade towards 16.50-16 by week’s end with last Monday’s low at 16.02.

I would also like to add 1-2 more new trades this week but I’m slightly cautious with Thursday’s Fed update looming. While I don’t think there will be any surprises, I want to see how today’s session opens up with a possible trade this afternoon. I’m looking at the financial sector as a possible play so stay locked-and-loaded in case I take action.

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, $34.97, down $0.06)

KDP October 36 calls (KDP211015C00036000, $0.55, unchanged)

Entry Price: $0.55 (8/23/2021)
Exit Target: $1.10
Return: 0%
Stop Target: None

Action: Tuesday’s pullback hit $34.76 with upper support is at $34.75-$34.50 getting challenged but holding. Resistance is at $35-$35.25.

Rite Aid (RAD, $16.99, up $0.30)

RAD September 15 puts (RAD210917P00015000, $0.35, down $0.05)

Entry Price: $0.82 (8/19/2021)
Exit Target: $1.65
Return: -57%
Stop Target: None

Action: Shares tagged to a high of $17.27 with prior and lower resistance at $17.25-$17.50 getting cleared but holding. New support is at $16.50-$16.25.

Juniper Networks (JNPR, $29.43, up $0.21)

JNPR September 30 calls (JNPR210917C00030000, $0.45, unchanged)

Entry Price: $0.55 (8/3/2021)
Exit Target: $1.10
Return: -18%
Stop Target: None

Action: Lower resistance at $29.50-$29.75 was challenged but held with yesterday’s high hitting $29.49. A close above the latter and last Thursday’s 52-week high at $29.67 would be a bullish development for a trip past $30. Support is at $29.25-$29.

Smith & Wesson Brands (SWBI, $23.78, up $0.15)

SWBI September 30 calls (SWBI210917C00030000, $0.25, unchanged)

Entry Price: $0.85 (8/3/2021)
Exit Target: $1.70
Return: -71%
Stop Target: None

Action: Shares were up for the third-straight session with the high reaching $23.87. Lower resistance at $23.75-$24 was cleared and held. Support remains at $23.50-$23.25.