MomentumOptions.com Pre-Market Update for 8/27/2021

Geopolitical Tensions Weigh on Market

8:00am (EST)

The stock market showed some nervousness on Thursday after a suspected suicide bomb exploded outside an Afghanistan airport, killing a number of people including U.S. marines and children. Wall Street was also keeping an eye on the highly anticipated Fed economic symposium in Jackson Hole in hopes of central bankers providing some clarity on the latest monetary policy.

Fed Chairman Jerome Powell is scheduled to make remarks on Friday and how the U.S. central bank might start tapering its bond purchases. The lower close snapped multiple winning streaks for the major indexes with fresh support levels now in play.

The Russell 2000 tagged a late session low of 2,212 while closing at 2,213 (-1.1%). Prior and upper support at 2,225-2,200 failed to hold. A drop below the latter would indicate additional weakness towards 2,175-2,150 and the 200-day moving average with the August bottom at 2,122. Below is a chart of the IWM.

The Nasdaq ended at 14,945 (-0.6%) with the afternoon low hitting 14,939. Fresh and upper support at 15,000-14,850 was breached and failed to hold. A move below the latter would suggest downside pressure towards 14,750-14,600 and the 50-day moving average.

The S&P 500 tapped a low of 4,468 while finishing at 4,470 (-0.6%). New and upper support at 4,475-4,450 failed to hold. A close below the latter would likely lead to additional weakness towards 4,425-4,400.

The Dow tested an intraday low of 35,205 before settling at 35,213 (-0.5%). Near-term and upper support at 35,250-35,000 was tripped and failed to hold. A close below the latter below would signal an ongoing fade towards 34,750-34,500 and the 50-day moving average.

Market Movers

Shares of SelectQuote (SLQT) plummeted 45% after announcing a mixed quarter. The company reported a profit of two cents a share versus four cents while revenue of $188.4 million missed forecasts of $184.9 million.

Volatility Index

The Volatility Index (VIX) was up for the second time in three sessions after jumping to a high of 19.27. Lower resistance at 19-19.50 was breached but held. A close above 20 and the 200-day moving average would be a slightly bearish development with upside risk towards 21-21.50.

New support is at 18-17.50 and the 50-day moving average.

Market Analysis

The SPDR S&P 500 ETF (NYSE: SPY) was down for the first time in six sessions with the low hitting $446.16. Fresh and upper support at $446.50-$446 was clipped and failed to hold. A close below the latter would indicate additional weakness towards $444.50-$444.

Resistance is at $448-$448.50 with Wednesday’s all-time peak at $449.46.

RSI (relative strength index) is back in a downtrend with upper support at 55-50 holding. A close below the latter would signal further weakness towards 45 and the mid-July low. Resistance is at 60-65.

Sector

The Health Care Select Sector SPDR Fund (NYSE: XLV) extended its losing streak to three-straight sessions with the low kissing $134.52. Prior and upper support at $135-$134.50 was breached and and failed to hold. A close below the latter would suggest a further fade towards $133-$132.50.

Resistance is at $135.50-$136 with Monday’s all-time top at $136.98.

RSI remains in a downtrend with upper support is at 55-50 holding. A drop below the latter would be a bearish signal for additional weakness towards 45-40 and the early June lows. Resistance is at 60-65.

Market Outlook

Geopolitics don’t usually impact the stock market too much but when news of death comes out, it tends to have a little bit more of an impact. Today’s battle will be between Fed Chairman Powell and the VIX holding 20.

Last Friday and Monday were up sessions and are typically bullish signals money is flowing into the market as traders stay long over the weekend. If we can have a repeat of this action into next week, higher record highs likely remain in store through the end of the month. If the VIX clears and holds 20 on Fed speak, expect a return of near-term choppiness.

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.

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Agenus (AGEN, $6.33, up $0.25)

AGEN January 7 calls (AGEN220121C00007000, $1.20, up $0.10)

Entry Price: $1.20 (8/26/2021)
Exit Target: $2.40
Return: 0%
Stop Target: None

Action: Angenus (AGEN) is a biotech company that is focusing on clinical-stage immuno-oncology that has 17 candidates in development. Nine of the candidates are company owned while the rest are with partnerships of some well-known drug makers.

The company also has three experimental vaccines in clinical studies and two adjuvants, which are substances which enhances the body’s immune response to an antigen. One of the adjuvants is for Shingles and the other is for the treatment of Malaria.

The shingles vaccine contains Agenus’ QS-21 Stimulon adjuvant and was approved in October 2017 by the FDA and in partnership with GlaxoSmithKline (GSK). The QS-21 is also being used by the same two companies for its malaria vaccine, which is awaiting regulatory approval.

The 17 candidates in clinical development are in a number of different phases that must go through regulatory hurdles with three of them in Phase 2 studies through a partnership with Betta Pharmaceuticals. The rest are in Phase 1 or Preclinical stages through partnerships with Bristol-Myers Squibb (BMY), Merck (MRK), Gilead Sciences (GILD) and Incyte (INCY).

It is important to note that the immuno-oncology space is crowded with thousands of immunotherapies in development. While there is a good chance a number of Angenus’ initiatives could get final regulatory approval, some treatments might also still fail commercially.

For its most recent quarter, Angenus reported a loss of 37 cents a share on revenue of $10.7 million versus forecasts for a loss of 24 cents on revenue of $20.4 million.

There are only three Wall Street analysts that cover the stock with two Strong Buy ratings and one Buy. In late June, one analyst raised the price target on Agenus to $11, up from $8.

As far as the technical outlook, shares have been making fresh 52-week highs and have doubled in 2021 after coming into the year at just over $3. From the chart below, you can see shares are in a nice uptrend since mid-May after bottoming at $2.50 in April. Resistance is $6.50-$6.75 going forward with support at $6-$5.75. A close below $5.50 and the 50-day moving average would signal a possible near-term peak.

The company currently has a market-cap of $1.5 billion and investing in small biotech has it risks. Angenus is still losing money but has revenues and receives royalty payments. I think there is a good chance shares clear $10 by this January and could be a likely takeover target at some point down the road.

Financial Select Sector SPDR Fund (XLF, $38.49, down $0.19)

XLF October 40 calls (XLF211015C00040000, $0.45, down $0.05)

Entry Price: $0.50 (8/25/2021)
Exit Target: $1.00
Return: -10%
Stop Target: None

Action: Shares tested a low of $38.45 with current and upper support at $38.50- $38.25 failing to hold. Resistance remains at $38.75-$39 with the recent all-time high at $38.95.

Keurig Dr Pepper (KDP, $34.97, up $0.05)

KDP October 36 calls (KDP211015C00036000, $0.50, unchanged)

Entry Price: $0.55 (8/23/2021)
Exit Target: $1.10
Return: -9%
Stop Target: None

Action: Yesterday’s high tapped $35.09 with lower resistance at $35-$35.25 getting cleared but holding. Support remains at $34.75-$34.50.

Rite Aid (RAD, $16.51, down $0.47)

RAD September 15 puts (RAD210917P00015000, $0.40, up $0.05)

Entry Price: $0.82 (8/19/2021)
Exit Target: $1.65
Return: -51%
Stop Target: None

Action: Upper support at $16.50-$16.25 was breached but held by a penny on the pullback to $16.48. Lowered resistance at $16.75-$17.

Juniper Networks (JNPR, $29.40, down $0.08)

JNPR September 30 calls (JNPR210917C00030000, $0.40, down $0.05)

Entry Price: $0.55 (8/3/2021)
Exit Target: $1.10
Return: -27%
Stop Target: None

Action: Thursday’s low tagged $29.33 with new and upper support at $29.25-$29 getting challenged but holding. Resistance is at $29.50-$29.75.

Smith & Wesson Brands (SWBI, $24.25, down $0.32)

SWBI September 30 calls (SWBI210917C00030000, $0.40, down $0.05)

Entry Price: $0.85 (8/3/2021)
Exit Target: $1.70
Return: -53%
Stop Target: None

Action: Shares tested a low of $24.02 with upper support at $24.25-$24 holding. Resistance is at $24.50-$24.75.