MomentumOptions.com Pre-Market Update for 8/30/2021

Fed Speak Soothes Wall Street

8:00am (EST)

The stock market bounced back on Friday to close out a solid week after Fed Chairman Powell signaled caution over any eventual decision to raise interest rates as he continued a wait and see approach on further progress made in the economy.

Powell offered no indication on when the central bank plans to cut its asset purchases but stated it could be this year. He also reiterated that he believes current elevated levels of inflation will prove transitory as the economic recovery further matures.

The Russell 2000 closed 2,277 (+2.9%) and back above its the 50-day moving average with the intraday peak tapping 2,281. Prior and lower resistance from early July at 2,275-2,300 was reclaimed. A close above the latter would indicate additional strength towards 2,325-2,350. Below is a chart of the IWM.

The Nasdaq tagged a record high of 15,144 before settling at 15,129 (+1.2%). 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 4,513 while ending at 4,509 (+0.9%). Key resistance at 4,500 was cleared and held. Continued closes above this level would suggest additional momentum towards 4,525-4,550.

The Dow finished at 35,455 (+0.7%) after making an afternoon run to 35,479. Near-term and lower resistance at 35,250-35,500 was recovered. A close above the latter and the recent all-time peak at 35,631 would signal a breakout towards 35,750-36,000.

Market Movers

Shares of Big Lots (BIG) fell nearly 5% after missing quarterly numbers. The company reported a profit of $1.09 a share on revenue of $1.46 billion. Wall Street was looking for $1.13 a share on sales of $1.48 billion.

Big Lots said comparable sales decrease of 13.2% but on a two-year basis, comparable sales increased 14%.

Volatility Index

The Volatility Index (VIX) sank 13% with the intraday low hitting 16.11. Current and upper support at 16.50-16 was breached and held. A close below the latter would signal a retest towards 15-14.50.

Resistance is at 17-17.50 and the 50-day moving average.

Market Analysis

The iShares Russell Growth 1000 ETF (NYSE: IWF) was up for the sixth time in seven sessions after trading to an all-time high of $289.11. Unchartered territory and lower resistance at $289-$289.50 was tripped but held. A move above the latter would suggest further strength towards $290.50-$291.

Support is at $286.50-$286.

RSI is in an uptrend lower resistance at 65-70 getting recovered. A close above the latter would suggest strength towards 75-80 and levels from early July. Support is at 60-55.

Sector

The SPDR S&P Homebuilders ETF (NYSE: XHB) tagged an intraday peak of $79.01. Key resistance at $79 was cleared but held. A close above this level would signal a run towards $80-$80.50 with the all-time high from early May at $80.82.

Support is at $78-$77.50.

RSI is back in a slight uptrend with key support at 65 holding. Continued closes below this level would signal upside towards 70-75 and the early May highs. Support is at 60-55.

Market Outlook

With two trading days left for the month of August, the major indexes are showing gains of roughly 2%, on average, with the Dow just below this level. September can be a tricky to trade as it use historically be a bullish month, but has been bearish in recent decades as portfolios managers back after Labor Day tend to clean house.

The month could start off strong as August momentum continues but again, tends to close weak due to end-of-month portfolio restructuring. More importantly, September triple-witching week can be very volatile and when monthly, and quarterly, options expire.

We have three positions with September options that will expire in under three weeks. I like RAD for the put protection but we will need shares to fall back below $15 this week to feel more comfortable holding onto expiration. JNPR is expected to pay a dividend this week so there could be some weakness at some point and we will need SWBI to make a run towards $26 to keep this trade open.

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.

Agenus (AGEN, $6.26, down $0.07)

AGEN January 7 calls (AGEN220121C00007000, $1.15, down $0.05)

Entry Price: $1.20 (8/26/2021)
Exit Target: $2.40
Return: -4%
Stop Target: None

Action: Shares kissed a fresh 52-week peak of $6.45 before closing slightly lower. Key resistance is $6.50 was challenged but held. Support is at $6.25-$6.

Financial Select Sector SPDR Fund (XLF, $39.00, up $0.51)

XLF October 40 calls (XLF211015C00040000, $0.50, up $0.05)

Entry Price: $0.50 (8/25/2021)
Exit Target: $1.00
Return: 0%
Stop Target: None

Action: Friday’s all-time peak reached $39.01 with key resistance at $39 getting cleared but holding. Continued closes above this levels would suggest a run past $40. Support is at $38.75-$38.50.

Keurig Dr Pepper (KDP, $35.13, up $0.16)

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: Lower resistance at $35-$35.25 was cleared and held on the run to $35.22. Support remains at $34.75-$34.50.

Rite Aid (RAD, $17.05, up $0.54)

RAD September 15 puts (RAD210917P00015000, $0.30, down $0.10)

Entry Price: $0.82 (8/19/2021)
Exit Target: $1.65
Return: -63%
Stop Target: None

Action: Lower resistance at $17.25-$17.50 was cleared but held with the high hitting $17.41. Support is at $16.75-$16.50.

Juniper Networks (JNPR, $29.49, up $0.09)

JNPR September 30 calls (JNPR210917C00030000, $0.35, down $0.05)

Entry Price: $0.55 (8/3/2021)
Exit Target: $1.10
Return: -36%
Stop Target: None

Action: Friday’s high reached $29.69 with lower resistance at $29.50-$29.75 getting breached but holding. A close above $29.75 and last Wednesday’s 52-week high at $29.77 should get a push past $30 in play. Support is at $29.25-$29.

Smith & Wesson Brands (SWBI, $24.42, up $0.17)

SWBI September 30 calls (SWBI210917C00030000, $0.40, unchanged)

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

Action: Shares tested a high of $24.53 with lower resistance at $24.50-$24.75 getting breached but holding. Support is at $24.25-$24.