MomentumOptions.com Pre-Market Update for 9/2/2021

Nasdaq Hits Another Record High

8:00am (EST)

The stock market showed continued strength on Wednesday as better-than-expected economic news once again fueled momentum. ISM manufacturing gauge edged up 0.4 ticks to 59.9 in August while construction spending rose 0.3% in July.

The small-caps led the way higher followed by Tech with both rising for the third time over the past four sessions. Volatility edged lower as it continues to work its way towards key support levels.

The Russell 2000 closed at 2,287 (+0.6%) following the afternoon run to 2,293. Lower resistance at 2,275-2,300 was recovered. A pop above the latter would suggest additional strength towards 2,325-2,350. Below is a chart of the IWM.

The Nasdaq finished at 15,309 (+0.3%) with the intraday all-time high hitting 15,379. Unchartered territory and key resistance at 15,350 was cleared but held. Continued closes above this level would signal ongoing momentum towards 15,500-15,650.

The S&P 500 settled at 4,537 (+0.03%) after matching its record high of 4,537. Lower resistance at 4,525-4,550 was cleared but held. A move above the latter would indicate strength towards 4,575-4,600.

The Dow ended slightly lower at 35,312 (-0.1%) after making a run to 35,407. Key resistance at 35,500 was challenged but easily held. A close 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 apparel company PVH Corp. (PVH) jumped 15% following better-than-expected earnings. The company reported a profit of $2.72 a share on revenue of $2.31 billion versus forecasts of $1.20 and $2.14 billion, respectively.

Two analysts raised their Price Targets to $137 and $145 while keeping Outperform and Overweight ratings on the stock.

Volatility Index

The Volatility Index (VIX) fell for the third time in four sessions with the intraday low hitting 15.68. Prior and upper support at 16-15.50 was breached but held. A close below the latter would indicate a retest towards 15-14.50 with the late June 52-week low at 14.10.

Resistance is at 16.50-17.

Market Analysis

The S&P 400 Mid Cap Index (NYSE: MID) snapped a two-session slide after testing a high of 2,769. Key resistance at 2,775 was challenged but held. A close above this level and the all-time high from early May at 2,780 would signal a breakout towards 2,800-2,825.

Support is at 2,750-2,725.

RSI (relative strength index) has curl higher with key resistance at 60 holding. A close above this level would signal strength towards 65-70 and levels from April. Support is at 55-50.

Sector

The Energy Select Sector SPDR Fund (NYSE: XLE) extended its losing streak to three-straight session with the low kissing $47.51. Current and upper support at $48-$47.50 failed to hold. A close below the latter would signal ongoing weakness towards $46-$45.50.

Resistance is at $48.50-$49.

RSI is in a downtrend with key support at 40 holding. A close below this level would indicate additional weakness towards 35-30 and prior lows from last month and mid-July. Key resistance is at 50.

Market Outlook

I did some extended research and more detailed chart work last night. The major indexes remain in nice uptrend channels from last November and I have talked about a possible melt-up rally over the next few weeks on continued strength. However, key support levels could come into play in case the momentum stalls and there is a near-term pullback. This would include the Dow and S&P 500 falling back below their 50-day moving averages.

Three of our current trades are with September options and there is a strong possibility we could close two of them on Friday morning. These options expire in just over two weeks and what is typically considered the “danger zone”. We can save some of the premium to open new trades in the process but we will likely wait until next week with the market closed on Monday.

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, $6.19, up $0.02)

AGEN January 7 calls (AGEN220121C00007000, $1.10, unchanged)

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

Action: Shares closed slightly higher despite the intraday low reaching $5.94. Prior and upper support at $6-$5.75 was breached but held. Lowered resistance is at $6.25-$6.50.

Financial Select Sector SPDR Fund (XLF, $38.18, down $0.22)

XLF October 40 calls (XLF211015C00040000, $0.25, down $0.10)

Entry Price: $0.50 (8/25/2021)
Exit Target: $1.00
Return: -50%
Stop Target: None

Action: Shares extended their losing streak to three-straight sessions after tagging a low of $38.05. Near-term and upper support at $38.25-$38 failed to hold. Resistance is at $38.50-$38.75.

Keurig Dr Pepper (KDP, $35.74, up $0.07)

KDP October 36 calls (KDP211015C00036000, $0.70, up $0.05)

Entry Price: $0.55 (8/23/2021)
Exit Target: $1.10
Return: 27%
Stop Target: 57 cents (Stop Limit)

Action: Set an initial Stop Limit at 57 cents to start protecting profits and to avoid a loss.

Wednesday’s peak tapped $35.87 with prior and lower resistance at $35.75-$36 getting cleared but holding by a penny. Support is at $35.50-$35.25.

Rite Aid (RAD, $18.43, up $0.69)

RAD September 15 puts (RAD210917P00015000, $0.10, down $0.05)

Entry Price: $0.82 (8/19/2021)
Exit Target: $1.65
Return: -85%
Stop Target: None

Action: Shares were up for the fourth-straight session with the high hitting $18.45. Fresh and lower resistance at $18.25-$18.50 was cleared and held. Rising support is at $18-$17.75.

We could exit this trade by Friday if shares recover the 200-day moving average. While I like the idea of having put protection into mid-month, the price action has been undeniable and will likely force us into an early exit to save the remaining premium.

Juniper Networks (JNPR, $29.07, up $0.09)

JNPR September 30 calls (JNPR210917C00030000, $0.20, down $0.10)

Entry Price: $0.55 (8/3/2021)
Exit Target: $1.10
Return: -63%
Stop Target: None

Action: Yesterday’s intraday rebound reached $29.26 with lower resistance at $29.25-$29.50 getting cleared but failing to hold. Support is at $28.75-$28.50.

This trade has a little over two weeks before expiration and the inability for shares to clear and hold key resistance at $29.50 over the past week has been frustrating. I think shares will eventually make a run past $30, and the move could be strong, but we are running low on time. A close below $28.50, however, would likely force us out of the position.

Smith & Wesson Brands (SWBI, $24.88, up $0.75)

SWBI September 30 calls (SWBI210917C00030000, $0.70, up $0.35)

Entry Price: $0.85 (8/3/2021)
Exit Target: $1.70
Return: -18%
Stop Target: None

Action: Shares rallied to a high of $25.49 with prior and lower resistance at $25.25-$25.50 getting breached but holding. The options reached a peak of 80 cents. Support is at $24.25-$24.

The volatility and fluctuation in yesterday’s action came ahead of earnings. After the closing bell, the company blew out estimates but missed on revenue. I would like to see shares clear $26 today while a close below $22 will likely force us out of the position.