MomentumOptions.com Pre-Market Update for 9/3/2021

Jobless Claims Fuel Ongoing Momentum

8:00am (EST)

The stock market set another round of record highs on Thursday following better-than-expected jobs data and a boost in energy stocks. Specifically, initial claims for state unemployment benefits dropped 14,000 to 340,000, the lowest level since mid-March 2020.

Meanwhile, the energy sector jumped over 2% while reversing most of the losses suffered during the previous three sessions as a sharp decline in U.S. inventories and a weaker dollar fueled sentiment. Oil is back above the $70 level with forecasts for an upcoming push towards $80 a barrel.

The Russell 2000 extended its winning streak to three-straight sessions after testing a high of 2,309 while ending at 2,304 (+0.7%). Key resistance at 2,300 was cleared and held. Continued closes above this level would be a bullish development for a run towards 2,325-2,350. Below is a chart of the IWM.

The Dow tapped an intraday high of 35,475 while settling at 35,443 (+0.4%). Key resistance at 35,500 was challenged but held for the third-straight session. A close above this level and the recent all-time peak at 35,631 would suggest further strength towards 35,750-36,000.

The S&P 500 closed at 4,536 (+0.3%) with the fresh record peak kissing 4,545. Key resistance at 4,550 was approached but held. A move above this level would signal ongoing momentum towards 4,575-4,600.

The Nasdaq tagged a lifetime high of 15,380 before ending at 15,331 (+0.1%). Fresh resistance at 15,400 was challenged but held. A close above this level keeps upside towards 15,500-15,650 in focus.

Market Movers

Shares of American Eagle (AEO) sank 10% after mixed earnings results. The company reported a profit of 60 cents a share versus forecasts of 55 cents but revenue of $1.19 billion was below expectations for a print of $1.23 billion.

Volatility Index

The Volatility Index (VIX) was up for the second time in three sessions after trading to a high of 16.98. Current and lower resistance at 16.50-17 was tripped but held. A close above 17.50 and the 50-day moving average would be a slightly bearish development with upside risk towards 18.50-19.

Support is at 16-15.50.

Market Analysis

The Spider Small-Cap 600 ETF (NYSE: SLY) was up for the third-straight session with the intraday high reaching $98.58. Prior and lower resistance from late June at $98.50-$99 was cleared but held. A close above the latter would indicate a trip towards $100-$100.50 with the all-time high from early June at $100.94.

Support is at $97.50-$97 followed by $96-$95.50 and the 50-day moving average.

RSI (relative strength indicator) is in an uptrend with key resistance at 60 holding. A close above this level would indicate additional strength towards 65-70 with the latter representing the mid-March peak. Support is at 55-50.

Sector

The Communication Services Select Sector SPDR (NYSE: XLC) had its four-session winning streak snapped following the pullback to $85.32. New and upper support at $85.50-$85 failed to hold. A drop below the latter would suggest a retest towards $84-$83.50.

Resistance is at $86-$86.50 with Wednesday’s all-time top at $86.36.

RSI is back in a downtrend with upper support at 65-60 failing to hold. A close below the latter would signal additional weakness towards 55-50 and levels from mid-August. Key resistance is at 70.

Market Outlook

With the market closed on Monday for the Labor Day holiday, it will be interesting to see if traders will stay long, or if there is selling pressure, into the three-day weekend. If there is continued strength, there is a good chance Wall Street traders play catch-up following there summer vacations.

Volume will likely be light and can cause wider price fluctuations with the key indicator being where volatility closes. A lower close for the major indexes and a spike in the VIX could be a slight warning signal of a near-term top.

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, $6.17, down $0.02)

AGEN January 7 calls (AGEN220121C00007000, $1.05, down $0.05)

Entry Price: $1.20 (8/26/2021)
Exit Target: $2.40
Return: -13%
Stop Target: None

Action: Thursday’s low hit $6.06 with upper support at $6-$5.75 getting challenged but holding. Resistance remains at $6.25-$6.50.

Financial Select Sector SPDR Fund (XLF, $38.31, up $0.13)

XLF October 40 calls (XLF211015C00040000, $0.25, unchanged)

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

Action: Shares snapped a three-session slide with the high reaching $38.44. Lower resistance at $38.25-$38.50 was recovered. Support is at $38-$37.75.

Keurig Dr Pepper (KDP, $35.86, up $0.12)

KDP October 36 calls (KDP211015C00036000, $0.70, unchanged)

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

Action: Shares were up for the sixth-straight session with yesterday’s peak reaching $35.97. Prior and lower resistance at $35.75-$36 was cleared and held. A close above $36.25 would be a very bullish development that would set up a run towards $37 with the 52-week peak at $37.11. Support remains at $35.50-$35.25.

Rite Aid (RAD, $18.81, up $0.38)

RAD September 15 puts (RAD210917P00015000, $0.06, down $0.04)

Entry Price: $0.82 (8/19/2021)
Exit Target: $1.65
Return: -93%
Stop Target: None

Action: Close the trade this morning to save the remaining premium.

Although shares are at overbought levels, I mentioned coming into the week a close above the 200-day moving average would force us out of the position.

Juniper Networks (JNPR, $29.37, up $0.30)

JNPR September 30 calls (JNPR210917C00030000, $0.25, up $0.05)

Entry Price: $0.55 (8/3/2021)
Exit Target: $1.10
Return: -55%
Stop Target: None

Action: Thursday’s high tagged $29.38 with lower resistance at $29.25-$29.50 getting cleared and holding. I would love to see a close above the latter heading into the weekend. Support is at $29-$28.75.

Smith & Wesson Brands (SWBI, $22.09, down $2.79)

SWBI September 30 calls (SWBI210917C00030000, $0.10, down $0.60)

Entry Price: $0.85 (8/3/2021)
Exit Target: $1.70
Return: -88%
Stop Target: None

Action: Close the trade this morning to save the remaining premium.

The revenue miss was just a backbreaker for this trade after we nearly got back to even on Wednesday. We can revisit SWBI when shares recover $26 and the 50-day moving average, but for now, there appears to be continued risk towards the $20 area and the 200-day moving average.