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

Fed’s Comments Keep Bears in Control

8:00am (EST)

The stock market showed continued weakness on Wednesday with the majority of the major indexes falling for the third-straight session. The Fed’s Beige Book helped fuel bearish sentiment following comments that the U.S. economy slowed in August as concerns grew over how the renewed surge of coronavirus cases would affect the economic recovery.

The Russell 2000 settled at 2,249 (-1.1%) with the morning low reaching 2,241. Fresh and upper support at 2,250-2,225 was breached and failed to hold. A drop below the latter and the 50-day moving average would suggest ongoing weakness towards 2,200-2,175. Below is a chart of the IWM.

The Nasdaq tumbled to an intraday low of 15,206 before closing at 15,286 (-0.6%). Prior and upper support at 15,250-15,100 was breached but held. A move below the latter would signal additional risk towards 15,000-14,850.

The Dow ended at 35,031 (-0.2%) with the low kissing 34,925. Key support at 35,000 and the 50-day moving average were breached but levels that held. A close below the former will likely lead to a retest towards 34,750-34,500.

The S&P 500 tested a low of 4,493 before finishing at 4,514 (-0.1%). Crucial support at 4,500 was tripped but held. A close below this level would signal additional weakness towards 4,475-4,450.

Market Movers

Shares of eFFECTOR Therapeutics (EFTR) skyrocketed 112% after being briefly halted due to volatility. The stock was also halted three times on Tuesday on no specific news either day. Pfizer (PFE) owns a 5.5% stake in the company.

Volatility Index

The Volatility Index (VIX) was down for the first time in four sessions despite tapping an intraday high of 19.52. Lower resistance from mid-August at 19.50-20 was breached but held. A move above the latter and the 200-day moving average would be a slightly bearish development with additional strength towards 21.50-22.

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

Market Analysis

The iShares Russell Growth 1000 ETF (NYSE: IWF) remains in a seven-session trading range following the pullback to $289.87. Upper support at $290-$289.50 was tripped but held. A move below the latter would suggest further weakness towards $288-$287.50.

Resistance is at $292.50-$293 with the recent all-time high at $293.01.

RSI is in a slight downtrend with upper support at 65-60 holding. A close below the latter would suggest weakness towards 55-50 and levels from mid-August. Key resistance is at 70.

Sector

The iShares MSCI Emerging Markets ETF (NYSE: EEM) fell for the first time in three sessions following the intraday drop to $52.53. Key support at $52.50 and the 50-day moving average were challenged but held. A close below these levels would would signal further weakness towards $52-$51.50.

New resistance is at $53-$53.50 and the 200-day moving average.

RSI is back in a downtrend with upper support at 55-50 failing to hold. A close below the latter would indicate weakness towards 45-40. Key resistance is at 60.

Market Outlook

The lower close on the VIX wasn’t too surprising after the failed attempt to clear and hold 20. It just remains to be seen if this level will hold over the next two sessions and into the weekend. If so, a trading range could ensue into next week. A close back below the 50-day moving average, however, would signal the major indexes could be setting up another run towards record highs.

Momentum Options Play List

Closed Momentum Options Trades for 2021: 23-20 (53%). 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.

Campbell Soup Company (CPB, $43.02, up $0.14)

CPB October 42 puts (CPB211015P00042000, $0.75, down $0.05)

Entry Price: $0.70 (9/8/2021)
Exit Target: $1.40
Return: 8%
Stop Target: None

Action: Wednesday’s peak reached $43.77 with key resistance at $43.75 and the 50-day moving average getting cleared but levels that held. Support is at $43-$42.75.

The company recently announced unimpressive earnings and I think there is a good chance for a retest towards $40. We only need shares to fall below $40.60, technically, by mid-October to get a nice triple-digit return.

Agenus (AGEN, $6.36, down $0.04)

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 tapped a high of $6.50 before closing slightly in the red. Lower resistance at $6.50-$6.75 was kissed but held. Support at $6.25-$6.

Financial Select Sector SPDR Fund (XLF, $37.75, down $0.09)

XLF October 40 calls (XLF211015C00040000, $0.15, down $0.02)

Entry Price: $0.50 (8/25/2021)
Exit Target: $1.00
Return: -70%
Stop Target: None

Action: Yesterday’s low reached $37.55 with upper support at $37.75-$37.50 getting breached but holding. Resistance is at $38-$38.25.