MomentumOptions.com Pre-Market Update for 9/13/2021
Bears Extend Overall Winning Streak to Five-Straight Sessions
The stock market extended its losing streak to five-straight sessions on Friday as producer prices increased solidly in August, suggesting that high inflation is likely to persist over the near-term as the coronavirus pandemic continues to pressure supply chains.
The Producer Price Index rose 0.7% in August with the core rate 0.6% higher, following gains of 1% for both in July. Additional economic news showed July wholesale sales rose 2%, with inventories up 0.6% in the final reading.
The Russell 2000 settled on its session low of 2,227 (-1%). Prior and upper support at 2,225-2,200 was challenged but held on the close back below the 50-day moving average. A drop below the latter would indicate a further slide towards 2,175-2,150 and the 200-day moving average. Below is a chart of the IWM.
The Nasdaq finished at 15,115 (-0.9%) with the session low reaching 15,111. Fresh and upper support at 15,150-15,000 failed to hold. A move below the latter would suggest a retest towards 14,850-14,700 and the 50-day moving average.
The Dow tagged a low of 34,599 before ending at 34,607 (-0.8%). Prior and upper support from mid-July at 34,750-34,500 failed to hold. A close below the latter would signal ongoing weakness towards 34,250-34,000.
The S&P 500 tagged an afternoon low of 4,457 while closing at 4,458 (-0.8%). New and upper support at 4,475-4,450 failed to hold. A move below the latter opens up downside risk towards 4,425-4,400 and the 50-day moving average.
Shares of Affirm (AFRM) surged 34% after announcing quarterly results. The company reported a profit of 48 cents a share on revenue of $262 million versus forecasts of 29 cents and $226 million, respectively.
Five brokerage firms raised their Price Targets following the news with the highest at $150, up from $120.
The Volatility Index (VIX) rose for the fifth time in six sessions with the peak reaching 21.13. Prior and lower resistance from mid-August at 21-21.50 was breached but held on the close back above the 200-day moving average. A pop above the latter would indicate additional strength towards 22.50-23.
New support is at 20.50-20.
The Invesco QQQ Trust (QQQ) was down for the third-straight session after tagging a low of $376.24. Fresh and upper support at $376.50-$376 was tripped but held. A close below the latter would suggest a retest towards $375-$374.50.
Resistance is at $381.50-$382 with last Tuesday’s all-time peak at $382.78.
RSI (relative strength indicator) remains in a downtrend with upper support at 55-50 holding. A close below the latter would signal additional weakness towards 45-40 and prior levels from mid-May. Resistance is at 60.
The Real Estate Select Sector SPDR Fund (NYSE: XLRE) was down for the second-straight session following the late day pullback to $46.83. Upper support at $47-$46.50 failed to hold. A close below the latter and the 50-day moving average would indicate additional weakness towards $45.50-$45.
Lowered resistance is at $47.50-$48.
RSI is in a downtrend with key support from mid-May at 45 holding. A close below this level would suggest weakness towards 40-35 and levels from early March. Resistance is at 50-55.
For the week, the Russell 2000 tumbled 2.8%; the Dow sank 2.2%; the S&P 500 dropped 1.7%; and the Nasdaq gave back 1.6%. This week could also be challenging for the bulls with regular September options expiring (on Friday) and what is typically a bearish event.
Wednesday’s consumer report index will be the most important update concerning economic news with updates on manufacturing, jobless claims, consumer sentiment and retail sales also in focus throughout the week.
The fact volatility closed above 20 was the biggest takeaway and is signaling additional strength if the bulls can’t recover this level to start the week. The July and August highs reached 25.09 and 24.74, respectively, with a close above these levels likely triggering some panic selling.
I have a couple of bearish trades I like if this scenario plays out so stay locked-and-loaded in case I take action.
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, $43.15, up $0.35)
CPB October 42 puts (CPB211015P00042000, $0.75, down $0.10)
Entry Price: $0.70 (9/8/2021)
Exit Target: $1.40
Stop Target: None
Action: Friday’s peak reached $43.26 with lower resistance at $43.25-$43.50 getting cleared but holding. Support remains at $42.75-$42.50.
Agenus (AGEN, $6.50, down $0.04)
AGEN January 7 calls (AGEN220121C00007000, $1.20, unchanged)
Entry Price: $1.20 (8/26/2021)
Exit Target: $2.40
Stop Target: None
Action: Upper support at $6.50-$6.25 was breached but held on the pullback to $6.45. Key resistance is at $6.75.
Financial Select Sector SPDR Fund (XLF, $37.58, down $0.28)
XLF October 40 calls (XLF211015C00040000, $0.14, down $0.01)
Entry Price: $0.50 (8/25/2021)
Exit Target: $1.00
Stop Target: None
Action: Shares fell for the fourth time in five sessions with the low hitting $37.57. Upper support at $37.75-$37.50 failed to hold. Resistance is at $38-$38.25.