MomentumOptions.com Pre-Market Update for 9/14/2021
Volatility Falls Back Below 20
The stock market rebounded on Monday, with the broader market, the small-caps, and the blue-chips rising to end five-session losing streaks while Tech lagged after falling for the fourth-straight outing. Bullishness on the likely passage of a $3.5 trillion budget package helped sentiment, despite an expected proposal to raise the corporate tax rate to 26.5% from 21%.
Energy was the strongest sector after surging nearly 3% while Healthcare was the weakest after falling 0.6%. Meanwhile, volatility settled back below a key level of support despite kissing an intraday monthly high to remain in an overall four-month trading range.
The Dow closed at 34,869 (+0.8%) with the morning peak reaching 34,939. Fresh and lower resistance at 34,750-35,000 was cleared and held. A close above the latter and the 50-day moving average would indicate a possible near-term bottom with additional upside towards 35,250-35,500.
The Russell 2000 tested a midday high of 2,244 before ending at 2,240 (+0.6%). New and lower resistance at 2,250-2,275 was challenged but held on the close back above the 50-day moving average. A pop above the latter would suggest another run towards the 2,300 area. Below is a chart of the IWM.
The S&P 500 finished at 4,468 (+0.2%) after tagging a high of 4,492. Prior and lower resistance at 4,475-4,500 was breached but held. A move above the latter would indicate additional strength towards 4,525-4,550 with this month’s all-time peak at 4,545.
The Nasdaq settled at 15,105 (-0.1%) with the intraday low hitting 15,030. Key support at 15,000 was approached but held. A drop below this level would signal additional weakness towards 14,850-14,700 and the 50-day moving average.
Shares of iRhythm (IRTC) soared 35% after the company named DexCom’s (DXCM) chief operating officer, Quentin Blackford, as its new chief executive officer.
The Volatility Index (VIX) fell for the first time in three sessions despite trading to an intraday high of 21.18. Lower resistance at 21-21.50 and the 200-day moving average was breached but levels that held for the second-straight session.
The fade to 18.76 afterwards tripped fresh and upper support at 19-18.50, but a level that held, on the close back below 20.
The S&P 400 Mid Cap Index (NYSE: MID) snapped a five-session slide after testing a high of 2,710. Key resistance at 2,700 and the 50-day moving average were recovered. Continued closes above these levels would signal a retest towards 2,725-2,750.
Support is at 2,675-2,650.
RSI (relative strength index) is back in an uptrend with lower resistance at 45-50 getting cleared and holding. A close above the latter would suggest strength towards 55-60 and levels from the beginning of the month. Key support is at 40.
The Technology Select Sector Spider Fund (NYSE: XLK) rebounded to snap a three-session losing streak despite tapping a low of $155.65. Near-term and upper support from at $156-$155.50 was tripped but held. A close below the latter would suggest weakness towards $155-$154.50 and the 50-day moving average.
Resistance is at $158-$158.50 with the recent all-time peak at $160.13.
RSI is trying to curl higher with lower resistance at 55-60 holding. A move above the latter would signal strength towards 65-70. Key support is at 50 and a level that has been holding since mid-May.
It wasn’t too surprising to see volatility to close back below 20 as there has only been five closes above this level since May 21st. This has obviously frustrated the bears and once again gets all-time highs back in focus on continued closes below this level.
Of course, one day doesn’t make a trend and it will be important for the bulls to get a close back below 17.50 and the 50-day moving average this week.
As far as new trades, bearish trades have been put on hold until we see a resumption of lower lows as the environment remains tricky to trade. We have closed three of our last four trades for winners with three open trades heading into October with one going out into January.
One stock that I’m waiting on to show a sign of bottoming is Bristol Myers Squibb (BMY) as shares have fallen 13 times in 15 sessions after peaking at $69.75. Shares are now at the June low just below $63 with risk towards $61 on continued weakness. The dividend is now north of 3% with the relative strength index (RSI) signaling oversold conditions.
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, $43.83, up $0.68)
CPB October 42 puts (CPB211015P00042000, $0.50, down $0.25)
Entry Price: $0.70 (9/8/2021)
Exit Target: $1.40
Stop Target: None
Action: Yesterday’s high hit $44.30 with prior and lower resistance at $44.25-$44.50 getting cleared but holding. New support is at $43.75-$43.50 and the 50-day moving average.
Agenus (AGEN, $6.35, down $0.15)
AGEN January 7 calls (AGEN220121C00007000, $1.15, down $0.05)
Entry Price: $1.20 (8/26/2021)
Exit Target: $2.40
Stop Target: None
Action: Upper support at $6.25-$6 was challenged but held on the fade to $6.35. Resistance is at $6.50-$6.75.
Financial Select Sector SPDR Fund (XLF, $38.01, up $0.43)
XLF October 40 calls (XLF211015C00040000, $0.15, up $0.01)
Entry Price: $0.50 (8/25/2021)
Exit Target: $1.00
Stop Target: None
Action: Monday’s peak reached $38.06 with lower resistance at $38-$38.25 getting recovered. Support is at $37.75-$37.50.