I told you that it has been hard to bet against the bulls this year (and last), and yesterday they showed why. Of course, with volatility picking up and continued breaking headlines the rest of the week, the bears aren’t out of the game. However, yesterday’s action was a clear sign of momentum reversal, with the Dow setting an all-time record high.

The Dow added 100 points, or 0.6%, to finish at 17,131 on Tuesday. The blue-chips traded to an all-time intraday high of 17,167 following a dip back below 17,000 to 16,985 on the open. The close above 17,100 and the run to a fresh 52-week peak gets 17,350-17,500 back in play. Support is at 16,900-16,800.

The S&P 500 soared 14 points, or 0.7%, to settle a shade under 1,999. The index traded down to 1,979 and held support at 1,975 before surging to a high of 2,002. The bulls just missed holding the 2,000 level, and there are likely 20 points of risk to the upside or downside from here this week.

The Nasdaq zoomed 33 points, or 0.7%, to close at 4,552. Tech tested a low of 4,499.87 at the start of trading and technically fell below 4,500, but the rebound to 4,558 had the shorts scrambling. The close above 4,550 was bullish, and the next 50 points up or down could set the tone for the rest of September. Resistance is at 4,600, and support is at 4,500.

The Russell gained 4 points, or 0.4%, to end at 1,150. The small-caps tested a low of 1,141 on the open but made a run to 1,152 in the second half of trading before closing just off of its high. I specifically highlighted the 1,140 level as a key battle to watch this week, as the 10-year chart I played with showed this area as a major level of support. Like a prize fighter, the bulls got off of the mat in a big way.

The S&P 500 Volatility Index ($VIX, 12.73, down 1.39) tanked 10% after reaching a high of 14.53 on Tuesday’s open before breaking down like a rented mule. I said to watch the 13.50 level in yesterday’s Mid-Market Update for further confirmation on continued strength, and the bulls held this level into the close. In fact, they came close to taking out the 12.50 level.

I covered the VIX in detail this past weekend and, for those of you just joining me, check out the charts from Monday’s Pre-Market Update to see why I continue to say it has been one of THE BEST indicators for calling market direction this year. The bears missed their chance at clearing 15 (for now), and their new goal will be to get the VIX back above 13.50. I have said that the S&P index will be at fresh all-time highs if the VIX can get back below 11.50.

The bullish clues from Monday were that the blue-chips finished higher and that the VIX held 15. There were more bullish clues on Tuesday, and continued highs could be in store if the bulls keep their momentum. However, it is important to note that this is still a dangerous market to trade, especially if you are trying to short it.

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From desk to press, futures look like this: Dow (+8); S&P 500 (+0.5); Nasdaq (-3).

Momentum Options Play List

Closed Momentum Options Trades for 2014: 70-41 (63%). All trades are dated and time stamped so new subscribers can look at the past history to see how the trades have played out.

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 “Hard Stops” entered to close any trades or “Exit 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 9 a.m. and 12 p.m. – 1 p.m. updates. Also, I will usually give you a heads-up if I think I’m going to send an email outside of these time frames.

 All prices given in this update are current as of 9:00 a.m. EST.

Every new Momentum Options recommendation is listed with the price at which I entered my own position. If the price is slightly different than my recommended entry or exit price when you receive the alert, don’t let that keep you from getting into or out of a trade. Occasionally, you might even get a better “fill” price than what is posted in the Open Trades and Closed Trades.


Freeport-McMoRan (FCX, $34.89, up $0.57)

FCX October 35 calls (FCX141018C00035000, $0.75, up $0.30)

Entry Price: $0.75 (9/16/2014)

Exit Target: $1.10-$1.50

Return: 0%

Stop Target: None


FCX November 36 calls (FCX141122C00036000, $0.70, up $0.20)

Entry Price: $0.70 (9/16/2014)

Exit Target: $1.05-$1.40

Return: 0%

Stop Target: None

Action: Shares traded to a high of $35.10, and the rebound off of support at $34 and the 200-day moving average was strong. The next level of resistance is at $35.50.


Sony (SNE, $20.25, up $0.38)

SNE October 20 calls (SNE141018C00020000, $0.70, up $0.25)

Entry Price: $0.40 (9/15/2014)

Exit Target: $0.80-$1.20

Return: 75%

Stop Target: None


SNE January 20 calls (SNE150117C00020000, $1.35, up $0.30)

Entry Price: $1.05 (9/15/2014)

Exit Target: $2.10

Return: 29%

Stop Target: None

Action: Shares traded up to $20.35 and held $20 into the close. This level will try to hold as support, with backup at $19.75. I have a near-term target of $22 for Sony.


World Wrestling Federation (WWE, $14.80, down $0.21)

WWE October 16 calls (WWE141018C00016000, $0.35, down $0.10)

Entry Price: $0.45 (9/11/2014)

Exit Target: $0.90

Return: -22%

Stop Target: None

Action: Support is at $14.75-$14.50, and a close below the latter might force me out of the trade. I would like to see shares regain $15 today.


MGM Resorts International (MGM, $22.82, down $0.39)

MGMNovember 22 puts (MGM141122P00022000, $0.75, up $0.15)

Entry Price: $0.40 (9/10/2014)

Exit Target: $0.60-$0.80 (closed half at $0.60 on 9/15/2014)

Return: 69%

Stop Target: 60 cents (Stop Limit)

Action: Shares traded to a low of $22 yesterday, and these options reached a peak of $1.03. There is a chance that shares test $20, but I have set a Stop Limit of 60 cents on the other half of the position in case shares rebound.


Flextronics (FLEX, $10.89, up $0.01)

FLEX October 12 calls (FLEX141018C00012000, $0.04, flat)

Entry Price: $0.07 (9/5/2014)

Exit Target: $0.15-$0.25

Return: -43%

Stop Target: None


FLEX January 11 calls (FLEX150117C00011000, $0.65, flat)

Entry Price: $0.68 (9/5/2014)

Exit Target: $1.50+

Return: -3%

Stop Target: None

Action: The company’s management team is meeting with analysts this Friday, so an upgrade could be coming.

Support is at $10.75. Near-term resistance is at $11.25. If cleared, shares could make another run at $11.75 and fresh 52-week peaks again.

I believe shares are going to make a strong move past $12 in the coming weeks and $14 by year-end.


Fortinet (FTNT, $26.10, up $0.43)

FTNT December 29 calls (FTNT141220C00029000, $0.85, flat)

Entry Price: $0.95 (9/2/2014)

Exit Target: $1.90

Return: -11%

Stop Target: None

Action: The battle over $26 continued yesterday. The 52-week high is $26.80. If cleared, here comes $28-$30. Support is at $25.50.


Rubicon (RBCN, $5.20, down $0.42)

RBCN December 8 calls (RBCN141220C00008000, $0.20, down $0.05)

Entry Price: $0.35 (8/25/2014)

Exit Target: $0.70

Return: -43%

Stop Target: None

Action: Support at $5.75 was penetrated on Monday, and I said shares could test $5.50-$5 on continued weakness. Tuesday’s low was $5.17.

I still like the trade, as open interest is massive in these call options. The short-interest is also ballooning, with 30% of the float sold short. Analysts are expecting a terrible quarter, and the company has beaten estimates two of the past four quarters.

This is a sapphire play that has until December before the trade expires. These were “cheap” options, so stay patient, as a big payday could be coming.


Trades on Hold — other 2014 Portfolio Open positions (3): These are trades that are still open in the portfolio but are down over 50%. They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around. This means I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly when the trade closes or if the options expire. Click on the Open Trades and Closed Trades pages to see all open and closed positions.

S&P 500 Spiders September 180 puts (from August 2014) — Tuesday’s rally was the nail in the coffin for this trade unless the market falls from the sky by Friday. I opened this trade in early August when the S&P 500 fell below 1,909. The index recovered the 1,950 level a week later, but I mainly kept this trade open as “insurance.” Like a game of cards, it was a personal preference, but, unlike 21, you can at least get a couple pennies back.

I doubt the S&P falls 10% in three days, but it could. If so, I would quickly recommend opening October puts in less than a minute to play this kind of action and still make money, but I would be shocked.

I don’t want to be cheesy and close this trade just to have a 98% loser instead of 100%. I know it can be hard to take a 100% loss, but just remember it is only one trade in an overall batch.

Since May, I have been on an incredible hot streak as I have closed 80% of my trades for winners. There have been numerous trades that returned over 100%, and those trades tend to equal out some of the ones that take these kinds of hits. Additionally, all of my Momentum Options trades target 100+% returns or more.

The most you can lose on an option trade is 100%, but winners can run up to 300%, 500% and even 1,000% or more. It’s why I trade options because there is no other investment in the world that has this kind of power in the time frame I’m looking for.

I wanted to explain my thought process for the ton of new subscribers this month and the emails we have received. You are likely not in this trade, but longer-term subscribers are and already know how this trade went down (literally).

I still feel “safe” holding insurance, so I will leave it open. However, chances are good the options will expire worthless.

AKS Steel Holding October 12 calls (from August 2014) and the January 13 calls (from August 2014) — Shares were up 5% yesterday and were at $10.50 in after-hours. I will update the trade in today’s Mid-Market Update. Shares were just above $11 at the time.

Pool October 50 puts (from July 2014) — The break-even point for the trade is at $48.90, technically, by mid-October. These options have nearly a month before they expire. I will check when earnings are due, as a miss would really help this trade.