The bulls avoided their first four-session losing streak of the year following Wednesday’s rebound, and the stigma of the “death cross” was avoided, as the small-caps recovered resistance along with the rest of the major averages. Volatility fell 10% but remains elevated, as Wall Street did some dip-buying.

The Dow jumped 154 points, or 0.9%, to finish at 17,210. The blue-chips were a little shaky on the open and tested 17,033 before a steady climb into the closing bell. Support at 17,000 held, and the bulls reached a peak of 17,226 while holding 17,200. Resistance is at 17,350, with fluff up to 17,500 on continued strength.

The S&P 500 surged 15 points, or 0.8%, to end at 1,998. The index traded down to 1,978 to start the session before testing a high of 1,999.79. However, the bulls fell short of clearing and holding the 2,000 level. This was the one concerning clue from yesterday’s action, but, if cleared, another run at 2,025 could come. Support has been steady at 1,975.

The Nasdaq zoomed 46 points, or 1%, to settle at 4,555. Tech also struggled on the open, as the bears pushed support and a low of 4,500 before recovering the 4,550 level. The precise movement to support at exactly 4,500 and the bounce to reclaim resistance was picture perfect. The action signaled the perfect back test before a massive drop — or further strength. Resistance is at 4,600 and has been a brick wall all month long.

The Russell 2000 soared 9 points, or 0.9%, to close at 1,128. The small-caps traded down to 1,116 on the open and held 1,115-1,100 before closing a point off its session high. The bulls recovered 1,125, but the major hurdles remain at 1,140-1,150. If the latter is cleared, a continued rally could be in store. It is also important to note that the major moving averages (50,100, 200) are all within 2 points of each other and are hovering around the 1,150 level. Watch for 1,130 on this morning’s open for continued strength or 1,120 for a possible a breakdown.

The S&P 500 Volatility Index ($VIX, 13.27, down 1.66) stayed below 15 in the morning open and ended near its session low of 13.24. The bulls were able to recover the 13.50 level but still need to get below 12.50 and then 11.50 before new highs can be achieved. The bears are still trying to ring the panic bell at 15.

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Ahead of the open, futures are shaping up like this: Dow (+1); S&P 500 (-1); Nasdaq 100 (-3).

Momentum Options Play List

Closed Momentum Options Trades for 2014: 72-46 (61%). 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.

 

General Motors (GM, $33.65, up $0.43)

GM December 32 puts (GM141220P00032000, $0.80, down $0.15)

Entry Price: $0.95 (9/22/2014)

Exit Target: $1.90

Return: -16%

Stop Target: None

Action: A rising tide will lift all boats. GM traded to a high of $33.68 on Wednesday but is still struggling with its 50-day moving average at $34.24. Shares appear ready to trade down to $32.50 over the near term as long as $34.50 holds.

I believe GM could fall below $30 and test $28 in the longer term. If shares trade down to $30 by mid-December, these options will easily double from the entry price, as they will be worth at least $2.

 

Apollo Group (APOL, $25.24, down $0.12)

APOL November 24 puts (APOL141122P00024000, $1.05, up $0.05)

Entry Price: $0.85 (9/22/2014)

Exit Target: $1.70

Return: 24%

Stop Target: 87 cents (Stop Limit)

Action: APOL traded to a low of $24.95 but was unable to hold below the $25 level into the close. The options reached a peak of $1.31. I have placed a new Stop Limit of 87 cents on the trade to protect profits in case shares rebound and test $26.

I have a near-term target of $24, with a chance of shares testing $22-$20. I have been bearish on this stock for years and have been targeting a test to the mid-teens at some point. A break below $24 is the last line of support and represents the 100-week moving average. There is risk to $28 on a back test, but resistance will try to hold at $26.

 

Staples (SPLS, $12.82, up $0.01)

SPLS December 14 calls (SPLS141220C00014000, $0.35, flat)

Entry Price: $0.45 (9/18/2014)

Exit Target: $0.70-$0.90

Return: -22%

Stop Target: None

Action: A close above $13-$13.20 would be bullish. I have a near-term target of $14 and a longer-term target of $17. The 52-week high is at $16.67. The open interest in these call options is over 18,000 contracts and continues to build. The 50-day moving average (MA) recently crossed over the 100-day MA, and shares are in a nice uptrend. Support is at $12.60-$12.40 and the 200-day MA. These options have three months before expiration, so we have plenty of time to ride out the short-term volatility.

 

Freeport-McMoRan (FCX, $33.25, up $0.29)

FCX November 36 calls (FCX141122C00036000, $0.27, up $0.02)

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

Exit Target: $1.05-$1.40

Return: -61%

Stop Target: None

Action: There is risk to $32.50 on further selling pressure. These options have two months before they expire, and I like the trade as long as $32 holds up. Resistance is at $34.

 

Flextronics (FLEX, $10.81, up $0.02)

FLEX October 12 calls (FLEX141018C00012000, $0.05, flat)

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

Exit Target: $0.15-$0.25

Return: -29%

Stop Target: None

 

FLEX January 11 calls (FLEX150117C00011000, $0.55, flat)

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

Exit Target: $1.50+

Return: -18%

Stop Target: None

Action: Support is at $10.75-$10.50. Near-term resistance is at $11-$11.25. If cleared, shares could make another run at $11.75 and fresh 52-week peaks. I believe shares are going to make a strong move past $12 in the coming weeks and $14 by year-end.

 

Fortinet (FTNT, $25.84, up $0.33)

FTNT December 29 calls (FTNT141220C00029000, $0.80, up $0.10)

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

Exit Target: $1.90

Return: -16%

Stop Target: None

Action: Resistance is at $26. Yesterday’s high was $25.99. Support at $25.50 and the 50-day moving average. A close below this level would be bearish and could lead to $25-$24.

 

Rubicon (RBCN, $4.74, flat)

RBCN December 8 calls (RBCN141220C00008000, $0.15, flat)

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

Exit Target: $0.70

Return: -57%

Stop Target: None

Action: There is risk to $4.75-$4.50. Resistance is at $5.25.

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, but the company has beaten loss 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, or buyout of the company, could be coming.

 

Trades on Hold — other 2014 Portfolio Open positions (2): 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.

AKS Steel Holding October 12 calls (from August 2014) and January 13 calls (from August 2014) — Continue to hold.

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 — Continue to hold.