Dear Momentum Options Subscriber,
The bulls got back on track to push fresh all-time highs on Tuesday. Further choppiness is likely in store for the rest of the week with Friday’s nonfarm payrolls report in the mix. However, the blue-chips are on the verge of cracking 18,000, which could be the tide that lifts all boats.
The Dow jumped 102 points, or 0.6%, to end at 17,879. The blue-chips traded to another all-time intraday high of 17,897 and just missed clearing 17,900. A close above this level will likely trigger 18,000, with additional fluff to 18,250. Support at 17,800 held, with backup at 17,600.
The S&P 500 gained 13 points, or 0.6%, to close at 2,066. The index traded to a high of 2,068 and held positive territory throughout the session. Support at 2,050 stayed strong, with backup at 2,040. Resistance is at 2,075.
The Nasdaq zoomed 28 points, or 0.6%, to settle at 4,755. Tech reached a peak of 4,761 and held 4,750 into the closing bell. I am waiting for a pop past 4,775-4,800 to possibly add another bullish index trade. Support is at 4,725-4,700.
The Russell 2000 jumped 14 points, or 1.3%, to close at 1,168. The small-caps traded to a high of 1,171 and also held green from start to finish but failed at clearing resistance at 1,175. Support is at 1,150-1,140.
The S&P Volatility Index ($VIX, 12.85, down 1.44) dropped 10% and closed back below 13.50. The bulls nearly cleared 12.50, which would signal strength, but the bears are still pressing for a run past 15.
From desk to press, futures are shaping up like this: Dow (+2); S&P 500 (-0.25); Nasdaq 100 (+1.50).
Momentum Options Play List
Closed Momentum Options Trades for 2014: 95-56 (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 8:30 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.
Diamond Foods (DMND, $29.71, down $0.06)
DMND December 32 calls (DMND141220C00032000, $0.60, down $0.10)
Entry Price: $0.87 (11/18/2014)
Exit Target: $1.75
Stop Target: None
Action: It was a little disappointing to see shares not participate in yesterday’s rally, but support at $29 held following a test to $29.38. Near-term resistance is at $30.50. Earnings are due out on Monday, Dec. 8, after the close.
You can read my detailed write-up on DMND in the Nov. 19 Mid-Market Update.
IMAX (IMAX, $30.95, down $0.05)
IMAX December 32 calls (IMAX1220C00032000, $0.40, down $0.10)
Entry Price: $0.35 (11/12/2014)
Exit Target: $0.70 (Limit Order on Half)
Stop Target: None
Action: Shares traded to a high of $31.13 on Tuesday. Resistance is at $31.50-$32. Support is at $30.
International Business Machines (IBM, $162.67, up $1.13)
IBM January 170 calls (IBM150117C00170000, $0.85, up $0.05)
Entry Price: $1.75 (11/10/2014)
Exit Target: $3.50
Stop Target: $0.50
Action: Resistance is at $163.50. Support is at $160.
You can read more about why I like this trade and its risk/reward setup in the Nov. 11 Pre-Market Update.
Flextronics (FLEX, $11.10, down $0.01)
FLEX January 11 calls (FLEX150117C00011000, $0.45, flat)
Entry Price: $0.68 (9/5/2014)
Exit Target: $1.25
Stop Target: None
Action: Resistance is at $11.25-$11.50, and a close above the latter should get the 52-week high of $11.83 in play. Support is at $10.75, with backup at $10.50 and the 100-day moving average.
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.
Rubicon December 8 calls (From August 2014) — Continue to hold.
Fortinet December 29 calls (from September 2014) — Continue to hold.
Editor and Chief Options Strategist