Dear Momentum Options Subscriber,

The market went for a wild ride on Tuesday, as the bulls and bears exchanged blows in one of the more volatile sessions we have seen in weeks. The action was intense, which is why I prepared a detailed list of things to watch yesterday. It helped keep my emotions in check (and hopefully yours as well), as the game plan I covered is falling right into place.

The Dow declined 51 points, or 0.3%, to end at 17,801 on Tuesday. The blue-chips tested a low of 17,629, and I talked about an overshoot to 17,600 on a drop below 17,800. The bulls rebounded into the close to hold support by a point, which was encouraging. Resistance remains at 17,900-18,000.

The S&P 500 slipped by half of a point, or 0.02%, to close just below 2,060. The index stumbled to a low of 2,034 during the first half of trading after support at 2,040 was stretched. The bulls pushed a high of 2,060, held positive territory minutes ahead of the closing bell and easily held the 2,050 level. Resistance is at 2,075, which is less than 1% away.

The Nasdaq gained 25 points, or 0.5%, to close at 4,766. The bears were aggressive on the open and pushed the second layer of support at 4,675-4,650 after reaching 4,674. The bulls responded by clearing 4,700 ahead of Wall Street’s lunch break and holding prior resistance at 4,750. This keeps a run past 4,800 in play, which is also less than 1% away.

The Russell 2000 zoomed over 20 points, or 1.8%, to settle at 1,188. The small-caps tumbled to a low of 1,153 during the opening onslaught but held support at 1,150. The index made it back to even by mid-day and cleared 1,175-1,180 shortly afterwards to end at its session high.

The S&P Volatility Index ($VIX, 14.89, up 0.68) stayed elevated throughout Tuesday’s session after opening at 16.23 and trading to a high of 16.68. I was expecting a pop past 15 and a test to 17.50 after seeing a futures crumble before yesterday’s open. If the bulls can at least hold 15 for the rest of the week, it would follow my game plan heading into next week. If the VIX clears 17.50 and the bears hold, things could get nasty, but I won’t flinch until 20 trips.

From desk to press, futures are shaping up like this: Dow (-15); S&P 500 (-1.75); Nasdaq 100 (-1.25).

Momentum Options Play List

Closed Momentum Options Trades for 2014: 96-59 (62%). 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.


Pfizer (PFE, $31.95, down $0.02)

PFE February 33 calls (PFE150220C00033000, $0.60, flat)

Entry Price: $0.57 (12/8/2014)

Exit Target: $1.15

Return: 5%

Stop Target: None


PFE March 33 calls (PFE150320C00033000, $0.71, flat)

Entry Price: $0.68 (12/8/2014)

Exit Target: $1.40

Return: 4%

Stop Target: None

Action: Shares tested a low of $31.45 and held near-term support at $31.50 before bouncing back to push $32.01. A close above $32 should lead to a continued breakout to $33-$35.

You can view the chart work on PFE in the Dec. 9 Pre-Market Update.


iShares Russell 2000 (IWM, $118.17, up $1.95)

IWM January 121 calls (IWM150117C00121000, $1.05, up $0.44)

Entry Price: $0.90 (12/5/2014)

Exit Target: $1.80

Return: 17%

Stop Target: None

Action: The small-caps cleared resistance at $118 after a test to support at $115. This clears the way for a run past $120 as long as $117.50-$115 holds as backup. The 52-week high is $120.97.


PowerShares QQQ (QQQ, $104.96, up $0.33)

QQQ January 107 calls (QQQ150117C00107000, $0.80, up $0.07)

Entry Price: $0.98 (12/5/2014)

Exit Target: $2.00

Return: -18%

Stop Target: None

Action:  Short-term resistance at $105 was nearly cleared following the dip to support at $103. I have talked about the QQQs making a run to $110 on continued closes above $105, and the recent 52-week high is north of $106.


JDS Uniphase (JDSU, $13.91, up $0.67)

JDSU January 13 calls (JDSU150117C00013000, $1.20, up $0.15)

Entry Price: $0.65 (12/3/2014)

Exit Target: $1.30

Return: 85%

Stop Target: None


JDSU March 14 calls (JDSU150320C00014000, $1.10, up $0.35)

Entry Price: $0.70 (12/3/2014)

Exit Target: $1.40

Return: 57%

Stop Target: None

Action: Shares easily cleared resistance at $13.50-$13.75 after reaching a peak of $13.93 on Tuesday. This gets a run to $14-$15 in the mix. Support at $13 is moving up and will try to hold at $13.50-$13.25 on a pullback.

The stock rebounded following comments from Verizon’s CFO who said that investment in telecom equipment should continue to trend higher.

You can read my full update on JDSU in the Dec. 3 Alert.


International Business Machines (IBM, $162.99, up $1.13)

IBM January 170 calls (IBM150117C00170000, $0.75, up $0.15)

Entry Price: $1.75 (11/10/2014)

Exit Target: $3.50

Return: -57%

Stop Target: $0.50

Action: Support at $160 was tested following the drop to $160.80 and held before the surge past $163. Resistance is at $165.


Flextronics (FLEX, $11.10, up $0.12)

FLEX January 11 calls (FLEX150117C00011000, $0.40, flat)

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

Exit Target: $1.25

Return: -40%

Stop Target: None

Action: Support is at $10.75, and a close below this level might force me out of the trade. Shares closed back above $11 following a dip to $10.72 on Tuesday. Resistance is at $11.25.


Trades on Hold — other 2014 Portfolio Open positions (1): 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.

Fortinet December 29 calls (from September 2014) — Continue to hold.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options