Dear Momentum Options Subscriber,

The energy stocks are getting whacked again today, as over 60% of the top S&P stocks within the sector have now fallen over 30%. Incredible.

Catching a falling knife can be dangerous, and it’s best to wait for the dust to settle before going bargain hunting. While it has been tempting to short the sector, I haven’t actively looked for put options, as I have been aggressive buying call options since the mid-October lows.

At some point, the energy stocks will bottom, and there will be an incredible opportunity to buy them. Even better, I can use longer-term call options and get into some juicy trades for “pennies on the dollar.”

With crude oil’s 4% dive to $61 today, the bears are once again pushing the second waves of market support.

Heading into the second half of trading, the Dow is down 165 points to 17,635, while the S&P 500 is declining 17 points to 2,042. The Nasdaq is off 31 points to 4,735, and the Russell 2000 is giving back 10 points to 1,177.

Our trades are holding up well despite the whacky action, so let’s go check the tape.

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 1:50 p.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, $32.15, up $0.20)

PFE February 33 calls (PFE150220C00033000, $0.67, up $0.07)

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

Exit Target: $1.15

Return: 18%

Stop Target: None


PFE March 33 calls (PFE150320C00033000, $0.80, up $0.09)

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

Exit Target: $1.40

Return: 18%

Stop Target: None

Action: A close above $32 on a day like today would be sweet. The 52-week high is at $32.96. Support is at $31.50. 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. You can also read about PFE’s fundamentals in the Dec. 9 Mid-Market Update.


iShares Russell 2000 (IWM, $117.14, down $1.03)

IWM January 121 calls (IWM150117C00121000, $0.85, down $0.20)

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

Exit Target: $1.80

Return: -6%

Stop Target: None

Action: I would like to see $117.50-$117 hold into the close.


PowerShares QQQ (QQQ, $104.51, down $0.45)

QQQ January 107 calls (QQQ150117C00107000, $0.70, down $0.10)

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

Exit Target: $2.00

Return: -29%

Stop Target: None

Action:  There is risk to $103. Short-term resistance is at $105. 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, $13.93, up $0.02)

JDSU January 13 calls (JDSU150117C00013000, $1.20, flat)

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

Exit Target: $1.30

Return: 85%

Stop Target: $0.90 (Stop Limit)


JDSU March 14 calls (JDSU150320C00014000, $1.10, flat)

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

Exit Target: $1.40

Return: 57%

Stop Target: $0.90 (Stop Limit)

Action: Set Stop Limits at $0.90 for both positions.

A close above $14 would be super bullish and could lead to a quick run at $15 and fresh 52-week peaks. Short-term support is at $13.75, with $13.50-$13.25 serving as backup.

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


International Business Machines (IBM, $160.61, down $2.38)

IBM January 170 calls (IBM150117C00170000, $0.55, down $0.20)

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

Exit Target: $3.50

Return: -69%

Stop Target: $0.50

Action: Support is at $160.


Flextronics (FLEX, $11.07, down $0.03)

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: Resistance is at $11.25. Support is at $10.75, and a close below this level might force me out of the trade.


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