Dear Momentum Options Subscriber,

The bulls showed some muscle on Thursday, but I worried about their fast start, as the monumental gains faded into the close. A good showing again today would be bullish for next week, but the bears still look hungry.

The Dow added 63 points, or 0.4%, to settle at 17,596. The blue-chips tested 17,750 throughout the session and reached 17,758 before the fade below 17,600. Resistance at 17,800 held despite the 220-point pop, with risk to 17,350 on continued weakness.

The S&P 500 gained 9 points, or 0.5%, to finish at 2,035. The index zoomed past short-term resistance at 2,050 to reach 2,055 before slipping back below 2,040 into the close. Shaky support at 2,025 remains, with risk to 2,010-2,000 on a drop below this level.

The Nasdaq jumped 24 points, or 0.5%, to close at 4,708. Tech tested a high of 4,759 and cleared resistance at 4,750 before another backtest to 4,700. The bears are still targeting a push or close into the 4,675-4,650 zone.

The Russell 2000 advanced 5 points, or 0.4%, to end just under 1,167. The small-caps raced to a high of 1,180 and cleared resistance at 1,170-1,175 but were unable to hold these levels. There is risk to 1,160 and, as long as 1,150 sticks, the bounce to higher highs should start next week.

The S&P Volatility Index ($VIX, 20.08, up 1.05) traded to a low of 15.94 on the open and into the second half of trading before clearing and closing above 20. This was a bearish signal and one I flinched on, as it opened the door for a run to 22.50-25. A close below 17.50 today would be bullish for next week.

Oil’s drop below $60 and fresh 5-year lows spooked Wall Street and was the main culprit for the Thursday’s ruined rally. A win is still a win, but the bulls need a good showing today to ease the selling pressure.

From desk to press, futures are shaping up like this: Dow (-82); S&P 500 (-8); Nasdaq 100 (-20).

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.

 

Marvell Technology (MRVL, $14.40, up $0.11)

MRVL January 15 calls (MRVL150117C00015000, $0.33, up $0.05)

Entry Price: $0.35 (12/11/2014)

Exit Target: $0.70

Return: -6%

Stop Target: None

 

MRVL February 15 calls (MRVL150220C00015000, $0.55, up $0.05)

Entry Price: $0.55 (12/11/2014)

Exit Target: $1.10

Return: 0%

Stop Target: None

Action: Resistance is at $14.75-$15. A close above $15.25 should lead to a run to prior 52-week highs north of $16. If $16 clears, both options would be $1.00 in the money. Support is at $14 on a break below the 200-day moving average, or $14.25.

 

Pfizer (PFE, $31.65, down $0.21)

PFE February 33 calls (PFE150220C00033000, $0.55, down $0.05)

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

Exit Target: $1.15

Return: -4%

Stop Target: None

 

PFE March 33 calls (PFE150320C00033000, $0.65, down $0.05)

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

Exit Target: $1.40

Return: 7%

Stop Target: None

Action: Shares traded to a high of $33.12 on Thursday, and the move was swift before shares gave back their gains. I wasn’t thrilled with the action because the options should have made a nice move and didn’t.

Support is at $31.50. A close above $32 should lead to a continued breakout to $33-$35. The 52-week high is at $32.96.

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, $116.12, up $0.46)

IWM January 121 calls (IWM150117C00121000, $0.70, up $0.05)

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

Exit Target: $1.80

Return: -22%

Stop Target: None

Action: Thursday’s high reached $117.68 before the fade to $116. Resistance is at $117.50-$118. Support is at $115, with risk to $114-$113.50.

 

PowerShares QQQ (QQQ, $103.80, up $0.49)

QQQ January 107 calls (QQQ150117C00107000, $0.65, up $0.10)

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

Exit Target: $2.00

Return: -34%

Stop Target: None

Action: Short-term resistance is at $105, and yesterday’s high reached $105.04. There is risk to $103-$102.50.

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, $13.75, up $0.12)

JDSU January 13 calls (JDSU150117C00013000, $1.10, up $0.10)

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

Exit Target: $1.30

Return: 69%

Stop Target: $0.80 (Stop Limit)

 

JDSU March 14 calls (JDSU150320C00014000, $1.00, up $0.05)

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

Exit Target: $1.40

Return: 43%

Stop Target: $0.80 (Stop Limit)

Action: Resistance is at $14, and a close above this level would be bullish. Thursday’s peak reached $14.19. The 52-week high is at $14.99. Support is at $13.50, and a drop below this level could get the Stop Limits in play.

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

 

Flextronics (FLEX, $10.85, down $0.05)

FLEX January 11 calls (FLEX150117C00011000, $0.30, down $0.05)

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

Exit Target: $1.25

Return: -55%

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 (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.

Fortinet December 29 calls (from September 2014) — Continue to hold. You can read more about my thoughts on FTNT in the Dec. 11 Pre-Market Update.

International Business Machines January 170 calls (from November) — Continue to hold.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options