Dear Momentum Options Subscriber,

The bulls wasted all of their energy on Monday’s open following a dead-cat bounce in oil overnight. The slide in crude led to a test to double-nickels ($55/barrel), which was a level not seen since the summer of 2009.

As oil slipped, so did the market, and the bears broke through another layer of technical support. The bulls managed a rebound off of the lows and left a few signs that they aren’t going down without a fight.

The Dow fell just under 100 points, or 0.6%, to finish at 17,180 on Monday. The blue-chips made a run to 17,403 before testing a low of 17,115. The bulls held support at 17,000 and the 100-day moving average, but the third-straight negative Monday was bearish. Short-term resistance is at 17,350 once 17,200 clears.

The S&P 500 slipped 13 points, or 0.6%, to end at 1,989. The index traded to 2,018 on the open but closed below its 50-day moving average and below its 100-day average by a point. I talked about further weakness to 1,975-1,950 on a close below this level, and Monday’s low reached 1,982. Resistance is at 2,000-2,025, which served as prior support.

The Nasdaq gave back 48 points, or 1%, to settle at 4,605. Tech made a run to resistance at 4,700 before falling by triple digits from its peak of 4,698. The bears pushed a low of 4,592, with the bulls holding 4,600 into the close. This was a slightly bullish sign, but a drop below 4,575 and the 50-day moving average could lead to continued weakness.

The Russell 2000 dropped a dozen points, or 1.1%, to close at 1,140. The small-caps kissed resistance at 1,160 shortly after the opening bell before plunging to a low of 1,138. The bulls held 1,140, and I mentioned that there could be “stretch” to 1,140-1,135. A close below these levels could lead to a test of 1,125.

The S&P Volatility Index ($VIX, 20.42, down 0.66) tested 25 after trading to a high of 24.83 during the session but finished lower. The bulls pushed 17.77 on the open but failed to get below 17.50, which was a clue that further selling pressure could come. The VIX still closed above 20, but Monday’s action was slightly bullish as long as 22.50-25 holds.

The Fed will be in focus over the next two days, so the market will likely react to any bullish or bearish news that comes from the talking heads and the FOMC minutes. This could create added volatility, but I’m hoping yesterday’s action was the height of it, with a possible bottom forming in the indexes this week.

From desk to press, futures are shaping up like this: Dow (-111); S&P 500 (-16); Nasdaq 100 (-38).

Momentum Options Play List

Closed Momentum Options Trades for 2014: 97-59 (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.


American Express (AXP, $90.04, down $0.96)

AXP January 95 calls (AXP150117C00095000, $0.65, down $0.25)

Entry Price: $0.60 (12/15/2014)

Exit Target: $1.20

Return: 8%

Stop Target: None

Action: Shares are just above the major moving averages, with the 50-day and 200-day holding on Monday’s dip to $89.15. There is further risk to $88 and the 100-day moving average. A close below this level would be bearish. Resistance is at $91.50-$92.


Marvell Technology (MRVL, $14.08, down $0.11)

MRVL January 15 calls (MRVL150117C00015000, $0.25, down $0.05)

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

Exit Target: $0.70

Return: -29%

Stop Target: None


MRVL February 15 calls (MRVL150220C00015000, $0.45, down $0.05)

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

Exit Target: $1.10

Return: -18%

Stop Target: None

Action: Support is at $14. Yesterday’s low touched $13.95. Resistance is at $14.25-$14.50.


Pfizer (PFE, $30.86, down $0.09)

PFE February 33 calls (PFE150220C00033000, $0.35, flat)

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

Exit Target: $1.15

Return: -39%

Stop Target: None


PFE March 33 calls (PFE150320C00033000, $0.50, flat)

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

Exit Target: $1.40

Return: -26%

Stop Target: None

Action: Support is at $30. 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, $113.55, down $1.16)

IWM January 121 calls (IWM150117C00121000, $0.35, down $0.10)

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

Exit Target: $1.80

Return: -61%

Stop Target: None

Action: Support is at $114-$113.50. Resistance is at $115.


PowerShares QQQ (QQQ, $101.61, down $1.06)

QQQ January 107 calls (QQQ150117C00107000, $0.30, down $0.20)

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

Exit Target: $2.00

Return: -69%

Stop Target: None

Action: There is risk to $101-$100. Short-term resistance is at $102 followed by $103.50.


JDS Uniphase (JDSU, $13.66, down $0.15)

JDSU March 14 calls (JDSU150320C00014000, $1.00, flat)

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

Exit Target: $1.40

Return: 43%

Stop Target: $0.80 (Stop Limit)

Action: The low on the options reached $0.96 on the stock’s dip to $11.59 on Monday. The Stop Limit of $0.80 could trigger on a drop below $11.50, but I’m looking for this level to hold.

Support is at $13.50. Resistance is at $14, and a close above this level would be bullish. The 52-week high is at $14.99.

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


Flextronics (FLEX, $10.78, up $0.16)

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

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

Exit Target: $1.25

Return: -55%

Stop Target: None

Action: Resistance is at $11. 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) — Shares are holding $28, and I would like to see $29 clear by Wednesday. I mentioned last week that this trade from early September could come down to the wire, as these options expire this Friday — Continue to hold.

International Business Machines January 170 calls (from November 2014) — Last week’s drop below $160 and Friday’s close at $155 was the nail in the coffin on this trade. Monday’s low reached $152.84. The options closed at $0.30 yesterday, and I suggest exiting this position at the open this morning. Use a limit order and try to get $0.25-$0.30 at the opening bell, and I will do one last update this afternoon.

IBM earnings are expected to be reported on Jan. 20, which would be a possible catalyst for a rebound, but these options expire before then. I was on the wrong side of the trade this time around and will keep the stock on my Watch List. There could be another opportunity to play this name down the road, perhaps with an earnings trade, as the setup should favor a better risk/reward setup. I still believe that IBM will rebound at some point in 2015, but I doubt shares will recover $170 by mid-January. I can use the rest of the premium to pay for “cheaper” call or put options on a different stock.


Holiday Savings Event: The local stores have their holiday decorations up and I’m beginning to think about gifts, so today I wanted to invite you to join me for a special Holiday Savings Event that I’m throwing for a limited time only. Renew your Momentum Options service today and save $200. It doesn’t matter when your subscription expires because I’ll just extend your current membership. Click here now to take advantage of this savings opportunity!

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options