Dear Momentum Options Subscriber,

Gold ($GOLD, $1,197, up $4) tested a low of $1,130 an ounce in early November and is now trying to recover some of its luster.

The yellow metal closed back below the $1,200 level and the 50-day moving average on Monday after testing a low of $1,191 an ounce. There is additional risk to $1,180 over the near term, and a close below $1,175-$1,170 will likely lead to a backtest to fresh multi-year lows.

With this in mind, I checked the 10-year chart for gold, and it’s just as bearish. The monthly chart below shows gold struggling to hold its 100-day average at $1,191, with potential risk to $1,000-$800. This means that another 20%-30% decline is possible.


Needless to say, the next few weeks could offer better clues as to whether it’s time to go long or short gold. A recovery above $1,200-$1,220 would be a bullish sign, while continued closes below $1,200 would be bearish.

The easiest way to trade gold is to trade the S&P Spiders Gold Shares (GLD, $114.97, up $0.58).

Investors could buy shares to play support and resistance, but the options are a “cheaper” way to speculate on gold’s up and down moves.

The close below $115 and the 50-day moving average is still playing out but has opened the door for a possible test to $110. The 52-week low is at $109.67.


The GLD February 109 puts (GLD140220P00109000, $1.55, up $0.15) could be used to play a possible breakdown to $110, but these options would technically be “out of the money” if GLD holds this level through mid-February.

This means that the aforementioned put options would expire worthless, which shows the time premium built into these options. However, if $110 fails to hold, a test to $105-$100 could come as another round of selling pressure hits gold. If so, the aforementioned put options would easily double.

This trade could be entered with a stop set at $119 on a rebound in gold.

With the longer-term trend still showing weakness, I like the risk/reward this trade has to offer, but I still want to wait a few days to see how the action is going to play out.

Volatility has been crazy too, but the bulls have emerged as we head into the second half of trading. The Dow is up 123 points to 17,304, while the S&P 500 is advancing 12 points to 2,002. The Nasdaq is gaining 11 points to 4,616, and the Russell 2000 is also advancing 11 points to 1,151.

I have a lot to cover with our current trades, so let’s go check the action.

Momentum Options Play List

Closed Momentum Options Trades for 2014: 97-60 (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 12:55 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.


American Express (AXP, $89.85, down $0.20)

AXP January 95 calls (AXP150117C00095000, $0.65, flat)

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, $14.17, up $0.09)

MRVL January 15 calls (MRVL150117C00015000, $0.25, flat)

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

Exit Target: $0.70

Return: -29%

Stop Target: None


MRVL February 15 calls (MRVL150220C00015000, $0.50, up $0.05)

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

Exit Target: $1.10

Return: -9%

Stop Target: None

Action: Support is at $14. Resistance is at $14.25-$14.50.


Pfizer (PFE, $31.25, up $0.39)

PFE February 33 calls (PFE150220C00033000, $0.45, up $0.10)

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

Exit Target: $1.15

Return: -21%

Stop Target: None


PFE March 33 calls (PFE150320C00033000, $0.60, up $0.10)

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

Exit Target: $1.40

Return: -12%

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, $114.76, up $1.21)

IWM January 121 calls (IWM150117C00121000, $0.45, up $0.10)

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

Exit Target: $1.80

Return: -50%

Stop Target: None

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


PowerShares QQQ (QQQ, $101.79, up $0.18)

QQQ January 107 calls (QQQ150117C00107000, $0.35, up $0.05)

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

Exit Target: $2.00

Return: -64%

Stop Target: None

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


JDS Uniphase (JDSU, $13.78, up $0.12)

JDSU March 14 calls (JDSU150320C00014000, $1.05, up $0.05)

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

Exit Target: $1.40

Return: 50%

Stop Target: $0.80 (Stop Limit)

Action: 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, $11.04, up $0.26)

FLEX January 11 calls (FLEX150117C00011000, $0.40, up $0.10)

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

Exit Target: $1.25

Return: -40%

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) — The options have traded to a high of $0.30 today, and the limit order of $0.25 triggered on the rebound. Please close this trade if you haven’t done so already.


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