Dear Momentum Options Subscriber,

Low inflation is on the Fed’s list of worries, and the bulls climbed the wall of worry to clear resistance while holding their gains into the close. It was like a plot out of a Hollywood movie, as the Fed remained soft and kept rates unchanged.

I said that “patient” would be the cool new Fed word, and they must have read my comments from yesterday’s Pre-Market Update, as I emphasized the importance of staying patient ahead of the meeting.

The game plan over the past few weeks is starting to take shape, but nothing can be taken for granted in this type of market environment.

The Dow jumped 288 points, or 1.7%, to close at 17,356. The blue-chips held positive territory throughout the session and easily cleared 17,200 after peaking at 17,389. The bulls challenged the next layer of resistance at 17,350 and held this level into the close. A pop past 17,400 gets 17,600 back in the mix. Near-term support is at 17,200-17,000.

The S&P 500 soared 40 points, or 2%, to settle at 2,012. The index easily cleared 1,975 shortly after the open and made a run past resistance at 2,000 on the Fed’s announcement. The bulls pushed a high of 2,016, and the next layer of resistance is at 2,025. Support is fresh at 2,000, with risk to 1,985-1,975 on a backtest.

The Nasdaq zoomed 96 points, or 2.1%, to finish at 4,644. Tech made a strong statement following the breakthrough past 4,600 and run to resistance at 4,650. The high reached 4,651. Although this level failed to hold into the close, the bulls held 4,625-4,600, and the action gets 4,700 in play. A close back below 4,600 would be bearish.

The Russell 2000 surged 35 points, or 3.1%, to end at 1,174. The small-caps recovered several layers of resistance after opening above 1,140 at 1,141. This set the table for a run to 1,150-1,160 (now support), but the recovery to 1,170 was even more impressive. The bulls came close to tripping 1,175-1,180, and a close above the latter gets 1,200 back in play.

The S&P Volatility Index ($VIX, 19.32, down 4.25) collapsed 18% as the bulls got the VIX back below 20. A close back above this level keeps risk to 23.50-25 active, but a drop below 17.50 would confirm that the worst is over.

From desk to press, futures are shaping up like this: Dow (+195); S&P 500 (+25); Nasdaq 100 (+58).

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 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, $90.44, up $2.20)

AXP January 95 calls (AXP150117C00095000, $0.70, up $0.25)

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

Exit Target: $1.20

Return: 14%

Stop Target: None

Action: Shares cleared $90 after reaching a peak of $90.57 on Wednesday. The next level of resistance lies at $92-$93. Support is at $88 if there is another dip below $90.

 

Marvell Technology (MRVL, $14.20, up $0.41)

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

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

Exit Target: $1.10

Return: -21%

Stop Target: None

Action: Shares zoomed past $14 and traded to a high of $14.21. The next wave of resistance is at $14.50-$14.75, and a close above the latter would be super bullish. Support at $13.75 was stretched but held up well. I would like to see $14 hold on a pullback for the rest of the week.

 

Pfizer (PFE, $31.12, up $0.45)

PFE February 33 calls (PFE150220C00033000, $0.35, up $0.05)

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

Exit Target: $1.15

Return: -21%

Stop Target: None

 

PFE March 33 calls (PFE150320C00033000, $0.45, up $0.05)

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. Yesterday’s peak reached $31.35. 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, $116.89, up $3.50)

IWM January 121 calls (IWM150117C00121000, $0.80, up $0.45)

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

Exit Target: $1.80

Return: -11%

Stop Target: None

Action: Near-term resistance at $115 cleared and held into the close, which will now serve as short-term support. Resistance is at $117.50-$118.

 

JDS Uniphase (JDSU, $13.69, up $0.16)

JDSU March 14 calls (JDSU150320C00014000, $0.95, flat)

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

Exit Target: $1.40

Return: 36%

Stop Target: $0.80 (Stop Limit)

Action: The Stop Limit of $0.80 held on Wednesday’s dip to $13.36, as the calls kissed $0.82. Support at $13.50-$13.25 is still in play, as shares failed to clear $13.75. Resistance is at $14. The 52-week high is at $14.99.

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

 

Flextronics (FLEX, $10.68, down $0.09)

FLEX January 11 calls (FLEX150117C00011000, $0.25, down $0.05)

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

Exit Target: $1.25

Return: -63%

Stop Target: None

Action: There was no Fed love rebound in FLEX, as shares tested a low of $10.53.

 

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 closed at $28.48 and matched the recent 52-week peak at $28.50 yesterday. The bad news is that these options expire tomorrow. The options are still “out of the money,” and I need shares above $29.95 to break even on the trade.

While it has been frustrating to watch this trade play out for over three months to end with a loss, I want to see where the action is mid-day before deciding to close the trade and save some premium — Continue to hold.

I hate to be wrong on any trade, and to be on the wrong side of an option twice is like playing with fire. However, I could go back to the stove with FTNT March options if shares clear $29 or higher and tech stays hot.

Side note: FireEye (FEYE) could also be an “option,” but the calls and puts trade at a juicer premium, as takeover chatter runs hot and cold on this name.

PowerShares QQQ January 107 calls (from December 2014) — Continue to hold.

 

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