Dear Momentum Options Subscriber,

The bears made another appearance on Tuesday and stole the bulls’ lunch to get a clean sweep on the major indexes. Near-term support held, but the fading momentum needs to be watched for further signs of a possible decline.

The Dow dropped double-nickels (55 points), or 0.3%, to finish at 17,983. The blue-chips stayed in negative territory throughout the session and traded to a low of 17,959. It was the first close below 18,000 after four sessions above this level. The good news is that support at 17,900-17,800 held. Backup support is at 17,600. Resistance is at 18,000-18,100.

The S&P 500 slipped 10 points, or 0.5%, to close at 2,080. The index traded in the red from start to finish and bottomed at 2,079. Support at 2,080-2,075 stuck, but there is further risk to 2,050 on a close below this level. Resistance is at 2,090-2,100.

The Nasdaq fell 29 points, or 0.6%, to settle at 4,777. Tech also showed weakness after testing a low of 4,772 and falling back below the 4,800 level. The bulls held support at 4,775, but there is additional risk to 4,750-4,700 on a continued pullback. Resistance is at 4,800-4,815.

The Russell 2000 declined 6 points, or 0.5%, to end at 1,213. The small-caps made a brief trip into positive territory by nearly half of a point on the open to 1,219, but the rest of the session was downhill. The bears pushed a low of 1,212, but the bulls easily held 1,210-1,200. A close below the latter might suggest that a short-term top is in. Resistance is at 1,220-1,225.

The S&P Volatility Index ($VIX, 15.92, up 0.86) stayed elevated after reaching a peak of 16.20. There is still risk to 17.50, and a close above this level would be a bearish development. The bulls need to get the VIX back below 15 by today or Friday’s close.

There will likely be action to take on a few more trades this afternoon as I wind down the 2014 portfolio, though I will likely carry over a few current positions into 2015.

From desk to press, futures are shaping up like this: Dow (+10); S&P 500 (+2.5); Nasdaq 100 (+3.5).

Momentum Options Play List

Closed Momentum Options Trades for 2014: 102-64 (61%). 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.

 

AT&T (T, $34.08, down $0.03)

T February 35 calls (T150220C00035000, $0.33, flat)

Entry Price: $0.35 (12/26/2014)

Exit Target: $0.70

Return: -6%

Stop Target: None

Action: Shares held near-term support at $34-$33.75 following Tuesday’s dip to $34.03. Resistance is at $34.50-$34.75. I have a near-term target of $35-$36 for the stock.

 

Boston Scientific (BSX, $13.37, up $0.14)

BSX February 14 calls (BSX150220C00014000, $0.45, up $0.05)

Entry Price: $0.45 (12/19/2014)

Exit Target: $0.90

Return: 0%

Stop Target: None

Action: Resistance is at $13.25-$13.40. Yesterday’s high reached $13.39. Support is at $13 and the 50-day moving average. A close below $12.75 and the 200-day moving average would be bearish.

These options have nearly two months before they expire. I will likely continue to hold this trade into 2015, as there is plenty of time to wait for a possible run past $14.

 

Marvell Technology (MRVL, $14.47, up $0.14)

MRVL January 15 calls (MRVL150117C00015000, $0.15, flat)

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

Exit Target: $0.70

Return: -57%

Stop Target: None

 

MRVL February 15 calls (MRVL150220C00015000, $0.45, flat)

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

Exit Target: $1.10

Return: -18%

Stop Target: None

Action: Shares traded to a high of $14.52 but failed to hold this level into the close. I may drop the MRVL January 15 calls if shares are not above this level by the Mid-Market Update. This would reduce a little exposure on a pullback if resistance holds, but I believe a run past $15 is in the works.

 

JDS Uniphase (JDSU, $13.94, up $0.13)

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: Near-term support is at $13.75, and yesterday’s low reached $13.73. A close below this level could lead to $13.50-$13.25, which would likely trigger the Stop Limit.

A mini-trading range has formed with resistance at $14-$14.25. The 52-week peak is at $14.99.

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

 

Flextronics (FLEX, $11.35, up $0.03)

FLEX January 11 calls (FLEX150117C00011000, $0.45, flat)

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

Exit Target: $1.25

Return: -33%

Stop Target: None

Action: Shares are holding $11.25, and the next wave of resistance is at $11.50. Support is at $11-$10.75.

This is the last remaining trade from September, and I would like to see a run past $11.50 by today’s Mid-Market Update. If not, I could close the trade and look at further-out options to buy more time.

The FLEX April 12 calls (FLEX150417C00012000, $0.45, flat) could replace our current position to buy more time for the trade, as they have nearly four months before expiration. If I make the swap, I will send out a New Trade Alert. I may also elect to add them while rolling the dice with our current position in the FLEX January 11 calls into the New Year.

 

Holiday Savings Event: The local stores still have their holiday decorations up and I’m still thinking 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