Dear Momentum Options Subscriber,
The bears got aggressive yesterday, and Wall Street is on the verge of calling for another selloff following Monday’s pullback. While it is too early to say this pullback will be the start of something bigger, the technical picture is weakening for the bulls.
The Dow dropped 83 points, or 0.5%, to settle at 17,766. The blue-chips traded into the red on the open, with the bears pushing a low of 17,760 intraday. The close below 17,800 gets 17,600 and the 200-day moving average in play. The 200-day average came into play in late January and early February and held both times. Resistance remains at 17,900-18,000 and the 50- and 100-day moving averages.
The S&P 500 sank 13 points, or 0.7%, to close at 2,079. I talked about risk to 2,080-2,075 on continued weakness, and the close below the 100-day moving average was bearish. There is additional risk to 2,050 and the 200-moving average on a close below 2,070. Resistance is at 2,090-2,100 and the 50-day moving average.
The Nasdaq tumbled 46 points, or 0.9%, to finish at 5,021. Tech tried to stay bullish following its half-point run to 5,069, but short-term resistance at 5,075 stuck. The drop to 5,014 held the 5,025-5,000 zone and the 50-day moving average. A close below 5,000 could lead to a test to 4,950 and the 100-day moving average.
The Russell 2000 stumbled 7 points, or 0.6%, to end at 1,253. The small-caps tested greener pastures shortly after the open but never made it past 1,261 or resistance at 1,270-1,275. The steady fade to 1,252 held fresh support at 1,250 and the 50-day moving average. There is wiggle room to 1,240 on continued weakness, and a close below this level would be bearish. A move back above 1,260 again would be bullish.
The S&P 500 Volatility Index ($VIX, 15.29, up 1.08) stayed elevated throughout Monday’s session, with the bears pushing a high of 15.50. The close above 15 was the first in over a month. I have mentioned that we will stay relaxed until 17.50 is tripped. This level has held since early February.
The pullback last week and on Monday has taken us out of some great trades. However, the good news is that the portfolio is light and is once again ready to rumble with new trades.
From desk to press, futures look like this: Dow (-19); S&P 500 (-2.5); Nasdaq 100 (-12).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 59-19-1 (75%). 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 8:00 a.m. EST.
I hereby disclose that I will be participating in the following trade(s). 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.
Wells Fargo (WFC, $56.12, down $0.49)
WFC July 60 calls (WFC150717C00060000, $0.17, down $0.04)
Entry Price: $0.20 (6/5/2015)
Exit Target: $0.50
Stop Target: None
Action: Support is at $56-$55.50. Resistance is at $56.50.
Rigel Pharmaceuticals (RIGL, $3.63, down $0.05)
RIGL September 5 calls (RIGL150918C00005000, $0.50, down $0.05)
Entry Price: $0.40 (6/4/2015)
Exit Target: $0.80
Stop Target: None
Action: Resistance is at $3.75, followed by $4 and the 50-day moving average. Support is at $3.50, followed by $3.30-$3.25 and the 100-day moving average.
You can read my detailed write-up on RIGL in the June 5 Pre-Market Update.
Sony (SNE, $29.27, down $0.78)
SNE July 33 calls (SNE150717C00033000, $0.20, down $0.05)
Entry Price: $0.45 (6/1/2015)
Exit Target: $0.90
Stop Target: None
Action: Support is at $28 and the 100-day moving average. Resistance is at $30.
Dot Hill Systems (HILL, $7.30, down $0.13)
HILL September 7.50 calls (HILL150918C00007500, $0.75, down $0.05)
Entry Price: $0.55 (5/21/2015)
Exit Target: $1.10
Stop Target: $0.57 (Stop Limit)
HILL December 7.50 calls (HILL151218C00007500, $1.10, down $0.05)
Entry Price: $0.80 (5/21/2015)
Exit Target: $1.60
Stop Target: $0.85 (Stop Limit)
Action: Support is at $7.25-$7. Resistance is at $7.50-$7.75.
You can read my full update on HILL and check out its 15-year chart in the May 22 Pre-Market Update.
iShares Russell 2000 (IWM, $124.82, down $0.58)
IWM June 128 calls (IWM150619C00128000, $0.26, down $0.14)
Entry Price: $0.70 (5/19/2015)
Exit Target: $0.90 (Limit Order)
Stop Target: None
Action: Short-term support is at $124 and the 50-day moving average. Resistance is at $126-$127.
Editor and Chief Options Strategist