Dear Momentum Options Subscriber,

I mentioned that all-times highs for the major indices were still in the mix, and Thursday’s run into blue-sky territory had the short-sellers covering. With June options expiring today, the action could stay hot as the bulls try to extend their winning streak to four-straight sessions.

The Dow roared 180 points, or 1%, to settle at 18,115 on Thursday. The blue-chips easily cleared 18,000 shortly after the open and made a steady run to 18,174 intraday. The close above 18,100 was bullish, but further resistance remains at 18,200-18,350. The all-time high from mid-May is at 18,351, and a close above this level gets 18,500-18,600 in play. Support is at 18,000-17,900.

The S&P 500 soared 20 points, or 1%, to close at 2,121. The index opened above the 2,100 level and reached a peak of 2,126 intraday. Resistance at 2,125 held. A close above this level will get all-time highs north of 2,135 in the mix, with a run to 2,150 possible.

The Nasdaq zoomed 68 points, or 1.3%, to finish at 5,132. Tech opened above the 5,075 level and made a steady push past resistance at 5,100 on yesterday’s rally. The index traded to a fresh all-time high of 5,143, and I have been mentioning that there is fluff to 5,200-5,250 over the near term. Support is at 5,100-5,075 on a pullback.

The Russell 2000 surged 16 points, or 1.3%, to end at 1,284. The small-caps tested prior resistance at 1,275-1,270 at the start of trading, which was a good sign that all-time highs would come into play. The index reached a peak of 1,287 and looks poised to take out the 1,300 level. Support has moved up to 1,280-1,275.

The S&P 500 Volatility Index ($VIX, 13.19, down 1.31) opened at 14.03, which represented the high of the day, with 15 easily holding. The move down to 12.54 came close to taking out 12.50, which is a level I would like to see the bulls hold ahead of the weekend.

I have a New Trade this morning on a name I have liked all year. While it is rare that I take new trades on a Friday, I want to get us back into this trade before Wall Street notices last night’s headlines. Please read this morning’s trade instructions very carefully.

From desk to press, futures look like this: Dow (+9); S&P 500 (+1); Nasdaq 100 (+6).

Momentum Options Play List

Closed Momentum Options Trades for 2015: 65-20-1 (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 portfolio.

 

New Trade

Rambus (RMBS, $15.06, up $0.06)

Use a limit order to buy to open the RMBS August 16 calls (RMBS150821C00016000, $0.55, flat) for a maximum price of $0.72.

Use limit orders up to $0.72 to try and get into these call options on this morning’s open. If the call options open above this level, cancel the trade. Again, if the RMBS August 16 calls open above $0.72, do not chase them. The quality of your brokerage firm could also play a role in getting filled at the open. For those of you who may be new to options trading, make sure you enter your “buy to open” order as a “limit order,” rather than a “market order.”

If shares open slightly higher, I would like to think we can get in at $0.60-$0.65. However, I’m giving us a little wiggle room up to $0.72. I will provide an additional update on this trade shortly after the open.

Rambus added $144 million to its bottom line over the next three years after signing SK Hynix Inc. to a licensing deal. Shares have been holding $15 and the 50-day moving average and could challenge fresh 52-week highs on the bullish news. If the call options open lower than $0.55, even better.

I like RMBS as a takeover candidate at some point this year as well, which is another reason I don’t mind taking this trade on a Friday.

RMBS

Current Trades

Microsoft (MSFT, $46.72, up $0.75)

MSFT July 47 calls (MSFT150717C00047000, $0.85, up $0.25)

Entry Price: $0.73 (6/18/2015)

Exit Target: $1.50

Return: 16%

Stop Target: None

Action: I went with this trade yesterday on the Nasdaq’s breakout, as I love the chart for MSFT. The current setup shows a “golden cross” formed in May and into early June, with the 50-day moving average crossing above the 100- and 200-day moving averages.

The recent backtest to $45 held the 100-day moving average. The gap and close above the 50-day moving average on Thursday was bullish, as it sets up another run at $50. Clusters of resistance are at $47-$48, but a move above the latter should get fresh 52-week highs north of $50 in play.

The stock currently yields 2.7%, and this could attract lazy fund managers. The company recently paid a $0.31 dividend in May. With the release of Windows 10 coming in July, and the possibility of an Xbox spinoff, I like the risk/reward this trade offers.

MSFT

United Parcel Service (UPS, $101.40, up $0.98)

UPS July 105 calls (UPS150717C00105000, $0.42, up $0.02)

Entry Price: $0.53 (6/11/2015)

Exit Target: $1.05

Return: -21%

Stop Target: None

 

UPS October 110 calls (UPS151016C00110000, $0.62, up $0.03)

Entry Price: $0.70 (6/11/2015)

Exit Target: $1.40

Return: -11%

Stop Target: None

Action: Resistance is at $102. Yesterday’s high reached $101.68, which was a nice rebound. Support is at $100-$99 and the 100- and 50-day moving averages.

You can read my extended write-up on UPS in the June 12 Pre-Market Update.

UPS

Wells Fargo (WFC, $57.70, up $0.53)

WFC July 60 calls (WFC150717C00060000, $0.22, up $0.02)

Entry Price: $0.20 (6/5/2015)

Exit Target: $0.50

Return: 10%

Stop Target: None

Action: Shares traded to a fresh all-time high of $57.84 on Thursday. A move above $58 gets $60 in play. Support is at $56.50-$56.

WFC

Rigel Pharmaceuticals (RIGL, $3.37, up $0.04)

RIGL September 5 calls (RIGL150918C00005000, $0.30, flat)

Entry Price: $0.40 (6/4/2015)

Exit Target: $0.80

Return: -25%

Stop Target: None

Action: Support is at $3.25-$3. Resistance is at $3.50.

You can read my detailed write-up on RIGL in the June 5 Pre-Market Update.

RIGL

Sony (SNE, $30.19, up $0.24)

SNE July 33 calls (SNE150717C00033000, $0.17, up $0.02)

Entry Price: $0.45 (6/1/2015)

Exit Target: $0.90

Return: -62%

Stop Target: None

Action: Support is at $29-$28.50 and the 100-day moving average. Near-term resistance is at $30.75-$31 and the 50-day moving average.

SNE

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options