Dear Momentum Options Subscriber,

The bulls extended their winning streak another day after tapping fresh all-time highs on Tuesday. The pullback off of the peaks held fresh support, and the VIX closed below 12.50.

The Dow climbed 24 points, or 0.1%, to end at 18,144. The blue-chips traded to a high of 18,188 on the open, with resistance holding at 18,200. A move above this level could get 18,350-18,500 and all-time highs in play. Support is at 18,000-17,900.

The S&P 500 gained a point, or 0.06%, to settle at 2,124. The index made a run to resistance at 2,125-2,135 but missed holding these levels after tapping 2,128 intraday. The dip to 2,119 held short-term support at 2,115-2,100.

The Nasdaq popped a 6-pack, or 0.1%, to close at 5,160. Tech traded to another all-time high north of 5,163 while holding the 5,150 level for the second-straight session. This keeps 5,200-5,250 in the mix. Support is at 5,100-5,075 on a drop below 5,125. Yesterday’s low checked-in at 5,139.

The Russell 2000 added 3 points, or 0.3%, to finish at 1,295. The small-caps traded down to 1,289 an hour after the open but easily held support at 1,280-1,275. The rebound to 1,296 into the closing bell keeps my near-term target for a run past 1,300 in play.

The S&P 500 Volatility Index ($VIX, 12.11, down 0.63) traded in negative territory throughout the session after kissing a low of 11.97. The close below 12.50 was bullish. A drop below 11.50 could signal that single-digits may arrive on the VIX at some point in July. A move back above 13.50 will need to be watched carefully.

From desk to press, futures look like this: Dow (-58); S&P 500 (-5); Nasdaq 100 (-8).

Momentum Options Play List

Closed Momentum Options Trades for 2015: 65-20-1 (76%). 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.

 

US Steel (X, $22.91, up $0.29)

X July 21 puts (X150717P00021000, $0.28, up $0.01)

Entry Price: $0.28 (6/23/2015)

Exit Target: $0.60

Return: 0%

Stop Target: None

Action: Short-term resistance is at $23.50. A move below $22.50-$22 could open the door for a test to $21-$20.

X

The steel industry has been hurt by lower prices and competition in recent years. US Steel missed Wall Street’s expectations in late April when it reported a loss of $0.07 versus expectations for a profit of $0.12. Revenue also fell short, coming in at $3.27 billion versus estimates for $3.43 billion.

Foreign steel producers are benefiting from the jump in the dollar, as their weaker currencies allow them to produce steel at cheaper prices. The flood of cheaper imports has pushed steel prices down nearly 25% in 2015. Naturally, this has hurt the bottom lines of companies in this sector.

There could be help on the way if Congress steps in and issues a favorable ruling from a recent caucus hearing on anti-dumping trade cases. This is the risk to our put option trade, as shares of X could rally on good news. The company is also a frequent target of takeover rumors.

Earnings aren’t due out until late July, and these options will expire before then. I took this trade more on a technical basis, but the fundamentals have been deteriorating. Earnings could improve in future quarters, but I think the company has another cycle or two of negative earnings before a possible turnaround.

This doesn’t mean that shares can’t rally despite the recent weakness. Wall Street started getting giddy on the sector in May, but they may have been a little early. A move above $23.75-$24 would likely force me out of this trade and possibly have me looking at call options.

However, I’m expecting X to drop near $21-$20 over the next two to three weeks before a possible rebound during the second half of the year.

 

S&P 500 SPDR ETF (SPY, $212.05, up $0.16)

SPY July 200 weekly puts (SPY150710P00200000, $0.18, down $0.06)

Entry Price: $0.45 (6/19/2015)

Exit Target: $0.90-$1.20 (Limit Order at $0.90 on first half)

Return: -60%

Stop Target: None

Action: Resistance is at $213. A close below $210 and the 50-day moving average would be bearish. Additional help is at $208 and the 100-day moving average.

You can read my full update on SPY and view the chart work in the June 22 Pre-Market Update.

 

Rambus (RMBS, $14.94, down $0.07)

RMBS August 16 calls (RMBS150821C00016000, $0.44, down $0.06)

Entry Price: $0.55 (6/19/2015)

Exit Target: $1.40

Return: -20%

Stop Target: None

Action: Support is at $14.50 and the 50-day moving average on a drop below $14.75. Tuesday’s low checked in at $14.78. Resistance is at $15.25-$15.50, and a close above the latter would be bullish.

You can read my full update on RMBS and view the chart work in the June 22 Pre-Market Update.

 

Microsoft (MSFT, $45.91, down $0.32)

MSFT July 47 calls (MSFT150717C00047000, $0.40, down $0.10)

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

Exit Target: $1.50

Return: -45%

Stop Target: None

Action: Support is at $45.50-$45 and the 50-day moving average. Resistance is at $47.

 

United Parcel Service (UPS, $100.75, down $0.64)

UPS July 105 calls (UPS150717C00105000, $0.23, down $0.12)

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

Exit Target: $1.05

Return: -57%

Stop Target: None

 

UPS October 110 calls (UPS151016C00110000, $0.46, down $0.07)

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

Exit Target: $1.40

Return: -34%

Stop Target: None

Action: Support is at $101 and the 200-day moving average, followed by $99 and the 100- and 50-day moving averages. Resistance is at $102.

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

 

Wells Fargo (WFC, $57.89, down $0.01)

WFC July 60 calls (WFC150717C00060000, $0.18, up $0.02)

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

Exit Target: $0.50

Return: -10%

Stop Target: None

Action: Resistance is at $58-$58.50. Yesterday’s high reached $58.26. Support has moved up to $57.

 

Trades on Hold — other 2015 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.

Sony (SNE) July 33 calls (from 6/1/2015) — Continue to hold.

Rigel Pharmaceuticals (RIGL) September 5 calls (from 6/4/2015) — Continue to hold.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options