Dear Momentum Options Subscriber,
Shares of Schnitzer Steel Industries (SCHN, $17.12, down $2.15) are down roughly 11% following an unimpressive earnings report. The company reported a third-quarter loss of $9.6 million, or $0.36 a share, versus estimates for a loss of $0.10 a share.
Schnitzer tried to “spin” its losses after adjusting them for restructuring costs and discontinued operations, and some headlines are reporting the company “beat” estimates. I always say that the real proof in the pudding is the revenue figure. On that front, the company reported $467 million for the quarter versus estimates north of $503 million.
The technical damage done on today’s drop below the 50-day moving average could lead to a test to $15 and fresh 52-week lows in coming weeks. Shares tested $15.06 in mid-April.
This was good news for our US Steel (X) put option trade, as shares are down almost 2% in sympathy with SCHN.
Although futures were showing a strong start to today’s session, I had a feeling that resistance would hold and that there would be a mid-day fade into the close. That process has started early, as a couple of the major indexes tested negative territory heading into afternoon trading.
The Dow is currently up 7 points to 17,603, while the S&P 500 is adding a point to 2,059. The Nasdaq is higher by 14 points to 4,972, and the Russell 2000 is gaining 4 points to 1,251.
I have another Trade Alert below for our position in Sony (SNE), and it looks like we will wrap up June with an 11-4 track record. However, July promises to be even better, as the current environment is exactly the kind of market I thrive in.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 66-21-1 (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 1:00 p.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.
Krispy Kreme Doughnuts (KKD, $19.24, up $0.05)
KKD August 19 puts (KKD150821P00019000, $0.70, flat)
Entry Price: $0.55 (6/29/2015)
Exit Target: $1.10-$1.60
Stop Target: None
Action: A move below $19 and the 200-day moving average should be the trigger for additional weakness to $18.50-$18 and the 50-day moving average. Near-term resistance is at $20.
US Steel (X, $20.53, down $0.27)
X July 21 puts (X150717P00021000, $1.15, up $0.25)
Entry Price: $0.28 (6/23/2015)
Exit Target: $0.60, raise to $1.50 (closed first half at $0.45 on 6/25/15)
Stop Target: $0.65 (Stop Limit)
Action: Raise the Exit Target to $1.50 on the second half of the trade. I will adjust our Stop Limit after today’s close.
Support is at $20 and the 52-week low of $20.13. Short-term resistance is at $21-$21.50.
You can read my full report on X in the June 24 Pre-Market Update.
Rambus (RMBS, $14.48, down $0.12)
RMBS August 16 calls (RMBS150821C00016000, $0.40, flat)
Entry Price: $0.55 (6/19/2015)
Exit Target: $1.40
Stop Target: None
Action: Support is at $14.50. Resistance is at $14.75-$15.
You can read my full update on RMBS and view the chart work in the June 22 Pre-Market Update.
Rigel Pharmaceuticals (RIGL, $3.16, up $0.14)
RIGL September 5 calls (RIGL150918C00005000, $0.20, flat)
Entry Price: $0.40 (6/4/2015)
Exit Target: $0.80
Stop Target: None
Action: Shaky support is at $3, with risk to $2.80-$2.75 and the 200-day moving average on a close below this level. Resistance is at $3.25.
You can read my detailed write-up on RIGL in the June 5 Pre-Market Update.
Trades on Hold — other 2015 Portfolio Open positions (4): 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) — Sell to close the SNE July 33 calls at current levels. The company is issuing a secondary offering to “fund” its sensor business. Today’s 6% drop could have shares languishing below $30 into mid-July.
Microsoft (MSFT) July 47 calls (from 6/18/2015) — Continue to hold.
United Parcel Service (UPS) October 110 calls (from 6/11/15) — Continue to hold.
Wells Fargo (WFC) July 60 calls (from 6/5/2015) — Continue to hold.
Editor and Chief Options Strategist