Dear Momentum Options Subscriber,
The bulls nearly got a clean sweep on Wednesday, but the blue-chips struggled to join the parade. For the most part, the bulls ended their three-session skid, but deeper concerns remain, as a number of high-profile companies continue to miss revenue expectations.
The Dow slipped 10 points, or 0.1%, to end at 17,540. The blue-chips made a strong run past resistance at 17,600 to 17,661 shortly after the open, but they started to lose momentum by mid-day. The late-day fade to 17,492 was a fresh low for the week and keeps risk open to 17,400-17,350.
The S&P 500 gained 6 points, or 0.3%, to finish 2,099. The index tested resistance at 2,115-2,125 during the first half of the action after reaching a peak of 2,112. The pullback to 2,095 held fresh support and the 50-day moving average. The 2,090 level has held for seven-straight sessions, and a break of that level will be our first clue that more damage may occur.
The Nasdaq jumped 34 points, or 0.7%, to close at 5,139. Tech was strong throughout the session and traded up to resistance at 5,175-5,100, but high end of that range failed to hold. However, the bears held the 5,150 level into the close and are still eyeing near-term support at 5,100-5,075.
The Russell 2000 added nearly 3 points, or 0.2%, to settle at 1,231. The small-caps cleared resistance at 1,240 and tapped a high of 1,243, but they failed to hold this level into the close. The bears pushed a low of 1,229 afterwards but failed at cracking support at 1,225-1,220.
The S&P 500 Volatility Index ($VIX, 12.51, down 0.49) traded to a low of 10.88, which is a number I had to confirm through a couple of different sources because it was hard to believe. I have mentioned that a drop below 12.50-11.50 would confirm that new highs are in store for the market, but the drop below 11 is hard to trust, and it might signal that a different story is developing. The VIX tested a high of 12.72 late in the day and closed above 12.50. This keeps risk open to 13.50-15.
From desk to press, futures look like this: Dow (+33); S&P 500 (+5); Nasdaq 100 (+14); Russell (+3).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 76-25-2 (74%). 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 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.
SPDR S&P 500 ETF (SPY, $210.07, up $0.69)
SPY August 205 puts (SPY150821P00205000, $0.62, down $0.28)
Entry Price: $0.90 (8/3/2015)
Exit Target: $1.35-$1.80 (Limit Orders on half)
Stop Target: None
Action: Resistance at $210 was stretched into the close. A move above $212 would be bullish. Support is at $208 if $210 fails.
PowerShares QQQ Trust (QQQ, $112.25, up $0.86)
QQQ August 110 puts (QQQ150821P00110000, $0.53, down $0.25)
Entry Price: $0.72 (7/30/2015)
Exit Target: $1.45
Stop Target: None
Action: Near-term resistance at $112 was cleared. A move above $113.50-$114 could force us out of the trade. Support is at $111-$110.
SPDR Gold Trust ETF (GLD, $103.93, down $0.38)
GLD September 98 puts (GLD150918P00098000, $0.70, up $0.07)
Entry Price: $0.82 (7/28/2015)
Exit Target: $1.65
Stop Target: None
Action: A move below $104-$103.50 should get $100 and below in play. Resistance is at $104-$104.50.
Gold pushed $1,085 an ounce yesterday and came within a dime of its late-July, five-year low. If the yellow metal cracks $1,080, the sell flood gates might open.
United Parcel Service (UPS, $102.94, up $0.30)
UPS October 110 calls (UPS151018C00110000, $0.47, up $0.07)
Entry Price: $0.70 (6/11/2015)
Exit Target: $0.70+
Stop Target: $0.20, raise to $0.35 (Stop Limit)
Action: Raise the Stop Limit from $0.20 to $0.35.
Resistance is at $103-$105. A move above the latter should get the trade back to even or better. Support is at $102-$101 and the 200-day moving average. A close below the latter will likely trip our Stop Limit.
Trades on Hold — other 2015 Portfolio Open positions (1): 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.
Rigel Pharmaceuticals (RIGL) September 5 calls (from 6/4/15) — Continue to hold.
Editor and Chief Options Strategist