Dear Momentum Options Subscriber,
Fear swept through Wall Street on Wednesday as the bears made their most significant move of the year. The technical damage caused from yesterday’s pullback was severe, but the bounce off of the lows might be telling another story.
The Dow dipped just a fraction of a point to close at 17,402. The blue-chips traded to a low of 17,125 shortly after the open, with backup support at 17,200-17,000 holding. A move below the latter could lead to 16,800-16,600. The close above 17,350-17,400 keeps short-term resistance at 17,600 in play.
The S&P 500 gained 2 points, or 0.1%, to settle 2,086. The index tested backup support at 2,050 following the drop to 2,052. There is additional risk to 2,025-2,000 on a move below 2,050. The close above 2,075-2,080 and the 200-day moving average was a plus and keeps 2,095-2,100 in the mix.
The Nasdaq added over 7 points, or 0.2%, to end at 5,044. Tech opened below the 5,000 level at 4,994 before tumbling to a low of 4,945. There is additional risk to 4,900-4,875 and the 200-day moving average on a close below 4,950. Resistance at 5,050 and the 100-day moving average held following a trip to 5,055 into the close. Additional hurdles remain at 5,075-5,100 and the 50-day moving average.
The Russell 2000 slipped 2 points, or 0.2%, to finish at 1,209. The small-caps opened at 1,203 and quickly retreated to a low of 1,189. I talked about risk to 1,190 and possibly 1,175 on a close below 1,200. The bulls held this level by the end of the session but failed to crack positive territory. Overhead resistance remains at 1,215, followed by 1,225.
The S&P 500 Volatility Index ($VIX, 13.61, down 0.10) soared past 15 and reached an intraday peak of 16.28 before closing lower. The 15 level has held for 12-straight sessions and for 22 of the past 23 sessions. A close above 15 keeps risk open to 17.50-20. A move below 12.50 ahead of the weekend could be a bullish clue that points to an end-of-summer rally.
I could have one or more New Trades shortly after the open, depending on the action. I have been preparing us for a rebound off of the lows by the end of the week, and yesterday’s bounce may have been the capitulation moment I have been looking for.
From desk to press, futures look like this: Dow (+57); S&P 500 (+6); Nasdaq 100 (+18); Russell (+6).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 79-26-2 (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.
JPMorgan Chase (JPM, $67.24, down $0.99)
JPM September 70 calls (JPM150918C00070000, $0.48, down $0.27)
Entry Price: $0.80 (8/10/2015)
Exit Target: $1.60
Stop Target: None
Action: Support at $66 and the 100-day moving average was tested following Wednesday’s dip to $66.07. The close above $67 was slightly bullish, and resistance remains at $68 and the 50-day moving average.
KB Home (KBH, $15.26, down $0.10)
KBH October 16 calls (KBH151016C00016000, $0.60, down $0.01)
Entry Price: $0.52 (8/10/2015)
Exit Target: $1.05
Stop Target: None
Action: Support at $15-$14.75 held following yesterday’s backtest to $14.79. Resistance is at $15.50-$15.75 and the 50- and 100-day moving averages.
You can read my detailed write-up on KBH in yesterday’s Pre-Market Update.
SPDR Gold Trust ETF (GLD, $107.77, up $1.51)
GLD September 98 puts (GLD150918P00098000, $0.22, down $0.09)
Entry Price: $0.82 (7/28/2015)
Exit Target: $1.65
Stop Target: None
Action: Resistance is at $108. Support is at $106-$105. I still like this trade, but I’m going to place it on “hold,” and it will appear in the “Trades on Hold” section of subsequent updates. I will bring back coverage on a move below $105. If I take any other action, I will send out a Trade Alert.
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