Dear Momentum Stocks Weekly Subscriber,

The market remained rocky on Wednesday as Wall Street fretted over the latest Fed minutes. Although the chances are good that a rate hike will come in September, according to the slick-talking pros, the dovish minutes offered hope that the zombies might wait until later in the year before making their move.

The Dow tanked 162 points, or 0.9%, to settle at 17,348. The blue-chips traded down to 17,282 ahead of the Fed minutes, and support at 17,400-17,350 was stretched before the index made a rebound to 17,517. The rally was short-lived, however, as the rebound fell shy of resistance at 17,600. There is additional help at 17,200 on the close below 17,350.

The S&P 500 sank 17 points, or 0.8%, to close at 2,079. The index made a swoon to 2,070 shortly after the open, with support at 2,075-2,070 holding. The recovery to 2,096 failed to break into positive territory and resistance at 2,100. A drop below 2,070 could get 2,050 back in play.

The Nasdaq declined 40 points, or 0.8%, to finish at 5,019. Tech tumbled to a low of 4,992, and the 5,000 level was cracked for just the second time since July 10. The bulls held this level into the close and have done so since the last time it was violated. There is risk to 4,950-4,900 if 4,975 fails to hold, and a close below 5,000 would be a bearish development. Resistance is at 5,050-5,075.

The Russell 2000 fell 12 points, or 1%, to end at 1,202. The small-caps tested support at 1,200-1,190 following Wednesday’s trip to 1,196. The bounce back to 1,211 fell shy of green pastures, but the close and hold above the 1,200 level felt slightly bullish. A move or close below 1,190 keeps risk open to 1,180-1,175.

The S&P 500 Volatility Index ($VIX, 15.25, up 1.46) flirted with the 15 level right into the close before finishing above this level. The bears pushed a high of 15.96 before the bulls tapped 13.73 shortly after the Fed minutes were released. The close above 15 was slightly bearish and opens the door for a possible test to 17.50-20. A move back below 13.50-12.50 will need to hold in order for the bulls to regain their momentum.

The VIX was at 14.99 with 15 minutes left in the trading session on Wednesday, so the close above 15 might also be a stretch. However, we still need to respect it. The action in the VIX today and tomorrow will be crucial in helping to determine whether support will hold or if we will get a continued pullback.

From desk to press, futures look like this: Dow (-125); S&P 500 (-14); Nasdaq 100 (-31); Russell (-8).

Chapter 1. Momentum Stocks Weekly Play List

All prices given in this update are current as of Aug. 19, 2015. I hereby disclose that I will be participating in the following trade(s).

The Momentum Stocks Weekly Closed Trade Track Record for 2015 is 26-1, for a 96% win rate (143-18, or 89% win rate, overall since the start of 2011).

View the entire list of open and closed trades by clicking here.

 

Bank of America (BAC, $17.46, down $0.23)

BAC October 18 calls (BAC151016C00018000, $0.40, down $0.06)

Entry Price: $0.45 (8/17/2015)

Exit Target: $0.90

Return: -11%

Stop Target: None

Action: Support is at $17.50 and the 50-day moving average, with backup at $17.25-$17.00. Resistance is at $17.75-$18.00.

You can read my full write-up on BAC in Monday’s Issue.

 

Rave Restaurant Group (RAVE, $11.15, up $0.08)

Original Entry Price: $11.70 (8/17/2015)

Lowered Price from Selling Options: N/A

Exit Target: $13.00+

Return: -5%

Stop Target: $7.00

Action: Shares continue to flirt with support at $10.75-$10.70. A close below this level could get $10.50-$10.00 in play. The June low reached $10.72, but I believe the longer-term trading floor will hold. Resistance is at $11.50 and the 200-day moving average.

 

Ohr Pharmaceutical (OHRP, $2.67, up $0.06)

Original Entry Price: $3.16 (7/28/2015)

Lowered Price from Selling Options: None

Exit Target: $6.00+

Return: -16%

Stop Target: $1.00

Action: Shares gained 13% on Monday and traded to a high of $3.15 after a George Soros-controlled fund reported a stake in the company.

Resistance at $2.75-$2.85 and the 50- and 100-day moving averages was tested on the news but failed to hold afterwards. Tuesday’s test to $2.53 and Wednesday’s dip to $2.52 were signs that fresh support at $2.50 might hold. A close below this level keeps risk open to $2.25-$2.00.

You can read my detailed update on OHRP in the July 30 Issue.

 

Limelight Networks (LLNW, $2.67, down $0.04)

Original Entry Price: $4.03 (7/9/2015)

Lowered Price from Selling Options: None

Exit Target: $5.00-$6.00

Return: -34%

Stop Target: $2.00 (Stop Limit)

Action: Near-term support is at $2.40-$2.20 on continued weakness and a drop below $2.50. Resistance is at $2.80-$3.00.

I have mentioned that Limelight could be a takeover target. Hopefully we can hit another solid winner by being patient with this trade like we were with Dot Hill Systems (HILL).

 

Rave Restaurant Group (RAVE, $11.15, up $0.08)

Original Entry Price: $13.92 (7/9/2015)

Lowered Price from Selling Options: N/A

Exit Target: $20.00

Return: -20%

Stop Target: $10.00

Action: Shares continue to flirt with support at $10.75-$10.70. A close below this level could get $10.50-$10.00 in play. The June low reached $10.72, but I believe the longer-term trading floor will hold. Resistance is at $11.50 and the 200-day moving average.

You can read my recent earnings update on RAVE and find out why it remains my No. 1 stock pick in the June 29 Issue.

 

Rigel Pharmaceuticals (RIGL, $2.89, flat)

Original Entry Price: $3.51 (6/2/2015)

Lowered Price from Selling Options: N/A

Exit Target: $4.00-$5.00

Return: -18%

Stop Target: $2.00

Action: Resistance at $3.00, and the 200-day moving average continues to be a struggle. Support is at $2.75-$2.70.

You can read my detailed write-up on RIGL in the June 8 Issue.

 

Flex (FLEX, $10.96, down $0.13)

Original Entry Price: $12.55 (5/19/2015)

Lowered Price from Selling Options: N/A

Exit Target: $15.00+

Return: -13%

Stop Target: $10.00

Action: Resistance is at $11.00-$11.25 and the 50-day moving average. Support is at $11.00, followed by $10.80-$10.75 on continued weakness.

You can read my detailed write-up on Flex in the July 30 Issue.

 

Psychemedics (PMD, $11.91, down $0.27)

Original Entry Price: $15.67 (5/5/2015)

Lowered Price from dividends: $15.52

Exit Target: $15.75 (Limit Order)

Return: -24%

Stop Target: $7.75 (Stop Limit)

Dividend Yield: 4.9%

Action: Resistance is at $12.00-$12.50. Support is at $11.50.

 

Huttig Building Products (HBP, $3.13, down $0.05)

Original Entry Price: $4.00 (8/13/2014)

Lowered Price from Selling Options: N/A

Exit Target: $6.00+

Return: -19%

Stop Target: $2.00 (Stop Limit)

Action: Shares are holding $3.00 and the 50-day moving average, with additional resistance at $3.20-$3.25. The 100-day moving average has crossed above the 200-day moving average and is giving a bullish signal.

 

Rambus (RMBS, $12.75, down $0.31)

Original Entry Price: $17.83 (11/14/2011)

Lowered Price from Selling Options: $16.38

Exit Target: $15.00+

Return: -22%

Stop Target: $9.00

Action: Support is at $12.75 and the 200-day moving average. Resistance at $13.00-$13.25.

We previously sold to open (wrote) the RMBS December 20 calls for $1.45 on Nov. 14, 2011 to reduce the cost basis to $16.38.

 

Trades on Hold (7): These are trades that are still open in the portfolio but are down from the original recommended price. These trades are on “hold” and are not a buy until I bring back coverage of the stock. This means I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly when a trade closes. I do not recommend adding to these positions or opening new positions.

Discovery Laboratories (DSCO, March 2015) — Continue to hold.

AKS Steel Holding (AKS, May 2011) — We sold to open (wrote) the AKS September 6 calls (AKS150918C00006000) on 4/30/2015 for 40 cents. Continue to hold.

DryShips (DRYS, January 2011) — We sold to open (wrote) the DRYS September 1 calls (DRYS150918C00001000) on 4/30/2015 for 5 cents. Continue to hold.

Bebe Stores (BEBE, February 2012) — We sold to open (wrote) the BEBE September 4 calls (BEBE150918C00004000) on 4/30/2015 for 35 cents. Continue to hold.

Vivus (VVUS, July 2012) — We sold to open (wrote) the VVUS September 4 calls (VVUS150918C00004000) on 4/30/2015 for 10 cents. Continue to hold.

Zynga (ZNGA, March 2014) — We sold to open (wrote) the ZNGA September 3 calls (ZNGA150918C00003000) on 4/30/2015 for 16 cents. Continue to hold.

Galena Biopharma (GALE, February 2014) — We sold to open (wrote) the GALE October 2 calls (GALE151016C00002000) on 4/30/2015 for 15 cents. Continue to hold.

Trade on!

Signed

Rick Rouse
Editor
Momentum Stocks Weekly