Dear Momentum Options Subscriber,
The bulls are trying to clear resistance this afternoon following another strong open, but, again, the big concern is if the gains will hold into the close. Tuesday’s pullback off of the highs and the nasty finish served as additional reminders that we are still in a very fragile market environment.
I mentioned that this week would be whacky and that a bottoming process could possibly be playing out. I have started to work on next Monday’s Pre-Market Update as well as a review of the 10-year charts. For new subscribers, I provided index charts in the Feb. 23 Pre-Market Update that showed how the market action could play out this year.
For the past three years, my February outlooks on the market have been incredibly accurate as to where the indexes might finish for the year. This year, my outlook was bullish once again, but I mentioned that certain levels would need to hold on any major pullback or correction to keep the uptrends intact.
The 10-year uptrend lines are now in play, and I’m hoping that by Friday’s close we will get a better picture of the recent damage. The other technical clues that I follow are giving mixed readings, which is making this a much more difficult environment to trade in.
The good news is that once volatility settles, a much clearer trend should develop. September options expire in less than three weeks, so this is the other risk of going long or short right now. I often call this time period the “danger zone,” as option premiums will rapidly start to deflate until expiration.
U.S. markets will be closed all day on Monday, Sept. 7, for Labor Day, and the three-day weekend will have a big impact on the time decay left in the September options.
I usually trade two to three times a week, but sometimes sitting on the sidelines instead of forcing the action makes more sense. In the meantime, I have at least 20 trade setups I’m looking at for next week, and possibly one for this week.
Currently, the Dow is up 334 points to 16,001, while the S&P 500 is higher by 37 points to 1,905. The Nasdaq is gaining 96 points to 4,602, and the Russell 2000 is adding 10 points to 1,114.
I could have a New Trade this afternoon ahead of the close, but, if you don’t hear from me, it means I’ve elected to remain on the sidelines.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 82-28-2 (73%). 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 1:50 p.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.
Krispy Kreme Doughnuts (KKD, $17.23, up $0.60)
KKD November 17 puts (KKD151120P00017000, $1.50, down $0.18)
Entry Price: $0.95 (8/19/2015)
Exit Target: $2.50 (Limit Order on first half)
Stop Target: $1.35 (Stop Limit)
Action: Resistance is at $17-$17.25. Support is at $16.75-$16.50.
The company is scheduled to report earnings on Sept. 9, after the close.
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.
Rigel Pharmaceuticals (RIGL) September 5 calls (from 6/4/15) — Continue to hold.
Bank of America (BAC) September 18 calls (from 8/17/15) — Continue to hold.
JPMorgan Chase (JPM) September 70 calls (from 8/10/2015) — Continue to hold.
iShares Russell 2000 (IWM) September 123 calls (from 8/19/2015) — Continue to hold.
Editor and Chief Options Strategist