Dear Momentum Options Subscriber,
The bulls showed Wall Street why they can’t be given up on following Wednesday’s strong gains. Instead of folding in the final hour of trading, the market got stronger and enjoyed its best day in four years.
The Dow zoomed 619 points, or 4%, to close at 16,285. The blue-chips traded in positive territory throughout the session, while reaching a peak of 16,303. The close above 16,200 was slightly bullish, as it keeps 16,400-16,600 in play. Support is at 16,000-15,800, but a close below the latter would be bearish.
The S&P 500 soared 73 points, or 3.9%, to finish at 1,940. The index struggled with prior resistance and the 1,900 level late into the session before making a run to 1,943. The close above 1,925 keeps 1,950-1,975 in the mix. Support will try to hold at 1,925-1,900 on a reversal. One concerning sign with the S&P 500 is the “death cross” that is close to becoming official. The 50-day moving average is within 5 points of crossing below the 200-day moving average.
The Nasdaq zoomed 191 points, or 4.2%, to end at 4,697. Tech opened at 4,633 and cleared resistance at 4,700 after reaching 4,703 ahead of the closing bell. If the bulls can hold this level, the next layers of resistance are at 4,750-4,800. Short-term support is at 4,600-4,550.
The Russell 2000 jumped 28 points, or 2.5%, to settle at 1,132. The small-caps tested resistance at 1,120-1,125 on the open before fading into negative territory mid-day. The low of 1,102 held support at 1,100 before a surge to session highs into the closing bell. The close above 1,125-1,130 gets 1,140-1,150 in the mix, but the downward sloping 50-day average is a concern. The spread between the 50- and 200-day moving averages is just a 12-pack, which is also a red flag.
The S&P 500 Volatility Index ($VIX, 30.32, down 5.70) stayed in negative territory all day following a low of 28.67. The bulls nearly held down 30, but the close above that level keeps 35-40 in play. I have said all week that the VIX needs to settle below 25-20 this week to confirm a possible bottom, and it should get interesting with two days left before the weekend.
From desk to press, futures look like this: Dow (+159); S&P 500 (+19); Nasdaq 100 (+51); Russell (+7).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 83-28-2 (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 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.
Krispy Kreme Doughnuts (KKD, $17.28, up $0.65)
KKD November 17 puts (KKD151120P00017000, $1.35, down $0.33)
Entry Price: $0.95 (8/19/2015)
Exit Target: $2.50 (Limit Order on first half)
Stop Target: $1.35 (Stop Limit)
Action: The Stop Limit of $1.35 triggered on the KKD November 17 puts late in the day following the run to $17.29, and we are now out of the position.
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