Dear Momentum Stocks Weekly 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).

Chapter 1. Momentum Stocks Weekly Play List

All prices given in this update are current as of Aug. 26, 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.

 

Flex (FLEX, $10.32, up $0.42)

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

Lowered Price from Selling Options: N/A

Exit Target: $15.00+

Return: -18%

Stop Target: $10.00, lower to $9.00 (Stop Limit)

Action: Lower the Stop Target to $9.00 and make it a Stop Limit order. Monday’s low touched $9.55.

The company announced a massive share buyback program this week to help shares rebound back above $10. Support is at $10.25-$10.00. Resistance is at $11.00-$11.25 and the 50-day moving average.

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

 

Bank of America (BAC, $16.06, up $0.80)

BAC October 18 calls (BAC151016C00018000, $0.16, up $0.04)

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

Exit Target: $0.90

Return: -64%

Stop Target: None

Action: There were several upgrades on BAC’s stock this week, and the close back above $16 was slightly bullish. Additional resistance is at $16.50-$16.75. Support is at $16-$15.75 on a pullback.

You can read my full write-up on BAC in the Aug. 17 Issue.

 

Rave Restaurant Group (RAVE, $10.07, up $0.01)

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

Lowered Price from Selling Options: None

Exit Target: $13.00+

Return: -14%

Stop Target: $7.00

Action: Support is at $9.50-$9.00 on another close below $10.00. Resistance is at $10.25-$10.50.

 

Ohr Pharmaceutical (OHRP, $2.63, up $0.15)

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

Lowered Price from Selling Options: N/A

Exit Target: $6.00+

Return: -17%

Stop Target: $1.00

Action: Support is at $2.50. A close below this level keeps risk open to $2.25-$2.00. Resistance is at $2.75 and the 50- and 100-day moving averages.

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

 

Limelight Networks (LLNW, $2.36, up $0.07)

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

Lowered Price from Selling Options: N/A

Exit Target: $5.00-$6.00

Return: -41%

Stop Target: $2.00 (Stop Limit)

Action: Near-term support is at $2.25, with risk to $2.00 if breached. Resistance is at $2.40-$2.50.

 

Rave Restaurant Group (RAVE, $10.26, down $0.14)

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

Lowered Price from Selling Options: N/A

Exit Target: $20.00

Return: -28%

Stop Target: $10.00

Action: Support is at $9.50-$9.00 on another close below $10.00. Resistance is at $10.25-$10.50.

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, $2.94, up $0.09)

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

Lowered Price from Selling Options: N/A

Exit Target: $4.00-$5.00

Return: -16%

Stop Target: $2.00

Action: Resistance is at $3.00 and the 200-day moving average. Support is at $2.75-$2.70.

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

 

Psychemedics (PMD, $11.09, down $0.03)

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

Lowered Price from Dividends: $15.52

Exit Target: $15.75 (Limit Order)

Return: -28%

Stop Target: $7.75 (Stop Limit)

Dividend Yield: 5.3%

Action: Resistance is at $11.50-$12.00. Support is at $11.00-$10.50.

 

Huttig Building Products (HBP, $3.07, down $0.03)

Original Entry Price: $4 (8/13/2014)

Lowered Price from Selling Options: No options available

Exit Target: $6.00+

Return: -23%

Stop Target: $2.00 (Stop Limit)

Action: Shares are holding $3.00 and the 50-day moving average. Resistance at $3.20-$3.25.

 

Rambus (RMBS, $13.11, up $0.40)

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

Lowered Price from Selling Options: $16.38

Exit Target: $15.00+

Return: -20%

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