Dear Momentum Options Subscriber,
The market rebounded for the second-straight session following comments from one Federal Reserve official. New York Fed President William Dudley excited Wall Street after he said that the odds for a September rate increase seemed less compelling now than a few weeks ago. He added that the threat posed to the U.S. economy by the recent market turmoil was a concern.
The Dow gained 369 points, or 2.3%, to finish at 16,654. The blue-chips made a run past upper resistance at 16,600 after reaching an intraday peak of 16,666. The close above 16,600 gets 16,800-16,900 in play. Short-term support has moved up to 16,400-16,350. There is risk to 16,200-16,000 on a close below the latter.
The S&P 500 climbed 47 points, or 2.4%, to end at 1,987. The index cleared upper resistance at 1,975 following an intraday trip to 1,989. The close above this level gets 2,000-2,010 in play. Support is at 1,975-1,970 on a pullback, with backup support at 1,960-1,950.
The Nasdaq zoomed 115 points, or 2.5%, to settle at 4,812. Tech opened at 4,761 and above prior resistance at 4,700. The push and close past 4,800 was also bullish, as it gets 4,850-4,900 back in the mix. Short-term support is at 4,800-4,750, with risk to 4,700 on a backtest.
The Russell 2000 advanced 21 points, or 1.9%, to close at 1,153. The small-caps opened on lower resistance at 1,140 while making a push past upper resistance and the 1,150 level. The bulls made a run to 1,157 and held 1,150 into the close. The next layers of resistance are at 1,160-1,170. Support is at 1,140-1,135 on a pullback.
The S&P 500 Volatility Index ($VIX, 26.10, down 4.22) dropped 14% after trading to a low of 24.49. The VIX opened at 27.11, with the bulls holding the 30 level throughout the session. The high of 27.53 keeps resistance at 27.50-30 for the bears. A close below 25 ahead of the weekend would be bullish.
I have a Trade Alert on Rigel Pharmaceuticals (RIGL) listed below, as shares continue to struggle to clear $3.00. This was the last trade from our previous batch in June, and it isn’t likely to recover.
From desk to press, futures look like this: Dow (-109); S&P 500 (-13); Nasdaq 100 (-27); Russell (-5).
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.
KB Home (KBH, $14.36, up $0.42)
KBH October 16 calls (KBH151016C00016000, $0.38, up $0.10)
Entry Price: $0.33 (8/27/2015)
Exit Target: $0.70
Stop Target: None
Action: Resistance is at $14.50-$14.75, followed by $15 and the 200-day moving average. Short-term support is at $14, with risk to $13.50 if breached.
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) — Sell to close the trade at current levels to save the remaining premium. Shares continue to struggle with resistance at $3.00. We can revisit the name once that level is cleared and when shares start to show momentum again.
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