Dear Momentum Options Subscriber,

The bears made a run at the August lows on Monday, with tech and the small-caps leading the decline. The bulls are running out of time to save September from the bears, and they could be facing a rocky October as well, as volatility has picked back up.

The Dow dropped 312 points, or 1.9%, to end at 16,002. The blue-chips fell below the 16,200 level shortly after the open and traded to a low of 15,981 late in the day. The lower end of the support range at 16,200-16,000 held into the close, but there is additional risk to 15,800-15,600 on continued weakness. Resistance is at 16,200, followed by 16,350-16,400.

The S&P 500 sank 49 points, or 2.6%, to settle at 1,882. The index opened at 1,929 and quickly fell below 1,925-1,900 during the first half of trading. These levels will now serve as resistance following a low of 1,879 and a close below 1,900. I talked about risk to 1,875, and a drop below this level could lead to 1,860-1,850 over the near term.

The Nasdaq tanked 142 points, or 3%, to close at 4,544. Tech had trouble holding 4,675-4,650 at the start of trading, and I warned of risk to 4,600-4,500 if 4,650 failed. Monday’s low reached 4,529, and I mentioned that a close below 4,500 could lead to panic selling. A move below this level could lead to a retest of the late August low of 4,292.

The Russell 2000 sank 32 points, or 2.9%, to finish at 1,090. The small-caps fell below crucial support at 1,100 by Wall Street’s lunch break. The intraday low touched 1,087, and the drop below the Aug. 26 low of 1,102 was a very bearish development. There is additional risk to 1,075-1,070 over the near term on continued weakness. Resistance is at 1,100-1,110.

The S&P 500 Volatility Index ($VIX, 27.63, up 4.01) opened just above 25 at 25.02 and reached an intraday peak of 28.33. I mentioned that there was additional risk to 30-35 if the bears cleared 25 this week. A move below 25 is needed to calm the storm, but the bulls really need to recover 23.50-22.50 to stop a possible flood.

From desk to press, futures look like this: Dow (+47); S&P 500 (+7.5); Nasdaq 100 (+19); Russell (+3).

Momentum Options Play List

Closed Momentum Options Trades for 2015: 85-33-2 (71%). 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.


Starbucks (SBUX, $55.77, down $2.22)

SBUX November 50 puts (SBUX151120P00050000, $0.90, up $0.43)

Entry Price: $0.90 (9/28/2015)

Exit Target: $1.80

Return: 0%

Stop Target: None

Action: Near-term support is at $55, followed by $54.50 and the 100-day moving average. Resistance is at $56-$56.25 and the 50-day moving average.


I don’t usually “short” SBUX, as I have mostly traded call options on the name throughout the years. In fact, a bullish SBUX trade earlier this year was one of our biggest wins so far.

However, shares have struggled to clear $60 and traded to a low of $42.05 on Aug. 24. If shares test $48 by mid-November, these options will easily double, as they will be $2 “in the money.”


Financial Select Sector SPDR (XLF, $22.28, down $0.53)

XLF November 22 puts (XLF151120P00022000, $0.69, up $0.20)

Entry Price: $0.66 (9/24/2015)

Exit Target: $1.35

Return: 5%

Stop Target: None

Action: Support is at $22, and yesterday’s low reached $22.21. A close below this level could lead to $20. Resistance is at $22.50-$22.75.


Sony (SNE, $24.05, down $1.29)

SNE October 24 puts (SNE151016P00024000, $0.85, up $0.45)

Entry Price: $0.65 (9/22/2015)

Exit Target: $1.30

Return: 31%

Stop Target: None

Action: The next wave of support is at $23.50, followed by $22. The Aug. 25 low reached $21.51. Resistance is at $25.


Cisco Systems (CSCO, $25.66, down $0.37)

CSCO November 27 calls (CSCO151120C00027000, $0.47, down $0.08)

Entry Price: $0.62 (9/16/2015)

Exit Target: $1.30

Return: -24%

Stop Target: None

Action: Support is at $25.50, followed by if $25. Resistance is at $26.


PayPal Holdings (PYPL, $32.25, down $1.52)

PYPL January (2016) 40 calls (PYPL160115C00040000, $0.57, down $0.26)

Entry Price: $1.05 (9/14/2015)

Exit Target: $2.10

Return: -46%

Stop Target: None

Action: Support is at $32.50-$32. Resistance is at $34.

You can read my detailed write-up on PYPL in the Sept. 15 Pre-Market Update.


Trades on Hold — other 2015 Portfolio Open positions (1): 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.

Corning (GLW) November 19 calls (from 9/16/2015) — You can read my take on GLW in the Sept. 17 Pre-Market Update — Continue to hold.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options

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