Dear Momentum Options Subscriber,
The bulls are now grinning at the Negative Nancys that predicted a market crash coming into the month of October. While picking market bottoms and tops is never easy, trading ranges make timing even more difficult. However, following yesterday’s run past the market’s upper resistance levels, the bulls have shown that the late-August lows formed, for now, a temporary bottom.
The Dow advanced 138 points, or 0.8%, to end at 17,050. The blue-chips traded in a tight range ahead of the FOMC minutes yesterday, with the low checking in at 16,859. Support at 16,800 was never really threatened before the late-day surge to 17,081. The close above 17,000 was super bullish and the first since Aug. 19. Additional resistance is at 17,300-17,350 and the 100-day moving average.
The S&P 500 climbed 17 points, or 0.9%, to settle at 2,013. The index drifted to a low of 1,987 mid-day, with support at 1,975 easily holding. The move past 2,000 and the 50-day moving average was impressive. The next layers of resistance are at 2,025-2,050 and the 100-day moving average.
The Nasdaq added 19 points, or 0.4%, to close at 4,810. Tech traded to an intraday low of 4,737, with fresh support at 4,725-4,700 holding. The push past resistance at 4,800 was a bullish sign, but the index fell short of clearing 4,850 and the 50-day moving average. Additional hurdles are at 4,875-4,900 and the 200-day moving average.
The Russell 2000 gained 10 points, or 0.9%, to finish at 1,163. The small-caps were weak throughout the first half of the session, with the bears pushing a low of 1,149. Near-term support at 1,150 held strong before the run to 1,164 and the 50-day moving average. The close above previous resistance at 1,160 was bullish and sets up a possible push to 1,175-1,180.
The S&P 500 Volatility Index ($VIX, 17.42, down 0.98) traded slightly higher from the open and into the FOMC meeting, with the high reaching 19.02. The VIX started moving lower following the announcement and traded down to 16.34 ahead of the closing bell. The close below 17.50 and the 100-day moving average was a very bullish development. The next hurdle is at 15, which is a level I would like to see hold before fully trusting this rebound rally. The bears will be aiming to get back above 18.50-19 ahead of the weekend. I doubt they will trip 20 today, but, if they do, that will be the tell that momentum has slowed.
I could have another New Trade this morning ahead of the Mid-Market Update, so stay close to your email inboxes or wait for my text alert. New subscribers can sign up to receive SMS text message alerts by clicking here.
I’ve also made some further adjustments to our Cisco Systems (CSCO) call position below, so please pay attention to the updated parameters.
From desk to press, futures look like this: Dow (+47); S&P 500 (+5); Nasdaq 100 (+8); Russell (+4).
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.
Cisco Systems (CSCO, $27.91, up $0.37)
CSCO November 27 calls (CSCO151120C00027000, $1.52, up $0.28)
Entry Price: $0.62 (9/16/2015)
Exit Target: $1.75 (closed first half at $0.87 on 10/5/2015)
Stop Target: $1.20, raise to $1.30 (Stop Limit)
Action: Raise the Stop Limit order from $1.20 to $1.30.
CSCO touched a high of $28.02 yesterday. Resistance is at $28. Support is at $27-$26.50.
I may decide to “piggy-back” this trade if shares clear $28.05 today. This means that I could add November call options while we still ride this current trade out. If I do start another position, I will send out a Trade Alert.
Kohl’s (KSS, $46.65, up $0.50)
KSS November 42.50 puts (KSS151120P00042500, $0.80, down $0.18)
Entry Price: $0.95 (10/7/2015)
Exit Target: $1.90
Stop Target: None
Action: Thursday’s high reached $47. Resistance is at $47-$47.50. Support is at $46-$45. A close below the latter should get the low $40s in play.
You can read my detailed write-up in the Oct. 7 Mid-Market Update. Earnings are due out Nov. 12.
Starbucks (SBUX, $59.46, up $0.68)
SBUX November 50 puts (SBUX151120P00050000, $0.33, down $0.09)
Entry Price: $0.90 (9/28/2015)
Exit Target: $1.80
Stop Target: None
Action: Resistance is at $60, and shares set a fresh 52-week high of $59.71 yesterday. A move past $60-$60.50 could lead to a run towards $65. Support is at $58, followed by $56.50 and the 50-day moving average.
Financial Select Sector SPDR (XLF, $23.39, up $0.14)
XLF November 22 puts (XLF151120P00022000, $0.21, down $0.04)
Entry Price: $0.66 (9/24/2015)
Exit Target: $1.35
Stop Target: None
Action: Resistance is at $23.50-$23.75 and the 50-day moving average. Support is at $23-$22.50.
Corning (GLW, $17.97, up $0.13)
GLW November 19 calls (GLW151120C00019000, $0.38, up $0.03)
Entry Price: $0.60 (9/16/2015)
Exit Target: $0.75
Stop Target: None
Action: Resistance is at $18-$18.50, followed by $19 and the 100-day moving average. Thursday’s high reached $18.04. Support is at $17.50-$17.
You can read my take on GLW in the Sept. 17 Pre-Market Update.
PayPal Holdings (PYPL, $31.67, down $0.71)
PYPL January (2016) 40 calls (PYPL160115C00040000, $0.45, down $0.10)
Entry Price: $1.05 (9/14/2015)
Exit Target: $2.10
Stop Target: None
Action: Resistance is at $33 and the 20-day moving average, followed by $34. Support is at $31-$30 on a close back below $32.
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.
Sony (SNE) October 24 puts (from 9/22/15) — Continue to hold.
Editor and Chief Options Strategist