Dear Momentum Options Subscriber,
The bulls got back on track and returned to their winning ways on Monday following two-straight losses to end the month of October. The push past the market’s upper resistance levels was a strong signal that further gains are ahead, despite Wall Street’s worries. Earnings and economic news will dominate this week’s action, but the bears are looking for an opportunity to do some damage.
The Dow jumped 165 points, or 0.9%, to finish at 17,828. The blue-chips briefly slipped to 17,655 on the open, with support at 17,600 easily holding. The 7-point loss was quickly erased with a strong run to 17,845 late in the day. The close above 17,800 opens the door for a possible trip to 18,000-18,100 over the near term.
The S&P 500 surged 24 points, or 1.2%, to close at 2,104. The index held positive territory throughout the session, with the bulls pushing an intraday high of 2,106. The move above 2,100 was bullish and sets up a possible run towards 2,125. The 52-week and all-time high is at 2,134. Support is at 2,080-2,075.
The Nasdaq zoomed 73 points, or 1.5%, to settle at 5,127. Tech stayed in the green throughout the day, with the late-day peak reaching 5,130. The close above 5,100 was the first since Aug. 10, which puts 5,150-5,200 back on the map. The 52-week and all-time high is at 5,231. Support is at 5,100-5,075 on a pullback.
The Russell 2000 climbed 24 points, or 2.1%, to end at 1,186. The small-caps led Monday’s charge, with the index breaking through upper resistance at 1,175-1,180. The bulls pushed a high of 1,187 to set up another possible showdown with the bears at the 1,200 level.
The S&P 500 Volatility Index ($VIX, 14.15, down 0.92) stayed slightly elevated on the open, with the bears testing 15.51. Resistance at 16.50-17.50 held tight before the collapse below 15 an hour into the session. The bulls got the VIX down to 13.67 and came close to tackling the 13.50 level.
I have updated the Exit Target and set a Stop Limit on our current trade in the iShares Russell 2000 (IWM) below.
I could also have another New Trade shortly after the opening bell, so stay locked and loaded. New subscribers can sign up to receive SMS text message alerts by clicking here.
From desk to press, futures look like this: Dow (-33); S&P 500 (-5); Nasdaq 100 (-11); Russell (-1.5).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 89-35-2 (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.
Juniper Networks (JNPR, $31.74, up $0.35)
JNPR December 33 calls (JNPR151218C00033000, $0.56, up $0.05)
Entry Price: $0.48 (11/2/2015)
Exit Target: $1.00
Stop Target: None
Action: Shares set a 52-week high of $31.84 yesterday. A move past $32 should get multi-year resistance at $34-$35 in play. Support is at $31-$30.50.
The weekly six-year chart shows that a possible run to $37.50-$40 could be in play over the longer term.
The company recently announced better-than-expected earnings after reporting a profit of $0.57 a share on revenue on $1.25 billion. The suits-and-ties were looking for $0.53 a share on revenue of $1.23 billion.
Juniper also gave current-quarter guidance of $0.57-$0.60 a share on revenue of roughly $1.3 billion. Analysts were looking for $0.57 a share on sales of $1.27 billion. These options will expire ahead of the company’s next announcement, so the headline risk of earnings is eliminated.
The storage space has been consolidating lately, with Dell and EMC (EMC) merging recently. While this trade is based on strong fundamentals and technical analysis, I like the fact that Juniper is in this space and could become a takeover target. The company recently hired Goldman Sachs to explore interest in going private and its other options. The rumor mill has NetApp (NTAP) possibly making a pitch for Juniper, but, again, this is just speculation at this point.
Analysts were busy issuing comments on JNPR stock last month, and they gave neutral to bullish ratings. Barclays initiated covered with an “Equal Weight” rating and $32 price target. RBC Capital raised its price target to $33 from $30 and kept its “Outperform” rating on the stock. Meanwhile, Citi initiated coverage of JNPR with a “Neutral” rating and $29 price target in early October.
In late July, brokerage firm Cantor Fitzgerald raised its price target from $31 to $36, while keeping a “Buy” rating on the stock. MKM partners upgraded shares from “Sell” to “Neutral” the same day after the better-than-expected $0.13 earnings beat.
These options will easily double if shares clear $34 by mid-December, technically, as they would be $1 in the money.
iShares Russell 2000 (IWM, $117.74, up $2.40)
IWM November 119 calls (IWM151120C00119000, $1.02, up $0.59)
Entry Price: $0.58 (10/29/2015)
Exit Target: $1.20, raise to $1.60 (Limit Order on first half)
Stop Target: $0.70 (Stop Limit)
Action: Raise the Exit Target and set a Limit Order to close the first half of the IWM November 119 calls at $1.60.
Also, set a Stop Limit at $0.70 to protect profits. I will raise it along the way if the small-caps continue higher.
Monday’s high reached $118.07. Short-term resistance is at $118-$118.50 and the 100-day moving average. Support has moved up to $116.
Motorola Solutions (MSI, $70.73, up $0.76)
MSI November 75 calls (MSI151120C00075000, $0.97, up $0.11)
Entry Price: $0.70 (10/22/2015)
Exit Target: $1.40
Stop Target: None
Action: Multi-year resistance is at $72.50. Support is at $69, followed by $68-$67.50 and the 50-day moving average.
The company is scheduled to announce earnings tomorrow, Nov. 4, before the opening bell. You can read my full update on MSI in the Oct. 23 Pre-Market Update.
Kohl’s (KSS, $46.71, up $0.59)
KSS November 42.50 puts (KSS151120P00042500, $0.60, down $0.10)
Entry Price: $0.95 (10/7/2015)
Exit Target: $1.90
Stop Target: None
Action: Resistance is at $47.50-$48 and the 50-day moving average. Support is at $46-$45.
You can read my detailed write-up in the Oct. 7 Mid-Market Update. Earnings are due out Nov. 12.
Corning (GLW, $18.79, up $0.19)
GLW November 19 calls (GLW151120C00019000, $0.29, up $0.03)
Entry Price: $0.60 (9/16/2015)
Exit Target: $1.20
Stop Target: None
Action: Resistance is at $19. Support is at $18.50-$18.25 and the 100-day moving average.
PayPal Holdings (PYPL, $36.99, up $0.98)
PYPL January (2016) 40 calls (PYPL160115C00040000, $1.10, up $0.24)
Entry Price: $1.05 (9/14/2015)
Exit Target: $2.10 (Limit Order on first half)
Stop Target: None
Action: Monday’s high reached $37.41. Resistance is at $37, and a close above this level would be a super bullish signal. Support is at $35.50 and the 10-day moving average.
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.
Financial Select Sector SPDR (XLF) November 22 puts (from 9/24/2015) — Continue to hold.
Editor and Chief Options Strategist