Dear Momentum Options Subscriber,

Cisco Systems (CSCO, $28.01, up $0.03) is scheduled to release its latest earnings report after Thursday’s close, and the results could give tech a lift if they come in better than expected. While “new tech” has been hot over the past few years, “old tech” is still shining given the recent earnings results from Microsoft (MSFT) and Intel (INTC).

Wall Street is looking for Cisco to earn $0.56 a share on revenue of $12.65 billion. The high estimate has the company earning $0.59 a share on revenue north of $12.8 billion. The lowball number has Cisco earning $0.55 a share on revenue of $12.55 billion. In other words, the headlines could read as either a $0.03 beat or a $0.01 miss.

I doubt Cisco will miss expectations, as it has beaten estimates over the past four quarters by $0.03, $0.01, $0.02 and $0.01, respectively.

Shares have been in a strong uptrend following September’s low and the push towards $29.50 in October. CSCO pulled back to its 200-day moving average this month, which could be considered either a gift or a warning sign heading into the company’s announcement.

The 50-day moving average is also in a strong uptrend and is on course to form “golden crosses” with the 100- and 200-day moving averages. A close below $27 on an earnings miss would negate the bullish setup.

While the near-term November options look tempting for a quick trade, I have been watching the December and January option chains for a possible play on Cisco.

The CSCO December 29 calls (CSCO151218C00029000, $0.50, up $0.03) have nearly five weeks before they expire and could be used to play a possible run to $30 by the end of the year. Shares previously failed to clear resistance at $29.50, and a move above this level should lead to a run past $30. If so, the aforementioned call options would double, as they would be worth at least $1.00.

Bullish traders could also target the CSCO January (2016) 30 calls (CSCO160115C00030000, $0.34, up $0.01), as they would give the trade two months to play out. These options would double if Cisco shares trade past $30.68, technically, by mid-January 2016.

Both options are actively traded, very liquid and have large open interest. This means that the bid/ask spread is only a penny or two, and the risk/reward is clearly visible.

If shares stay below $29 by mid-December or below $30 by mid-January, these options will expire worthless. We still have another day to get into a possible CSCO trade, so keep these options on your radar in case I take action.

As far as the market goes today, trading has been choppy once again, but the bulls are showing strength heading into the final hours of trading.

The Dow is currently up 26 points to 17,784, while the S&P 500 is gaining 3 points to 2,085. The Nasdaq is higher by 21 points to 5,104, and the Russell 2000 is adding a point to 1,188.

I have updated our current trades below, so let’s go check the tape.

Momentum Options Play List

Closed Momentum Options Trades for 2015: 93-37-2 (70%). 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 1:00 p.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.

 

Jabil Circuit (JBL, $24.08, up $0.12)

JBL December 25 calls (JBL151218C00025000, $0.80, flat)

Entry Price: $0.65 (11/10/2015)

Exit Target: $1.30

Return: 23%

Stop Target: None

Action: Support is at $23.50-$23. Resistance is at $24-$24.25. The 52-week high is at $24.95.

 

PowerShares QQQ Trust (QQQ, $113.99, up $0.71)

QQQ December 117 calls (QQQ151218C00117000, $0.80, up $0.18)

Entry Price: $0.63 (11/10/2015)

Exit Target: $1.30

Return: 27%

Stop Target: None

Action: Resistance is at $113.50-$114. Support is at $113-$112.50.

 

Hilton Worldwide Holdings (HLT, $25.80, up $0.10)

HLT December 27 calls (HLT151218C00027000, $0.40, flat)

Entry Price: $0.45 (11/5/2015)

Exit Target: $1.00

Return: -11%

Stop Target: None

Action: Near-term resistance is at $26. Support is at $25, followed by $24.50 and the 50-day moving average.

You can read my detailed write-up on HLT in the Nov. 9 Pre-Market Update.

 

iShares Russell 2000 (IWM, $117.83, down $0.34)

IWM December 124 calls (IWM151218C00124000, $0.32, down $0.08)

Entry Price: $0.58 (11/5/2015)

Exit Target: $1.20

Return: -45%

Stop Target: None

Action: Support is at $118-$117.50 and the 100-day moving average. Short-term resistance is at $120 and the 200-day moving average.

 

Comcast (CMCSA, $61.65, up $0.08)

CMCSA December 65 calls (CMCSA151218C00065000, $0.45, flat)

Entry Price: $0.74 (11/3/2015)

Exit Target: $1.50

Return: -39%

Stop Target: None

Action: Short-term resistance is at $62-$62.50. Near-term support is at $61-$60 and the 100-day moving average.

You can read my detailed write-up on CMCSA in the Nov. 4 Pre-Market Update.

 

Corning (GLW, $18.68, down $0.10)

GLW November 19 calls (GLW151120C00019000, $0.16, down $0.07)

Entry Price: $0.60 (9/16/2015)

Exit Target: $1.20

Return: -73%

Stop Target: None

Action: Resistance is at $19-$19.25. Support is at $18.25-$18 and the 100-day moving average.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options