Dear Momentum Options Subscriber,

It’s fitting that today is Friday the 13th, as the bears are continuing their week-long assault on the bulls once again. The major moving averages are in play, like we expected, and volatility is on the brink of exploding.

Needless to say, the bulls’ six-week run to the upside is done, and the bears are now pushing levels last seen in mid-October. Retail stocks continue to get hammered as well following lousy earnings from Nordstrom (JWN, $52.43, down $11.04) and Fossil (FOSL, $34.69, down $16.32).

Cisco Systems (CSCO, $25.93, down $1.90) is getting punished despite posting a $0.03 earnings beat and better-than-expected revenue numbers. The company lowered its current-quarter guidance, which is what disappointed Wall Street.

I had a feeling that Cisco’s announcement could be a “sell-the-news” event, which is why I stayed on the sidelines instead of taking an earnings trade. However, knowing a good quarter was in store, it was also hard to “short” the stock.

At first glance, today’s pullback in CSCO shares looks like it could make for an attractive entry point, but the break below the major moving averages could lead to further selling pressure.

It will be interesting to see if shares can hold $26 into the close with today’s low checking-in at $25.82 thus far. If this level fails to hold, I could add the CSCO December 26 puts (CSCO151218P00026000, $0.60, up $0.32), so keep them on your watch list.

If shares can hold $26, the CSCO December 26 calls (CSCO151218C00026000, $0.75, down $1.46) could be used to play a rebound to $27-$28.

Both aforementioned options would create a straddle option trade with a combined premium of approximately $1.30. The breakeven points would be if CSCO shares are above $27.30 or below $24.70, technically, by mid-December. A double would occur if shares are above $28.60 or below $23.40 at that time.

We can wait for the dust to settle into next week before taking any potential action on CSCO. There are bearish trades that I like, but I’m a little hesitant to add fresh positions with support holding. However, if the action worsens into the close, I could take action.

Our current trades are taking a hit, but this is why I went with December options on this week’s pullback. We did well in the same environment heading into October by buying into the September weakness, but we need to be a little more careful this time around.

The Dow is currently declining 134 points to 17,313, while the S&P 500 is lower by 14 points to 2,031. The Nasdaq is down 46 points to 4,958, and the Russell 2000 is up fractionally to 1,155. The S&P 500 Volatility Index ($VIX, 19.49, up 1.12) is holding 20 following a test to 20.12 this morning.

As usual, the charts tell the story, and I have already started my weekend homework. It is still too early to say if the bulls will regain momentum, but today’s close should provide a good clue as to how next week might shape up. The small-caps were up earlier in the session, and the VIX is below 20, both of which are good signs if they hold into the close.

If you don’t hear from me again, have a great weekend, and I will chat with everyone again on Monday morning.

Momentum Options Play List

Closed Momentum Options Trades for 2015: 93-38-2 (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 1:20 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, $23.39, down $0.33)

JBL December 25 calls (JBL151218C00025000, $0.65, down $0.03)

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

Exit Target: $1.30

Return: 0%

Stop Target: None

Action: Support is at $23.50, followed by $23. Resistance is at $24-$24.25.

You can read my detailed write-up on JBL in the Nov. 10 Mid-Market Update.


PowerShares QQQ Trust (QQQ, $110.60, down $1.44)

QQQ December 117 calls (QQQ151218C00117000, $0.27, down $0.15)

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

Exit Target: $1.30

Return: -57%

Stop Target: None

Action: Support is at $110. Resistance is at $112.


Hilton Worldwide Holdings (HLT, $24.57, down $0.55)

HLT December 27 calls (HLT151218C00027000, $0.22, down $0.04)

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

Exit Target: $1.00

Return: -51%

Stop Target: None

Action: Support is at $25, followed by $24.50 and the 50-day moving average. Near-term resistance is at $25.50-$26.

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


iShares Russell 2000 (IWM, $114.54, down $0.36)

IWM December 124 calls (IWM151218C00124000, $0.16, up $0.02)

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

Exit Target: $1.20

Return: -72%

Stop Target: None

Action: Support is at $114.50 and the 50-day moving average. Resistance is at $116.


Comcast (CMCSA, $60.56, down $0.93)

CMCSA December 65 calls (CMCSA151218C00065000, $0.38, down $0.12)

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

Exit Target: $1.50

Return: -49%

Stop Target: None

Action: Support is at $61-$60 and the 100-day moving average. Resistance is at $62-$62.50.

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

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options