Dear Momentum Options Subscriber,
The bulls reclaimed resistance on Wednesday despite the release of the latest Federal Open Market Committee (FOMC) minutes, which showed that a possible December interest-rate hike is still in the cards.
Most of the Fed Heads believe liftoff conditions could be met by December, and they used strong language in the minutes to prepare Wall Street for the move. However, to no surprise, some of the zombies believe it is unlikely that the information available by the December meeting will warrant raising rates.
The Dow jumped 247 points, or 1.4%, to settle at 17,737. The blue-chips opened at 17,485 with a 4-point loss, but that was quickly recovered before a late-day run to 17,752. The close above 17,700 and the 200-day moving average was bullish and gets 17,800-18,000 in play. Short-term support is at 17,600, followed by 17,450-17,350.
The S&P 500 soared 33 points, or 1.6%, to close at 2,083. The index traded in positive territory throughout the session, with the high checking in at 2,085. The close above 2,080 and the 200-day moving average looked bullish and sets up another push towards 2,090-2,100. Support is at 2,060-2,050 on a pullback.
The Nasdaq zoomed 89 points, or 1.8%, to finish at 5,075. Tech opened above the 5,000 level at 5,004 while making an intraday high of 5,078. The close above 5,050 should keep 5,100-5,125 on the bulls’ radar. Support has moved up to 5,025-5,000, followed by 4,950 and the 200-day moving average.
The Russell 2000 climbed 18 points, or 1.6%, to end at 1,171. The small-caps held short-term support at 1,150 after opening in positive territory and held their gains throughout the day. The run to 1,172 and close above the 50-day moving average looks good as long as 1,160-1,155 holds on any pullback. Resistance is at 1,175-1,180 and the 100-day moving average. A close above the latter could lead to a run at 1,200.
The S&P 500 Volatility Index ($VIX, 16.85, down 1.99) traded to a high of 19.45 during the first half of the action, with the bulls holding 20 for the second-straight session. The second-half drop to 16.80 and the close below 17.50 were also bullish signs. However, a move below 15 is needed to confirm that higher market highs are in store.
I could have another New Trade shortly after the open today, as I did additional research and homework last night to find the best option to trade in a sector that is showing strength. Stay locked and loaded in case I decide to take action.
From desk to press, futures look like this: Dow (+25); S&P 500 (+5.5); Nasdaq 100 (+16); Russell (+1.4).
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 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.
Wells Fargo (WFC, $55.67, up $0.71)
WFC December 57.50 calls (WFC151218C00057500, $0.41, up $0.09)
Entry Price: $0.38 (11/18/2015)
Exit Target: $0.80
Stop Target: None
Action: Shares traded to a high of $55.77 yesterday. Near-term resistance is at $56-$56.50. Support is at $54 and the 100- and 200-day moving averages.
The company recently matched Wall Street’s earnings expectations of $1.05 a share, but revenue came in slightly higher at $21.88 billion versus estimates for $21.76 billion. While the earnings-per-share figure is important, I like to see companies reporting higher revenue given the current economic environment. WFC won’t report its current-quarter numbers until January of 2016, so that headline risk is removed from this trade.
I have said all year that the financial stocks have lagged and need to show strength to possibly lead the market to fresh all-time highs. The slick-talking pros have been saying that a market correction or pullback will come once the Fed hikes rates, but I have penciled in the opposite reaction. It is too early to tell if the financial stocks are out of the woods, but yesterday’s action looked bullish.
The 52-week high for WFC is at $58.77. If shares can creep higher, analyst upgrades and price targets north of $60 could begin to pop up. I love this trade going forward as long $55-54 holds on a pullback.
Jabil Circuit (JBL, $24.76, up $0.78)
JBL December 25 calls (JBL151218C00025000, $1.10, up $0.29)
Entry Price: $0.65 (11/10/2015)
Exit Target: $1.30, raise to $1.50
Stop Target: $0.70, raise to $0.85 (Stop Limit)
Action: Raise the Exit Target from $1.30 to $1.50. Raise the Stop Limit from $0.70 to $0.85.
Shares tested a high of $24.85 on Wednesday. The 52-week high is at $24.95. Resistance is at $25, and a move above this level could lead to a blue-sky breakout. Support is at $24.50-$24.
You can read my detailed write-up on JBL in the Nov. 10 Mid-Market Update.
PowerShares QQQ Trust (QQQ, $113.63, up $2.14)
QQQ December 117 calls (QQQ151218C00117000, $0.55, up $0.30)
Entry Price: $0.63 (11/10/2015)
Exit Target: $1.30
Stop Target: None
Action: Resistance is at $114-$115. Support is at $112.50, followed by $110.
Comcast (CMCSA, $62.56, up $1.43)
CMCSA December 65 calls (CMCSA151218C00065000, $0.54, up $0.19)
Entry Price: $0.74 (11/3/2015)
Exit Target: $1.50
Stop Target: None
Action: Shares traded to a high of $62.63 yesterday. Resistance is at $63. Support has moved up to $61.50, followed by $60 and the 50- and 100-day moving averages.
You can read my detailed write-up on CMCSA in the Nov. 4 Pre-Market Update.
Trades on Hold — other 2015 Portfolio Open positions (2): 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.
Hilton Worldwide Holdings (HLT) December 27 calls — Continue to hold.
iShares Russell 2000 (IWM) December 124 calls — Continue to hold.
Editor and Chief Options Strategist
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