Dear Momentum Options Subscriber,

Trading was a little choppy this morning before the bulls made a push past the market’s fresh resistance levels. The bears are trying to hold these levels as we head into the final hours of today’s action, but volatility seems tame today. This could lead to a positive or mildly lower close, as the recent trading ranges continue to play out.

As far as earnings go, I mentioned that the flow of noteworthy news would come to a crawl through the end of the year and into the first week of January. Fourth-quarter earnings will play a major role next month in determining market direction, and they will be exciting to watch.

For now, Adobe Systems (ADBE, $89.21, down $0.35) is scheduled to confess its latest numbers after today’s close, and Wall Street is looking for $0.60 a share on revenue of $1.31 billion. The high estimate has the company earning $0.62 a share on sales of $1.33 billion. The low estimate has the numbers coming in at $0.58 a share on revenue of $1.28 billion.

There is a chance that the high estimate could be topped, as Adobe has beaten expectations by $0.04, $0.03, $0.05 and $0.06, respectively, in each quarter over the past year.

Shares are testing their 50-day moving average ahead of today’s earnings announcement following a recent run to an all-time high of $92.88.

 

The five-year chart below shows the incredible run from the low $20s to current levels, with solid momentum along the way. Given the current environment, shares are likely setting up for a huge move of $7-$9 on a beat-and-raise quarter or an earnings miss. In other words, a run towards $100 or a test to $80 is likely to occur following the news.

 

The ADBE December options look risky, as they expire next Friday and are quite expensive.

However, the ADBE December 95 calls (ADBE151218C00095000, $0.80, down $0.05) look tempting, and they would easily double if shares push $97 on Friday.

The ADBE December 82.50 puts (ADBE151218P00082500, $0.75, up $0.10) would double from current levels if shares fall below $81.

Although I’m more bullish than bearish on ADBE, there is a chance that the results come in shy of expectations, which is why trading earnings can be so tricky. As a safer trade, both aforementioned options could be used to create a “strangle” option trade, with breakeven points north of $96.50 or south of $81. A double would occur if ADBE shares can reach $98 or $79.50, technically, by next Friday.

The reward looks compelling, but I will be sitting on the sidelines with ADBE. There are other setups I like better that are “cheaper” and without the headline risk.

The Dow is currently up 104 points to 17,596, while the S&P 500 is advancing 9 points to 2,057. The Nasdaq is climbing 28 points to 5,051, and the Russell 2000 is adding 3 points to 1,149.

I have updated our current trades below, so let’s go check the tape. Also, stay locked and loaded into the close in case I take action on a New Trade.

Momentum Options Play List

Closed Momentum Options Trades for 2015: 95-41-2 (69%). 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 1:15 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.

 

Intel (INTC, $34.82, up $0.01)

INTC January 36 calls (INTC160115C00036000, $0.57, down $0.01)

Entry Price: $0.60 (12/9/2015)

Exit Target: $1.20

Return: -5%

Stop Target: None

Action: Resistance is at $34.75-$35. Support is at $34.50-$34.

You can read a more about my thoughts on INTC in this morning’s Pre-Market Update.

 

Medtronic (MDT, $77.59, up $0.03)

MDT January 80 calls (MDT160115C00080000, $0.56, down $0.09)

Entry Price: $0.72 (12/8/2015)

Exit Target: $1.45

Return: -22%

Stop Target: None

Action: Support is at $76, followed by $75-$74.75 and the 200-day moving average. Resistance is at $78.

You can read my detailed write-up on MDT in the Dec. 2 Mid-Market Update.

 

SPDR Gold Shares (GLD, $102.63, down $0.01)

GLD January 95 puts (GLD160115P00095000, $0.24, flat)

Entry Price: $0.51 (12/2/2015)

Exit Target: $1.05

Return: -53%

Stop Target: None

Action: Support is at $102. Resistance is at $104.

You can read my detailed write-up on Gold and GLD in the Nov. 30 Pre-Market Update.

 

MGM Resorts International (MGM, $22.01, down $0.05)

MGM January 25 calls (MGM160115C00025000, $0.18, flat)

Entry Price: $0.53 (12/2/2015)

Exit Target: $1.05

Return: -66%

Stop Target: None

Action: Support is at $21.75 and the 50-day moving average. Near-term resistance is at $23.

 

Harris (HRS, $83.42, up $0.08)

HRS December 85 calls (HRS151218C00085000, $0.50, flat)

Entry Price: $1.25 (11/19/2015)

Exit Target: $2.50

Return: -60%

Stop Target: None

Action: Resistance is at $84-$85. Near-term support is at $82.

 

PowerShares QQQ Trust (QQQ, $113.54, up $0.65)

QQQ December 117 calls (QQQ151218C00117000, $0.13, up $0.01)

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

Exit Target: $1.00 (Limit Order)

Return: -79%

Stop Target: None

Action: Support is at $112.50. Resistance is at $113.50-$115.

 

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.

Corning (GLW) January 20 calls — Continue to hold.

Wells Fargo (WFC) December 57.50 calls — Continue to hold.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options