Dear Momentum Options Subscriber,

The Fed raised interest rates yesterday for the first time since June of 2006, and the bears ran for cover. The bulls pushed the market’s upper resistance levels and are once again eyeballing a run to all-time highs. There are only 10 trading days left in the year, and this Friday is “quadruple witching” day, which is when contracts for stock index futures, stock index options, stock options and single stock futures all expire. With volatility still slightly elevated, the bulls will need to keep their momentum if they want to finish the year in positive territory.

The Dow advanced 224 points, or 1.3%, to close at 17,749. The blue-chips started off strong and held positive territory throughout the first half of trading. The index initially tested a low of 17,483 on the Fed news while holding support at 17,400-17,350. The rebound to 17,784 pushed upper resistance at 17,700-17,800. A close above the latter should get 18,000 in play.

The S&P 500 climbed 29 points, or 1.5%, to end at 2,073. The index held positive territory into the second half of trading before falling a point to 2,042 after the Fed announcement. Short-term support at 2,040 held before the rally to 2,076 during the final hour of trading. Previous resistance at 2,060 was cleared, but there are additional hurdles at 2,070-2,075.

The Nasdaq zoomed 75 points, or 1.5%, to settle at 5,071. Tech slipped 3 points to 4,992 late in the day, with support at 5,000-4,975 holding. The bulls pushed a high of 5,078 after Janet Yellen’s comments to push upper resistance at 5,075-5,100. The close above the latter should get 5,125-5,150 in the mix.

The Russell 2000 zoomed 17 points, or 1.5%, to finish just under 1,149. The small-caps gave a good sign that Wednesday would be a strong day, as they held positive territory throughout the session. The late-day high reached 1,150, and I talked about a run towards 1,150-1,160 this week based on momentum. Support has moved up to 1,130-1,125.

The S&P 500 Volatility Index ($VIX, 17.86, down 3.09) opened below 20 at 19.25 and tested a high of 20.24 during the morning action. The VIX stayed in the red throughout the day, with the bulls pushing a low of 17.12 into the closing bell. The close under 18 was a very bullish sign, but I won’t feel totally comfortable about a continued rally until the VIX gets below 15. The bears face a crucial two days and need to get the VIX back above 17.50-20 ahead of the weekend to keep fear in the market.

I have a number of Trade Updates this morning, so let’s get to it.

From desk to press, futures look like this:  Dow (+52); S&P 500 (+5); Nasdaq 100 (+21); Russell (+4.5).

Momentum Options Play List

Closed Momentum Options Trades for 2015: 95-43-2 (68%). 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.

 

General Electric (GE, $30.98, up $0.66)

GE January 31 calls (GE160115C00031000, $0.57, up $0.21)

Entry Price: $0.47 (12/16/2015)

Exit Target: $1.00

Return: 21%

Stop Target: None

 

GE February 32 calls (GE160219C00032000, $0.45, up $0.10)

Entry Price: $0.40 (12/16/2015)

Exit Target: $0.80

Return: 13%

Stop Target: None

Action: GE traded to a 52-week high of $31.23 yesterday and closed a penny below its previous 52-week peak.

Shares have been in a trading range between $30 and $31 since the start of November. Usually, the longer the trading range, the bigger the breakout or breakdown will be.

GE1

The chart shows a “golden cross” that formed in mid-October, with the 50-day moving average crossing above the 200-day moving average. The 50-day moving average remains in a strong uptrend, with the 100- and 200-day moving averages trending slightly higher.

GE2

The 20-year chart shows a possible run to $32.50-$35.

 

Visa (V, $79.86, up $1.24)

V January 82.50 calls (V160115C00082500, $0.72, up $0.17)

Entry Price: $0.55 (12/15/2015)

Exit Target: $1.10

Return: 31%

Stop Target: $0.58 (Stop Limit)

Action: Set a Stop Limit at $0.58. We can raise the Stop Limit along the way if shares keep their momentum.

Visa traded to a high of $79.98 yesterday. Continued closes above resistance at $80 would be bullish. The 52-week high is a penny north of $81. Near-term support is at $78-$77.75.

 

Halliburton (HAL, $35.86, down $1.24)

HAL January 40 calls (HAL160115C00040000, $0.32, down $0.36)

Entry Price: $0.73 (12/15/2015)

Exit Target: $1.50

Return: -56%

Stop Target: None

Action: Support is at $35. Resistance is at $37.

You can read my detailed write-up on HAL in the Dec. 16 Pre-Market Update.

 

iRobot (IRBT, $36.29, up $1.71)

IRBT January 34 calls (IRBT160115C00034000, $2.75, up $1.16)

Entry Price: $1.10 (12/10/2015)

Exit Target: $3.00, raise to $4.00

Return: 150%

Stop Target: $1.50, raise to $2.05 (Stop Limit)

Action: Raise the Exit Target from $3.00 to $4.00. Also, raise the Stop Limit order from $1.50 to $2.05.

Shares traded to a fresh 52-week high of $36.13 on Wednesday. Multi-year resistance is at $38-$40. Support has moved up to $35-$34.50.

 

Cisco Systems (CSCO, $27.24, up $0.39)

CSCO January 27 calls (CSCO160115C00027000, $0.70, up $0.13)

Entry Price: $0.53 (12/10/2015)

Exit Target: $1.10

Return: 32%

Stop Target: $0.58 (Stop Limit)

Action: Set a Stop Limit at $0.58.

Resistance is at $27.25-$27.50. Support has moved up to $26.75-$26.50.

 

Intel (INTC, $35.30, up $0.12)

INTC January 36 calls (INTC160115C00036000, $0.68, down $0.07)

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

Exit Target: $1.20

Return: 13%

Stop Target: None

Action: Support is at $35-$34.50. Resistance is at $35.50.

You can read a more about my thoughts on INTC in the Dec. 10 Pre-Market Update.

 

Medtronic (MDT, $78.57, up $1.47)

MDT January 80 calls (MDT160115C00080000, $0.80, up $0.30)

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

Exit Target: $1.45

Return: 11%

Stop Target: None

Action: Resistance is at $79.50 and the 52-week high. A close above $80 could lead to a blue-sky breakout. Support is at $77.50, followed by $76.

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

 

SPDR Gold Shares (GLD, $102.75, up $1.23)

GLD January 95 puts (GLD160115P00095000, $0.14, down $0.17)

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

Exit Target: $1.05

Return: -73%

Stop Target: None

Action: Resistance is at $103.50-$104. Support is at $101-$100.

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

 

Corning (GLW, $18.52, up $0.65)

GLW January 20 calls (GLW160115C00020000, $0.16, up $0.05)

Entry Price: $0.40 (11/23/2015)

Exit Target: $0.80

Return: -64%

Stop Target: None

Action: I have taken this trade off of the list of “Trades on Hold,” as these call options could pick up steam if shares continue higher.

The stock jumped nearly 4% yesterday on news that the company is working with Ford (F) to bring its “Gorilla Glass” technology to the automotive industry.

Gorilla Glass is the thin, lightweight glass on many newer smartphones, and yesterday’s news opens up a whole new ballgame for Corning. The automotive version has multiple layers for added safety, and these types of sales can be very accretive to earnings.

Gorilla Glass is more durable than traditional glass, and it’s also 30% lighter. This will help cars save fuel, and Ford said it also improves the handling of a vehicle.

Ford’s GT sports car models will become the first production vehicles to feature Corning’s Gorilla Glass. The switch saves 12 pounds of vehicle weight. Ford is also using Gorilla Glass for the rear window on the upcoming GT models as an acoustic separation wall. As a side note, BMW also uses Gorilla Glass for the interior panels of their BMW i8 hybrid automobiles.

Resistance is at $18.75-$19. Support is at $18, followed by $17.75-$17.50.

 

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.

MGM Resorts International (MGM) January 25 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