Dear Momentum Options Subscriber,

The bulls failed to hold their momentum from last week on Monday, as the bears dominated trading during yesterday’s session. The losses were kept somewhat in check, however, with fresh support holding and volatility staying slightly relaxed. The action will likely pick up steam by the end of the week, as corporate earnings and the Federal Open Market Committee (FOMC) meeting minutes will surely stir the pot.

The Dow fell 208 points, or 1.3%, to finish at 15,885. The blue-chips traded in negative territory throughout the session, with the low checking in at 15,880. Fresh support at 15,900-15,800 held, but a move below the latter would be a bearish development. Resistance is at 16,000-16,100.

The S&P 500 dropped nearly 30 points, or 1.6%, to settle at 1,877. The index stumbled to a low of 1,875 ahead of the closing bell, with support at 1,875-1,870 holding. There is wiggle room to 1,860-1,850 on further weakness, but a breach of these levels will likely lead to another round of selling pressure. Resistance is at 1,890-1,900.

The Nasdaq tumbled 72 points, or 1.6%, to close at 4,518. Tech opened lower at 4,574 but made a push towards resistance at 4,600 during the second half of trading. The index tested 4,590 but failed to get into positive territory. The late-day fade to 4,514 and close back below 4,550 keeps backup support at 4,500-4,475 in play.

The Russell 2000 sank 23 points, or 2.3%, to end at 997. The small-caps were in a steady downtrend throughout the day, with the late-day low reaching 996. The bulls held support at 1,000-995, but they face additional risk to 975 on a breach below the latter. Near-term resistance is at 1,115-1,120.

The S&P 500 Volatility Index ($VIX, 24.15, up 1.81) made a run to 24.31, with upper resistance at 25 holding. There is risk to 27.50-30 on move back above this level. The close above 23.50-22.50 was a slightly bearish signal, and these levels now represent support.

The lower close on Monday and failed follow-through from last week were bearish developments, as was oil falling back towards the $30 level. I could take action with index-option trades if there is additional selling pressure or a rebound this morning, so stay locked and loaded.

From desk to press, futures look like this: Dow (+3); S&P 500 (+2); Nasdaq 100 (+1.5); Russell (+0.7).

Momentum Options Play List

Closed Momentum Options Trades for 2016: 11-0 (100%). 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.

 

Opko Health (OPK, $7.96, down $0.28)

OPK March 7 puts (OPK160318P00007000, $0.35, up $0.05)

Entry Price: $0.35 (1/25/2016)

Exit Target: $0.70

Return: 0%

Stop Target: None

Action: Near-term support is at $7.75-$7.50. Resistance is at $8.25-$8.50, followed by $9.

Shares tested a 52-week low of $7.12 last week, and the close below $8 on Monday should keep lower lows in play. The 5-year weekly chart below shows risk to $6 on a move below $7, with possible risk to $5.

 

Cisco Systems (CSCO, $23.17, down $0.20)

CSCO February 24 calls (CSCO160219C00024000, $0.36, down $0.08)

Entry Price: $0.52 (1/22/2016)

Exit Target: $1.10

Return: -12%

Stop Target: None

 

CSCO March 25 calls (CSCO160318C00025000, $0.33, down $0.02)

Entry Price: $0.40 (1/22/2016)

Exit Target: $0.90

Return: -18%

Stop Target: None

Action: Near-term resistance is at $24-$24.50. Support is at $23-$22.50.

You can read my full writeup in the Jan. 22 Mid-Market Update.

 

Garmin (GRMN, $33.20, down $0.64)

GRMN February 30 puts (GRMN160219P00030000, $0.71, up $0.04)

Entry Price: $0.93 (1/20/2016)

Exit Target: $2.00

Return: -24%

Stop Target: None

Action: Support is at $33, followed by $32-$30. Resistance is at $34.

You can read my expectations for earnings in the Jan. 12 Pre-Market Update.

 

Harley-Davidson (HOG, $40.09, down $0.64)

HOG February 37.50 puts (HOG160219P00037500, $1.13, up $0.20)

Entry Price: $1.20 (1/20/2016)

Exit Target: $2.40

Return: -6%

Stop Target: None

Action: Support is at $40, followed by $38.75. Resistance is at $41-$42. Earnings are due to be released on Thursday.

You can read my full write-up on HOG in the Jan. 21 Mid-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.

General Electric (GE) February 32 calls — Continue to hold.

3D Systems (DDD) February 11 calls — Continue to hold.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options