In This Issue:

Dear Momentum Stocks Weekly Subscriber,

The bears continued their assault to lower lows on Wednesday, and they were looking to get their third-straight win. However, the bulls fought back during the second half of trading to regain positive territory and keep the current trading range in play. Volatility was insane yesterday, but it tried to level out following the whipsaw action.

The Dow added 183 points, or 1.1%, to close at 16,336. The blue-chips tested a low of 15,960 shortly after the open, with support at 16,000-15,900 holding. The surge to 16,381 afterwards pushed resistance at 16,350-16,400. A move above the latter should get 16,600 back in play.

The S&P 500 climbed 9 points, or 0.5%, to finish at 1,912. The index faded to 1,872 and stretched support at 1,875 before recovering the 1,900 level a couple of hours ahead of the closing bell. The high reached 1,918, which challenged resistance at 1,920-1,925. A move above the latter should get 1,940-1,950 back in the mix.

The Nasdaq fell 12 points, or 0.3%, to settle at 4,504. Tech traded to a high of 4,547 on the opening pop and nearly cleared resistance at 4,550. The 123-point drop to 4,424 afterwards came within the first hour of trading, but backup support at 4,425-4,400 held.

A close below the latter could lead to a test to 4,300 and the January low of 4,313. The bulls held 4,500, which is a level that gave us a great signal back in August that a market top was in. Since then, this has been the main battleground between the bulls and bears, which is why the next 100 points from here could be crucial in developing the next major trend.

The Russell 2000 gained slightly more than a point, or 0.14%, to end at 1,010. The small-caps made a run to 1,016 at the start of trading, but they fell shy of resistance at 1,020-1,025. The slide to 989 afterwards stretched support at 1,000-990, and there is risk to 975 on a close below the latter. The index held the 1,000 level for the seventh-straight session, but it is still trying to build a base at this level.

The S&P 500 Volatility Index ($VIX, 21.65, down 0.33) spiked to a high of 27.70 on the morning weakness to clear 25 and 27.50. These are prior resistance levels, along with 22.50-23.50. This type of action in the VIX may have signaled a temporary downslide in the market. Of course, it could also have been an omen of things to come, which is why it is important that we stay nimble with our trades until a clearer trend emerges.

From desk to press, futures look like this: Dow (-71); S&P 500 (-10); Nasdaq 100 (-24); Russell (-5).

Chapter 1. Momentum Stocks Weekly Play List

All prices given in this update are current as of Feb. 3, 2016. I hereby disclose that I will be participating in the following trade(s).

The Momentum Stocks Weekly Closed Trade Track Record is 0-1, for a 0% win rate for 2016 (144-26, or 85% win rate, overall since the start of 2011).

View the entire list of open and closed trades by clicking here.

 

Hansen Medical (HNSN, $3.24, down $0.27)

Original Entry Price: $4.50 (2/2/2016)

Lowered Price from Selling Options: N/A

Exit Target: $6.00

Return: -28%

Stop Target: $2.00

Action: Shares have been volatile this week and over the past month following a number of developments about the company.

The most important piece of news was the FDA clearance of the company’s Magellan Robotic Catheter eKit, or MRC eKit. This was the latest addition to the already-approved Magellan Robotic Catheters that help extend robotic capabilities. The latest function has the potential to help reduce procedure times and radiation exposure.

The company is still losing money, but it had nearly $36 million in its cash coffers coming into 2016. Revenue for 2015 came in at roughly $17 million. Two share offerings last year have diluted the company’s overall value, as shares are down from a 52-week high of $12.30.

The market cap for the company is under $100 million, which is another reason why shares have been volatile. One of the more bullish reasons I like this trade is the fact that Hansen Medical basically put itself up for sale after announcing in mid-January that it was seeking strategic alternatives.

At the time, the company’s CEO, Cary Vance, was quoted as saying, “Given our position as a leader in robotics technology, we believe now is the appropriate time to explore strategic alternatives.”

A takeover north of $5 might work, which would cost the acquirer of Hansen roughly $100 million. This would be pocket change for a company looking for better robotic technology to enhance its own.

The stock trades options and, at some point, I could write a covered call against the trade. However, this will limit the upside potential of the trade. For now, let’s sit tight and see what happens over the next few months, as I like Hansen as a takeover target for 2016.

 

Twitter (TWTR, $16.56, up $0.48)

Wrote the TWTR February 15 call (TWTR160219C00015000, $2.40, up $0.30)

Original Entry Price: $17.90 (1/22/2016)

Lowered Price from Selling Options: $14.40

Exit Target: $15.00

Return: 15%

Stop Target: $14.00

Action: Resistance is at $17-$17.50. Support is at $16.50-$16.

The TWTR February 15 calls expire in less than three weeks. Our gains are capped at 5% if the trade is “called away” at the call’s $15 strike price on Feb. 19.

 

Lattice Semiconductor (LSCC, $4.48, down $0.09)

Original Entry Price: $6.77 (12/29/2015)

Lowered Price from Selling Options: N/A

Exit Target: $9.00

Return: -34%

Stop Target: $3.50 (Stop Limit)

Action: Resistance is at $4.75-$5. Support is at $4.25-$4.

 

Relypsa (RLYP, $18.78, up $0.53)

Original Entry Price: $28.29 (12/28/2015)

Lowered Price from Selling Options: $26.14

Exit Target: $30.00+

Return: -28%

Stop Target: $14.00

Action: Support is at $18, with risk to $16 on a close below this level. Resistance is at $20.

You can read my detailed write-up in the Jan. 4 Issue.

 

Planet Fitness (PLNT, $14.87, up $0.09)

Entry Price: $17.85 (9/16/2015)

Lowered Price from Selling Options: N/A

Exit Target: $22.00

Return: -17%

Stop Target: $12.00

Action: Resistance is at $15. Support is at $14.50.

You can read my latest write-up on PLNT in the Nov. 16 Issue.

Rave Restaurant Group (RAVE, $5.85, down $0.02)

Original Entry Price (First Position): $13.92 (7/9/2015)

Lowered Price from Selling Options: N/A

Exit Target: $20.00

Return: -58%

Stop Target: $5.00

 

Original Entry Price (Second Position): $11.70 (8/17/2015)

Lowered Price from Selling Options: N/A

Exit Target: $13.00+

Return: -50%

Stop Target: $5.00

Action: Support is at $5.75. Resistance is at $6 and the 50-day moving average. There is still risk to $5.50 on a close below $5.75.

You can read my most recent write-up on the company in the Dec. 24 Issue. 

 

Rigel Pharmaceuticals (RIGL, $2.67, down $0.04)

Original Entry Price: $3.51 (6/2/2015)

Lowered Price from Selling Options: N/A

Exit Target: $4.00-$5.00

Return: -24%

Stop Target: $2.00 (Stop Limit)

Action: Support is at $2.60-$2.50. Resistance is at $2.80-$2.90, followed by $3 and the 100- and 50-day moving averages.

 

Psychemedics (PMD, $9.80, down $0.77)

Original Entry Price: $15.67 (5/5/2015)

Lowered Price from dividends: $15.22

Exit Target: $15.75 (Limit Order)

Return: -36%

Stop Target: $7.75 (Stop Limit)

Dividend Yield: 6.12%

Action: Resistance is at $10-$10.50. Support is at $9.50-$9.

 

Huttig Building Products (HBP, $3.23, down $0.04)

Original Entry Price: $4.00 (8/13/2014)

Lowered Price from Selling Options: N/A

Exit Target: $6.00+

Return: -19%

Stop Target: $2.00 (Stop Limit)

Action: Resistance is at $3.30-$3.35 and the 200-day moving average. Support is at $3.10-$3.

 

Rambus (RMBS, $12.14, up $0.23)

Original Entry Price: $17.83 (11/14/2011)

Lowered Price from Selling Options: $16.38

Exit Target: $15.00+

Return: -26%

Stop Target: $9.00

Action: Resistance is at $12.50-$12.75 and the 200-day moving average. Support is at $11.75-$11.50 and the 50- and 100-day moving averages.

 

Trades on Hold (1): These are trades that are still open in the portfolio but are down from the original recommended price. These trades are on “hold” and are not a buy until I bring back coverage of the stock. This means I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly when a trade closes. I do not recommend adding to these positions or opening new positions.

Zynga (ZNGA, March 2014) — Continue to hold.

Trade on!

Signed

Rick Rouse
Editor
Momentum Stocks Weekly