Dear Momentum Options Subscriber,
The broad market is getting clocked following a worse-than-expected jobs report this morning. Nonfarm payrolls came in at 151,000 versus expectations for a reading of 190,000. Meanwhile, the unemployment rate fell to 4.9% — down from 5%. This is misleading to some degree, however, as more people continue to drop out of the workforce and therefore aren’t counted.
Today’s fall back to support is giving mixed signals for next week, and a continued trading range could be in store. Economic news will be very light over the next week, but earnings will continue to flow. Given the results from some of the stocks that are getting hammered today, light earnings won’t do much to help the bulls regain momentum.
It has been a super busy week ahead of the Super Bowl on Sunday, and we are looking strong heading into the heart of February. As far as Wall Street and the big game go, the bulls will be rooting for the NFC’s Carolina Panthers, and the bears will be pulling for the AFC’s Denver Broncos.
The Super Bowl Indicator is part of a superstition that tries to predict the market’s behavior for the year based on the outcome of the game. The percentages say that if an NFC team wins, the indices usually trade higher. If an AFC team wins, the major averages usually finish the year lower.
I could care less which way the market is headed because we will trade the trend regardless of whether it is bullish or bearish. I’ve been a Broncos fan since my single-digit years, so this will be an exciting weekend for me. The majority of our trades this year have been bearish, which I hope is a good omen for our portfolio and my team.
As far as the current market action goes today, the Dow is down 166 points to 16,250, while the S&P 500 is lower by 26 points to 1,888. The Nasdaq is tanking 116 points, to 4,393 and the Russell 2000 is getting hit for 18 points to 996.
I have already started my weekend homework and plan to work all day on Saturday until the research is done. I mentioned earlier this week that my watch list is exploding with possible trade setups, so we just need to continue to be patient. January was an incredibly profitable month for us, so we don’t need to force the action.
I have updated our current trades below, including one position that we were stopped out of earlier today, and I don’t expect any further action ahead of the close. However, I will be watching the market until the final bell, so keep your eyes on your email inbox in case I take action. If you don’t hear from me again by 3:30 p.m. EST, however, have a great weekend, and I will chat with everyone again on Monday.
Momentum Options Play List
Closed Momentum Options Trades for 2016: 15-2 (88%). 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 1:35 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.
Bank of America (BAC, $13.05, down $0.20)
BAC March 13 calls (BAC160318C00013000, $0.68, down $0.12)
Entry Price: $0.68 (2/3/2016)
Exit Target: $1.00-$1.40
Stop Target: $0.70 (Stop Limit)
Action: The Stop Limit at $0.70 was triggered on today’s pullback in the stock, and we are now out of the position. I will keep BAC on my watch list for another possible re-entry point, but, for now, we are out.
Resistance is at $13.25-$13.50. Short-term support is at $12.75-$12.50 if $13 fails to hold.
Wal-Mart Stores (WMT, $67.01, up $0.59)
WMT March 60 puts (WMT160318P00060000, $0.51, down $0.12)
Entry Price: $0.65 (2/4/2016)
Exit Target: $1.00-$1.30 (Limit Order on first half at $1.00)
Stop Target: None
Action: Resistance is at $66.50-$67 and the 200-day moving average. Support is at $65.
Earnings are due out on Feb. 18, before the market opens, and I will cover the expected numbers on Monday.
Rambus (RMBS, $12.15, down $0.21)
RMBS March 13 calls (RMBS160318C00013000, $0.32, down $0.05)
Entry Price: $0.35 (2/2/2016)
Exit Target: $0.70
Stop Target: None
Action: Support is at $11.75. Resistance is at $12.25-$12.50.
You can read my extended write-up in the Feb. 2 Pre-Market Update.
Opko Health (OPK, $8.40, down $0.04)
OPK March 7 puts (OPK160318P00007000, $0.24, up $0.02)
Entry Price: $0.35 (1/25/2016)
Exit Target: $0.70
Stop Target: None
Action: Resistance is at $8.50. Near-term support is at $8.25-$8.
You can read my earlier write-up in the Jan. 26 Pre-Market Update.
Trades on Hold — other 2015 Portfolio Open positions (1): 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.
Garmin (GRMN) February 30 puts — Earnings are due to be released on Feb. 17, before the market opens — Continue to hold.
Editor and Chief Options Strategist