Dear Momentum Options Subscriber,

The bears got their second-straight Monday win yesterday, and they have won four of the past five by keeping the pressure on the bulls. There was a slight rebound off of yesterday’s lows, however, and backup support held despite the fresh 52-week lows in tech and the small-caps.

The Dow fell 178 points, or 1.1%, to finish at 16,027. The blue-chips opened at 16,147, which was below prior support at 16,200. This level is now resistance, followed by 16,350-16,400. The late-day low reached 15,803, but support held at 15,800. There is risk to 15,600 on a move below this level.

The S&P 500 declined 26 points, or 1.4%, to close at 1,853. The index tested backup support at 1,850-1,825 following the intraday move to 1,828. The January low reached 1,812. The close above 1,850 was slightly bullish, but resistance is at 1,870-1,875, which had served as prior support.

The Nasdaq gave back 79 points, or 1.8%, to end at 4,283. Tech traded to a fresh 52-week low of 4,212, and the close below the August low of 4,292 was a bearish development. Fresh support is at 4,250-4,200. Near-term resistance is at 4,300-4,325.

The Russell 2000 dropped 16 points, or 1.7%, to settle at 969. The small-caps breached their Jan. 20 low of 958 following the slippage to 955 ahead of the closing bell. A close below 950 could lead to panic-selling to 925-900. Short-term resistance is at 975-980, followed by 995-1,000.

The S&P 500 Volatility Index ($VIX, 26.00, up 2.62) jumped 11% after trading to a high of 27.72. The bulls held 27.50, but there is risk to 30-35 on a close above this level. Support is at 25, followed by 23.50-22.50.

My watch list is exploding with both bullish and bearish trades, and I could have a New Trade ahead of today’s Mid-Market Update, so stay close to your email inboxes.

From desk to press, futures look like this: Dow (-136); S&P 500 (-16); Nasdaq 100 (-31); Russell (-12).

Momentum Options Play List

Closed Momentum Options Trades for 2016: 16-2 (89%). 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.

 

Wal-Mart Stores (WMT, $66.90, down $0.10)

WMT March 60 puts (WMT160318P00060000, $0.61, flat)

Entry Price: $0.65 (2/4/2016)

Exit Target: $1.00-$1.30 (Limit Order on first half at $1.00)

Return: -6%

Stop Target: None

Action: Shares traded to a low of $65.16 yesterday, with the options reaching a peak of $0.97. We have a Limit Order in place to close the first half of the trade at $1.00.

Support is at $66.50 and the 200-day moving average, followed by $65. Resistance is at $68.

 

Rambus (RMBS, $11.94, down $0.06)

RMBS March 13 calls (RMBS160318C00013000, $0.25, down $0.05)

Entry Price: $0.35 (2/2/2016)

Exit Target: $0.70

Return: -29%

Stop Target: None

Action: Support is at $11.75, followed by $11.65-$11.50 and the 50- and 100-day moving averages. Resistance is at $12-$12.25.

You can read my extended write-up in the Feb. 2 Pre-Market Update.

 

Opko Health (OPK, $7.70, down $0.56)

OPK March 7 puts (OPK160318P00007000, $0.41, up $0.16)

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

Exit Target: $0.70

Return: 17%

Stop Target: None

Action: Monday’s low reached $7.57. Support is at $7.50. Resistance is at $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 — Continue to hold.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options