Dear Momentum Options Subscriber,

The Financial Select Sector SPDR ETF (XLF, $20.56, up $0.17) is holding above significant support following another test to the $20 level this week. While near-term support appears to be holding, there is still risk to $18.50 and the late-August low of $18.52 on a close below this level. Near-term resistance is at $21, followed by $21.50.

XLF

I predicted in advance that a “death cross” could form on the chart, which happened in late January, and that lower lows could come into play. I’ve also talked about the weakness in bank stocks, and many of them are now trading below book value. However, this doesn’t make them a screaming buy, as a number of headwinds remain in the sector.

I always say that “cheap” stocks can get cheaper, and I don’t believe that a true bottom has been made in the sector. However, a tradable bottom could be close to forming given today’s rebound.

Much of the bullishness in the sector today can be attributed to Janet Yellen’s somewhat dovish comments regarding monetary policy. She hinted that the Fed is unlikely to raise rates in March, but she also added that she doesn’t anticipate any rate cuts either.

The Dow is currently up 47 points to 16,061, while the S&P 500 is higher by 19 points to 1,871. The Nasdaq is gaining 76 points to 4,344, and the Russell 2000 is climbing 15 points to 979.

I have updated our current trades below, so let’s go check the tape.

Momentum Options Play List

Closed Momentum Options Trades for 2016: 17-2 (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 1:25 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, $12.18, down $0.02)

BAC March 13 calls (BAC160318C00013000, $0.33, down $0.05)

Entry Price: $0.40 (2/9/2016)

Exit Target: $0.80

Return: -18%

Stop Target: None

 

BAC April 14 calls (BAC160415C00014000, $0.25, down $0.04)

Entry Price: $0.30 (2/9/2016)

Exit Target: $0.60

Return: -17%

Stop Target: None

Action: Support is at $12. Short-term resistance is at $12.25-$12.50.

 

Rambus (RMBS, $11.83, up $0.07)

RMBS March 13 calls (RMBS160318C00013000, $0.21, up $0.02)

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

Exit Target: $0.70

Return: -40%

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, $8.08, up $0.32)

OPK March 7 puts (OPK160318P00007000, $0.32, down $0.06)

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

Exit Target: $0.70

Return: -9%

Stop Target: None

Action: Resistance is at $8-$8.25. Support is at $7.50.

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