Dear Momentum Options Subscriber,

The bulls rebounded in a big way to push upper resistance and major resistance levels. The two-day rally looks strong and cleared the (blue) downtrend lines I drew in Tuesday’s Pre-Market Update charts, for the most part. The Dow and Nasdaq fell shy of clearing their downtrend lines but came close, while the small-caps led Tuesday’s charge higher.

The Dow jumped 222 points, or 1.4%, to finish at 16,196. The blue-chips made a strong push to short-term resistance at 16,200 following an intraday peak of 16,191. A move above this level would clear the downtrend line from the late December highs and get 16,350-16,400 back on the map. Fresh support is at 16,100-16,000. Another breach of 15,800 would signal another short-term top. The Dow hasn’t posted a three-session winning streak all year so keep your fingers crossed or rub a rabbit’s foot for luck.

The S&P 500 soared 30 points, or 1.7%, to close at 1,895. The index went out near its peak but fell shy of upper resistance at 1,900. The pop above 1,885 and the downtrend line was a positive development. There is backup support at 1,875-1,870 on a breach back below 1,885.

The Nasdaq zoomed 98 points, or 2.3%, to end at 4,435. The tech index opened at 4,397 and just below fresh support now at 4,400. The downtrend line the bulls needed to clear is at 4,450 and should get 4,500 in play, when triggered. The index also went out at its session high, and the close above 4,425 was a bullish signal.

The Russell 2000 advanced 23 points, or 2.5%, to settle at 995. The small-caps traded to a high of 996 ahead of the closing bell with resistance at 1,000 holding. A move above this level should get 1,010-1,020 in the mix. Support has moved up to 985-980 with a close below 975 being a bearish development.

The S&P 500 Volatility Index ($VIX, 24.11, down $1.29) fell 5% but, more importantly, closed below 25. The bulls pushed a low of 23.32 that came on a sharp decline late in the afternoon before holding 24 afterwards. The next levels of support are at 23.50-22.50. There is wiggle room to 27.50 if the bears reclaim 25 but a move back above this level would keep me cautious in trusting the current rebound.

From desk to press, futures look like this: Dow (+122); S&P 500 (+15.75); Nasdaq 100 (+46); Russell 2000 (+8).

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 8 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.
Emerson Electric (EMR, $46.62, up $0.60)

EMR March 49 calls (EMR160318C00049000, $0.60, up $0.10)

Entry Price: $0.60 (2/16/2016)
Exit Target: $1.20
Return: 0%
Stop Target: None

Action: Shares traded to a high of $46.82 to test resistance at $47. A move above this level should get $48-$50 in focus. Support is at $46 and the 100-day moving average with backup help at $45.50 and the 50-day moving average.

sc (30)

 

Intel (INTC, $28.78, up $0.14)

INTC March 30 calls (INTC160318C00030000, $0.41, down $0.03)

Entry Price: $0.40 (2/16/2016)

Exit Target: $0.80

Return: 3%

Stop Target: None

Action: INTC shares peaked at $28.95 on Tuesday and fell just shy of $29 and short-term resistance. I’m expecting a short-term run past $30, if cleared. Support is at $28.50-$28.25.

The 50-day moving average is still in a major downtrend but I believe a run past $30 could come if shares can build a base above $29 this week.

sc (31)

 

Bank of America (BAC, $12.25, up $0.30)

BAC March 13 calls (BAC160318C00013000, $0.30, down $0.02)

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

Exit Target: $0.80

Return: -25%

Stop Target: None

 

BAC April 14 calls (BAC160415C00014000, $0.22, down $0.05)

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

Exit Target: $0.60

Return: -27%

Stop Target: None

Action: Shares traded to a high of $12.39 yesterday but our call options got no love. Resistance is at $12.25-$12.50. Short-term support has moved up to $12-$11.75.

 

Rambus (RMBS, $12.27, up $0.30)

RMBS March 13 calls (RMBS160318C00013000, $0.22, up $0.06)

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

Exit Target: $0.70

Return: -37%

Stop Target: None

Action: Resistance is at $12.50. Support is at $12.25-$12.

You can read my detailed writeup in the Feb. 2 Pre-Market Update.

 

Opko Health (OPK, $7.99, up $0.10)

OPK March 7 puts (OPK160318P00007000, $0.30, down $0.05)

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

Exit Target: $0.70

Return: -14%

Stop Target: None

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

 

Garmin (GRMN, $35.23, up $0.87)

GRMN February 30 puts (GRMN169219P00030000, $0.24, down $0.15))

Entry Price: $0.98 (1/20/2016)

Exit Target: $0.70 (closed half at $0.22 on 2/16/16)

Return: -75%

Stop Target: None

Action: Garmin’s earnings are due out this morning, so I could have a Trade Alert ahead of the open. If the company beats expectations and shares continue to rally, I will close the other half of the trade. If shares tumble below $32 on an earnings miss, I will likely keep the other half of the trade open.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options