Dear Momentum Options Subscriber,

The bulls made another strong showing on Wednesday as the market chugged higher for the third-straight session. Strength was displayed throughout the day, and the bears stayed in hibernation while volatility continued to relax. The stair-stepping to the upside looks good, but I always warn that the elevator drops are what we really have to watch out for.

The Dow climbed 257 points, or 1.6%, to close at 16,453. The blue-chips opened above 16,200 at 16,217. I mentioned that a move above this level would get 16,350-16,400 in play. This area is now acting as short-term support following yesterday’s run to 16,486. Fresh resistance is at 16,600, followed by 16,800.

The S&P 500 zoomed 31 points, or 1.7%, to end at 1,926. The index made a steady push past resistance at 1,925 after opening just under the 1,900 level at 1,898. The bulls pushed a high of 1,930, and additional resistance is now at 1,940-1,950. Support will try to hold at 1,910-1,900 on a pullback.

The Nasdaq soared 98 points, or 2.2%, to settle at 4,534. Tech cleared the 4,500 level about an hour into trading and reached an intraday peak of 4,540. The next layers of resistance are at 4,550-4,600. Support has moved up to 4,525-4,500.

The Russell 2000 rocketed higher by 15 points, or 1.5%, to finish at 1,011. The small-caps easily cleared the 1,000 level shortly after the open and pushed an intraday high of 1,016. I mentioned that a move above 1,000 should get 1,010-1,020 on the radar. Near-term resistance is now at 1,020-1,025, and a close above the latter would be another bullish signal. Support will try to hold at 1,000-995 on a pullback.

The S&P 500 Volatility Index ($VIX, 22.31, down 1.80) dropped 7% and traded in negative territory throughout Wednesday’s session. The low touched 21.83, and the close below 23.50-22.50 was a very bullish development. A close below 20 ahead of the weekend would be a beautiful bonus for the bulls. Resistance is at 23.50-25.

I have a number of Trade Updates listed below, including several Stop Limits that will help to protect our profits. Please pay close attention to the details and make the adjustments accordingly.

I could also have a New Trade for the portfolio this morning, so stay locked and loaded in case I take action. However, futures might be erratic ahead of the open, as the jobless claims report is due to be released at 8:30 a.m. EST, so I want to see how the dust settles before taking any new positions.

From desk to press, futures look like this: Dow (+49); S&P 500 (+5); Nasdaq 100 (+17); Russell (+3).

Momentum Options Play List

Closed Momentum Options Trades for 2016: 17-3 (85%). 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.

 

Microsoft (MSFT, $52.42, up $1.33)

MSFT March 52.50 calls (MSFT160318C00052500, $1.56, up $0.49)

Entry Price: $1.15 (2/17/2016)

Exit Target: $2.40

Return: 36%

Stop Target: $1.25 (Stop Limit)

Action: Set a Stop Limit at $1.25 to protect profits.

Shares traded to a high of $52.77 yesterday, and the options reached a peak of $1.75. Resistance is at $52.50-$53 and the 200-day moving average. A move above $53 will likely get $55-$56 in play. Support is at $50.50-$50.

 

Emerson Electric (EMR, $47.76, up $1.14)

EMR March 49 calls (EMR160318C00049000, $0.86, up $0.26)

Entry Price: $0.60 (2/16/2016)

Exit Target: $1.20 (closed first half at $0.90 on 2/17/16)

Return: 47%

Stop Target: $0.70 (Stop Limit)

Action: Set a Stop Limit at $0.70 on the second half of the EMR March 49 calls.

Wednesday’s high for EMR tapped $48.21, and the options reached a peak of $1.05.

Resistance is at $48.50-$49 and the 200-day moving average. A move above the latter would be super bullish. Support is at $46 and the 100-day moving average.

 

Intel (INTC, $29.47, up $0.69)

INTC March 30 calls (INTC160318C00030000, $0.62, up $0.21)

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

Exit Target: $0.80 (closed first half at $0.60 on 2/17/16)

Return: 52%

Stop Target: $0.50 (Stop Limit)

Action: Set a Stop Limit at $0.50 on the second half of the INTC March 30 calls.

INTC tested a high of $29.62 yesterday, and the options traded up to $0.69.

Short-term resistance is at $29.50-$30. Support is at $28.50-$28.25.

 

Bank of America (BAC, $12.56, up $0.31)

BAC March 13 calls (BAC160318C00013000, $0.34, up $0.04)

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

Exit Target: $0.80

Return: -15%

Stop Target: None

 

BAC April 14 calls (BAC160415C00014000, $0.24, up $0.02)

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

Exit Target: $0.60

Return: -20%

Stop Target: None

Action: Resistance is at $12.50-$12.75. Short-term support is at $12.25-$12.

 

Rambus (RMBS, $12.42, up $0.15)

RMBS March 13 calls (RMBS160318C00013000, $0.22, flat)

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

Exit Target: $0.70

Return: -37%

Stop Target: None

Action: Resistance is at $12.50-$12.75. Support is at $12.25-$12.

 

Opko Health (OPK, $8.78, up $0.79)

OPK March 7 puts (OPK160318P00007000, $0.20, down $0.06)

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

Exit Target: $0.70

Return: -43%

Stop Target: None

Action: Resistance is at $9. Support is at $8. The company reports earnings next week, and I will take a long look at their expected numbers over the weekend.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options