Dear Momentum Options Subscriber,

The market traded in a tight range on Thursday, but the bears controlled the majority of the action and snapped the bulls’ three-session win streak. The VIX stayed relaxed on the pullback, but volatility could be in play today, as regular February options are set to expire.

The Dow fell 40 points, or 0.3%, to end at 16,413. The blue-chips traded up to 16,511 on the open, with resistance at 16,600 easily holding. The fade to 16,390 afterwards held near-term support at 16,400-16,350. There is risk to 16,200-16,100 on a close below the latter.

The S&P 500 slipped 9 points, or 0.5%, to settle at 1,917. The index tested a high of 1,930 at the start of trading, but it struggled with short-term resistance at 1,940-1,950. The bears pushed an intraday low of 1,915, with support at 1,910-1,900 sticking. A close below the latter would be a bearish development.

The Nasdaq gave back 46 points, or 1%, to finish at 4,487. Tech kissed a high of 4,548, but it missed clearing resistance at 4,550. The 66-point pullback to 4,482 tested shaky support at 4,500-4,475. The close back below 4,500 was a bummer, and there is risk to 4,450-4,400 if 4,475 cracks.

The Russell 2000 dropped 6 points, or 0.6%, to close at 1,004. The small-caps made a run to 1,013 to push fresh resistance at 1,010-1,020 before tumbling to a low 1,002. The bulls defended the 1,000 level after clearing it on Wednesday for the first time since Feb. 4. There is backup help at 990, with risk to 975 if the index fails to hold 1,000-990.

The S&P 500 Volatility Index ($VIX, 21.64, down 0.67) traded up to 22.53 in the opening minutes on Thursday before languishing lower throughout the session. Resistance at 22.50-23.50 held tight before the late-day test to 21.29. A move below 20 ahead of the weekend would be a very bullish signal for next week.

I mentioned that today is February option expiration, and the market has traded lower 75% of the time on these days since 2000. With the odds for a win at 25%, any slight gains today would also be beneficial for the bulls.

I have two Profit Alerts for our trades in Microsoft (MSFT) and Intel (INTC), as both stocks made backtests to support ahead of yesterday’s closing bell, so let’s go check the books.

From desk to press, futures look like this: Dow (-86); S&P 500 (-11); Nasdaq 100 (-22); Russell (-6).

Momentum Options Play List

Closed Momentum Options Trades for 2016: 19-3 (86%). 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, $52.19, down $0.23)

MSFT March 52.50 calls (MSFT160318C00052500, $1.40, down $0.21)

Entry Price: $1.15 (2/16/2016)

Exit Target: $2.40

Return: 22%

Stop Target: $1.40 (Stop Limit)

Action: The MSFT March 52.50 calls traded to a low of $1.38 late in the day to trigger our Stop Limit at $1.40, and we are now out of the position.

Thursday’s high reached $52.94 before the pullback to $52.14. I will keep MSFT on my watch list for a possible re-entry point. For now, however, we are on the sidelines.

 

Intel (INTC, $29.42, up $0.05)

INTC March 30 calls (INTC160318C00030000, $0.67, up $0.05)

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

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

Return: 50%

Stop Target: $0.60 (Stop Limit)

Action: The Stop Limit at $0.60 on the second half of the INTC March 30 calls was triggered on the pullback, and we are now out of the position.

Shares held positive territory for much of Thursday’s session before the late-day dip to $29.44.

I will keep INTC on my watch list for a possible re-entry point, but, for now, we are on the sidelines. Making 50% on INTC in two days was a sweet win this week.

 

Emerson Electric (EMR, $48.34, up $0.58)

EMR March 49 calls (EMR160318C00049000, $1.00, up $0.14)

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

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

Return: 58%

Stop Target: $0.90 (Stop Limit)

Action: Shares traded to a high of $48.78 yesterday, with the calls reaching a peak of $1.20.

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.

 

Bank of America (BAC, $12.24, down $0.32)

BAC March 13 calls (BAC160318C00013000, $0.21, down $0.13)

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

Exit Target: $0.80

Return: -48%

Stop Target: None

 

BAC April 14 calls (BAC160415C00014000, $0.17, down $0.07)

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

Exit Target: $0.60

Return: -43%

Stop Target: None

Action: BAC shares were in a steady downtrend yesterday, with the low checking in at $12.10.

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

 

Rambus (RMBS, $12.44, up $0.02)

RMBS March 13 calls (RMBS160318C00013000, $0.23, up $0.01)

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

Exit Target: $0.70

Return: -34%

Stop Target: None

Action: Thursday’s high reached $12.66, but shares failed to hold $12.50. Resistance is at $12.50-$12.75. Support is at $12.25-$12.

 

Opko Health (OPK, $8.73, down $0.05)

OPK March 7 puts (OPK160318P00007000, $0.12, down $0.08)

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

Exit Target: $0.70

Return: -66%

Stop Target: None

Action: Resistance is at $9. Support is at $8.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options