Dear Momentum Options Subscriber,

The retail sector could be volatile this week, as a number of companies in the space will be reporting their numbers to Wall Street.

Companies expected to announce earnings after today’s close include Dollar Tree (DLTR) and Home Depot (HD). Macy’s (M) reported their quarterly results ahead of this morning’s open.

Iconix Brand Group (ICON), L Brands (LB), TJX Companies (TJX) and Vipshop Holdings (VIPS) are estimated to confess their numbers on Wednesday.

Thursday’s action includes results from Best Buy (BBY), Gap (GPS), Kohl’s (KSS) and Wayfair (W).

Finally, Foot Locker (FL) and JC Penney (JCP) will wrap up the week ahead of Friday’s open with their quarterly earnings.

One of the easiest ways to track the sector is by following the SPDR S&P Retail ETF (XRT, $42.29 up $0.23).

The sector made a solid move above its 50-day moving average on Monday and looks poised to make a near-term run towards $43-$45 and the 100-day moving average on continued strength. Support is at $41.50-$41. However, a close below $40-$39.50 would negate the bullish setup.

Options are available to trade on XRT, and the XRT March 44 calls (XRT160318C00044000, $0.33, up $0.05) were active yesterday on the bullish breakout.

There are a few possible trades that look tempting for the aforementioned companies that will be reporting later in the week. Although I have been bearish on the sector for months and we have done well using put options this year on retail names, it is hard to deny the price action. However, any bullish opportunities will need to show a healthy chart for me to possibly go long the sector or a certain stock.

Turning to the market, the Dow is down 176 points to 16,444, while the S&P 500 is lower by 20 points to 1,924. The Nasdaq is falling 53 points to 4,516, and the Russell 2000 is off 5 points to 1,016.

I have updated our current positions below, and there is a possibility I could add another New Trade ahead of today’s closing bell. Stay close to your email inboxes in case I take action.

Momentum Options Play List

Closed Momentum Options Trades for 2016: 20-3 (87%). 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 2:20 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.

 

Oracle (ORCL, $36.58, down $0.53)

ORCL April 40 calls (ORCL160415C00040000, $0.24, down $0.10)

Entry Price: $0.40 (2/22/2016)

Exit Target: $0.80

Return: -40%

Stop Target: None

Action: Support is at $36.50. Resistance is at $37.50-$38.

You can read my detailed write-up in this morning’s Pre-Market Update.

 

Bank of America (BAC, $12.21, down $0.34)

BAC March 13 calls (BAC160318C00013000, $0.14, down $0.08)

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

Exit Target: $0.80

Return: -65%

Stop Target: None

 

BAC April 14 calls (BAC160415C00014000, $0.12, down $0.03)

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

Exit Target: $0.60

Return: -60%

Stop Target: None

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

 

Rambus (RMBS, $12.65, up $0.06)

RMBS March 13 calls (RMBS160318C00013000, $0.25, flat)

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

Exit Target: $0.70

Return: -29%

Stop Target: None

Action: Resistance is at $12.50-$12.75 and the 200-day moving average. Support is at $12.25-$12.

 

Trades on Hold — other 2016 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.

Opko Health (OPK) March 7 puts (OPK160318P00007000) — Earnings are due to be released next week. Continue to hold the second half of the position.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options