Dear Momentum Options Subscriber,
The bulls came out swinging on Super Tuesday in an effort to clear the 50-day moving averages. The surge to higher highs put the bears to bed, temporarily, as March madness officially begins.
The Dow zoomed 348 points, or 2.1%, to finish at 16,865. The blue-chips opened at 16,545 and below prior resistance at 16,600, now support. The late day run to session highs and close above 16,800 and the 50-day moving average was a bullish sign. Additional hurdles remain at 17,000-17,200.
The S&P 500 advanced 46 points, or 2.4%, to settle at 1,978. The index cleared 1,950 and hour into trading and the move had a short-covering effect as the index also went out at its high. The move above 1,970-1,975 opens the door for a run at 1,990-2,000. Support has moved up to 1,960-1,950 and the 50-day moving average.
The Nasdaq climbed 131 points, or 2.9%, to close at 4,689. Tech opened at 4,596 and just below 4,600, a level that will now serve as short-term support. The next layers of resistance are at 4,700-4,750. A move above the latter could lead to a run towards 4,800-4,825 and the 100-day moving average.
The Russell 2000 climbed 20 points, or 2%, to end at 1,054. The small-caps were also a good story following the move above 1,043 and the 50-day moving average. The close above 1,050 was a bonus and opened the door for a possible test to 1,065-1,075. Support is at 1,045-1,035 on a pullback.
The S&P 500 Volatility Index ($VIX, 17.70, down 2.85) sank 14% and the close below its 200-day moving average was a bullish signal. The next layers of support are at 17.50-16.50. The current rally could take the VIX to a low of 15 and where a short-term top could be coming. A close back above 19.50-20 will be early warning signs a possible top is also in.
My trigger finger was a little itchy yesterday as it had been nearly two weeks since we have rang the register on a profitable trade. The good news is the portfolio went 7-1 for February which is always a tricky month to trade.
We also have a number of other profitable trades and I have raised and set Stop Limits for them. As far as OPK, shares closed Tuesday’s session above $9 after trading to a low of $8.58. Let’s go ahead and close the other half of the trade on this morning’s open.
From desk to press, futures look like this: Dow (-38); S&P 500 (-4.7); Nasdaq 100 (-7.5); Russell (-1.4).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 21-3 (88%). 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.
Whole Foods Market (WFM, $32.46, up $1.15)
WFM April 33 calls (WFM160415C00033000, $1.00, up $0.38)
Entry Price: $0.54 (2/26/2016)
Exit Target: $1.10, raise to $1.50
Stop Target: $0.75 cents (Stop Limit)
Action: Raise the Exit Target from $1.10 to $1.50.
Set a Stop Limit at $0.75 cents. We can adjust this higher if shares keep their momentum to protect these juicy profits.
Tuesday’s high reached $32.48. Resistance is at $32.50-$33. Support is at $32-$31.50.
You can read my detailed write-up, in the Feb. 29 Pre-Market Update.
Green Dot (GDOT, $21.14, up $0.48)
June 22.50 calls (GDOT160617C00022500, $1.20, up $0.20)
Entry Price: $0.70 (2/24/2016)
Exit Target: $1.75-$2.10 (Limit Order on half at $1.75)
Stop Target: $0.85 cents, raise to $0.95 cents (Stop Limit)
Action: Raise the Stop Limit from $0.85 cents to $0.95 cents.
Resistance is at $21.50 and the 52-week high of $21.62. A move above this level could lead to a quick run to $22-$24. Support is at $20.50-$20.
Oracle (ORCL, $37.99, up $1.21)
ORCL April 40 calls (ORCL160415C00040000, $0.47, up $0.20)
Entry Price: $0.40 (2/22/2016)
Exit Target: $0.80
Stop Target: None
Action: Resistance is at $38.25 and the 200-day moving average. A move above this level should lead to a run towards $40. Support is at $37-$36.50.
You can read my detailed write-up, in the Feb. 23 Pre-Market Update. Earnings are due out in a few weeks.
Bank of America (BAC, $13.19, up $0.67)
BAC April 14 calls (BAC160415C00014000, $0.28, up $0.13)
Entry Price: $0.30 (2/9/2016)
Exit Target: $0.60
Stop Target: None
Action: Shares traded to a high of $13.21 yesterday. Resistance is at $13.25-$13.50. A move above the latter could lead to a run towards $14-$14.25 and the 50-day moving average. Support is at $13.
Rambus (RMBS, $13.22, up $0.19)
RMBS March 13 calls (RMBS160318C00013000, $0.46, up $0.22)
Entry Price: $0.35 (2/2/2016)
Exit Target: $0.70
Stop Target: $0.38 cents (Stop Limit)
Action: Set a Stop Limit at $0.38 cents.
Resistance is at $13.50. A move above this level should lead to a push towards $13.75-$14. Support is at $12.75-$12.50 and the 200-day moving average.
I could “piggy-back” this trade on continued strength. We are in the March calls and they expire in less than three weeks. I have set a Stop Limit to protect profits but I’m still looking for this trade to return a triple-digit profit.
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) – Close the other half of the position on this morning’s open.
Q: Does it ever make sense to buy one of your picks after it has fallen? For instance, if it was a good buy at $1.00, is it a better buy at half that price? – D.W.
A: This is a great question D.W. but a hard one to answer. I expect all my trades to be winners but when one is struggling, and is down 50%, I usually place the trade on “hold”. This means the chart still looks good, or I’m waiting on a catalyst for the trade, but I wouldn’t suggesting chasing trades on hold.
If a current trade is listed, it is probably okay to get in as I still have a 100% return target from the entry price. However, I could take profits earlier than that based on how long the trade has been open, price action, or time remaining.
Additionally, if a trade is already up, there still might be an opportunity to get into them as well, based on my Exit Targets.
Q: How did you sell OPK at $0.08? My broker, E-Trade, does not accept a $0.08 sell price, only prices in $0.05 or $0.10 increments. – P.L.
A: P.L., hopefully you use Limit Orders when buying and selling options. Some brokerage firms may only trade in nickel increments and why it is important to place Limit Orders when opening and closing trades. If you place a Market Order, they usually fill, or sell, the option rounded to the nearest nickel.
Q: Is today’s (Tuesday’s) rally another short squeeze, or do you think this is the start of another leg higher for the market?
A: I have been predicting higher highs for the market since mid-February and mentioned the current rally could last through mid-March. Yesterday’s strong push past the 50-day moving averages should provide continued momentum for the major indexes.
I’m expecting a possible push towards the 100-day moving averages, and even the 200-day moving averages, on continued strength. However, I often say the bulls like taking the stairs higher while the bears prefer elevator drops lower. For this reason, I’m bullish but still cautious.
The market is in a precarious position with the major moving averages still trending lower. The current counter trend rally has been fun to play, but I mentioned there could be some mid to end of month weakness. The good news is that we will have great clues to remind us when to go short. Otherwise, keep enjoying the ride higher.
Editor and Chief Options Strategist
P.S. Save 60% Today. The sale is officially over, but I’m going to give you another chance to lock in these deep savings. Some of the best trading opportunities are dead ahead, and we’re going to capture plenty of profits. Renew today and you’ll not only save big but also receive the brand new special report: 2016 Roadmap: Top Catalysts for Huge Profits that I wrote with a few of my fellow InvestorPlace advisors. In it, you’ll discover where we think the market is heading and some of the hottest stocks and sectors you should get into. Don’t wait. Renew today and get immediate access to the 2016 Roadmap.