Dear Momentum Options Subscriber,

Shares of Shake Shack (SHAK, $41.35, down $0.64) could be volatile in after-hours trading today and on Tuesday morning, as the company is scheduled to announce its latest earnings figures after the close. Wall Street is looking for a profit of $0.07 a share on revenue north of $50 million.


The high estimate is pegged at $0.09 a share of sales of $51.7 million. The low estimate has the company earning a nickel on revenue of $48.7 million. Shake Shack has topped estimates by $0.05, $0.06, $0.07 and $0.02 over the past four quarters, respectively.

Shares have been in steady uptrend since bottoming at $30 in January and $32 in February. Last week’s close above the 100-day moving average signaled continued strength. A possible run towards the 200-day moving average could be in the mix if SHAK reports better-than-expected numbers and a rosy outlook.

The 52-week high is at $96.75, and shares are down nearly 60% from that peak. Most of the problem was the pie-in-the-sky valuation placed on the up-and-coming burger chain. While shares still seem “expensive” at current levels, I do like the stock over the longer term, and the chart looks bullish for the short term.

The options are quite pricey to trade, and there are both weekly and monthly options available. The SHAK March 41 calls (SHAK160318C00041000, $2.75, down $0.95) and the SHAK March 41 puts (SHAK160318P00041000, $2.60, up $0.50), are going for a combined cost of $5.35, and they are pricing in a 10%-15% move in the stock. Purchasing both options together would create a straddle option trade to play a move to either the upside or downside.

Both of these options expire on March 18, and shares would need to be above $46.35 or below $35.65, technically, by that date just for the trade to break even.

While I’m more bullish than bearish on Shake Shack and their burgers, the options are priced to perfection, making this a risky play. Therefore, I will be sitting on the sidelines ahead of tonight’s announcement.

Turning our focus to the broader market, the Dow is up 53 points to 17,060, while the S&P 500 is higher by 2 points to 2,002. The Nasdaq is advancing 5 points to 4,722, and the Russell 2000 is jumping 11 points to 1,093.

I have a number of trade updates listed below, so let’s get to it. I could also have another New Trade ahead of the closing bell, so stay locked and loaded in case I take action.

Momentum Options Play List

Closed Momentum Options Trades for 2016: 24-4 (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 12:10 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.


Rambus (RMBS, $12.94, down $0.33)

RMBS April 13 calls (RMBS160415C00013000, $0.40, down $0.40)

Entry Price: $0.40 (3/7/2016)

Exit Target: $0.80

Return: 0%

Stop Target: None

Action: We got a 50% discount on these options with today’s drop in the stock to $12.61. Support at $12.75-$12.60 and the 200-day moving average held on the pullback. There is risk to $12 and the 50-day moving average on a move below $12.50.

I would like to see shares hold $13 today and upper resistance at $13.25-$13.50 come into play later this week.


Intel (INTC, $31.08, up $0.38)

INTC April 29 puts INTC160415P00029000, $0.35, down $0.09)

Entry Price: $0.38 (3/7/2016)

Exit Target: $0.80

Return: -8%

Stop Target: None

Action: Short-term resistance is at $31-$31.50. A close above $32 would reverse the bearish setup over the short term. Support is at $30.50-$30. A close below $30 should get $29-$28 in play.


CVS Health (CVS, $98.90, down $0.38)

CVS April 105 calls (CVS160415C00105000, $0.33, down $0.10)

Entry Price: $0.45 (3/4/2016)

Exit Target: $0.90

Return: -27%

Stop Target: None

Action: Support is at $98, followed by $96.50 and the 100-day moving average. Resistance is at $100 and the 200-day moving average.

You can view a detailed chart for CVS and read my write-up in this morning’s Pre-Market Update.


Hertz Global Holdings (HTZ, $10.75, up $0.28)

HTZ April 11 calls (HTZ160415C00011000, $0.82, up $0.17)

Entry Price: $0.55 (2/26/2016)

Exit Target: $1.10

Return: 49%

Stop Target: None

Action: Resistance is at $10.75-$11. I mentioned that a run to $12-$13 could come on continued short-covering. The 100-day moving average is at $13.50, while support is at $10-$10.25.

You can read my detailed write-up in the March 3 Mid-Market Update.


Green Dot (GDOT, $22.21, up $0.37)

GDOT June 22.50 calls (GDOT160617C00022500, $1.55, up $0.01)

Entry Price: $0.70 (2/24/2016)

Exit Target: $2.10 (Limit Order on first half at $2.10)

Return: 121%

Stop Target: $1.20 (Stop Limit)

Action: I mentioned that a close above $21.75 could lead to a quick run to $22-$24. Support is at $21.50-$21.


Oracle (ORCL, $38.13, up $0.24)

ORCL April 40 calls (ORCL160415C00040000, $0.47, up $0.06)

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

Exit Target: $0.80

Return: 18%

Stop Target: None

Action: Resistance is at $38.25 and the 200-day moving average. A close above this level should lead to a trip to the low $40s. Support is at $37.50-$37 and the 100-day moving average.

You can read my detailed write-up in the Feb. 23 Pre-Market Update. Earnings are due to be released on March 15, and I will cover their numbers in the coming days.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options