Dear Momentum Options Subscriber,
The bulls made an opening run towards resistance on Thursday, but they struggled for the rest of the session to get back their lost gains. Volatility made the bears look good, as the opening rally started to fizzle after the first 30 minutes of trading. Despite the choppy action, the current rebound off of the mid-February lows remains intact, providing support holds today, and a possible close back above key resistance levels would look bullish for next week.
The Dow dipped 5 points, or 0.03%, to end at 16,995. The blue-chips tested near-term resistance at 17,100-17,200 following the rush to 17,130 shortly after the opening bell. The intraday breakdown to 16,821 held support at 16,900-16,800, but a close below the latter ahead of the weekend would be a bearish setup for next week.
The S&P 500 gained a fraction of a point, or 0.02%, to finish at 1,989. The index made an opening push past resistance at 2,000 but stalled after reaching a peak of 2,005. There is fluff to 2,025-2,050 on continued closes above this level. Support at 1,975-1,970 held tight following the intraday dip to 1,969, but a close below the latter would be a bearish development.
The Nasdaq dropped a 12-pack, or 0.3%, to settle at 4,662. Tech took out near-term resistance at the 4,700 level following its opening pop to 4,716. The fade to 4,607 afterwards pushed backup support at 4,600. The close above 4,650 was slightly encouraging despite the negative vibe following the opening hoopla.
The Russell 2000 fell 8 points, or 0.8%, to close just below 1,064. The small-caps made a run to 1,079 on the opening pop but failed to clear resistance at 1,080. I have mentioned that a close above this level would be bullish for a run towards 1,100. The move back below 1,070 was slightly bearish, but backup support at 1,060 held. There is risk to 1,050 on a breach below this level.
The S&P 500 Volatility Index ($VIX, 18.05, down 0.29) traded to a low of 17.06 shortly after the open, with major support at 17.50 being breached. This was a major development and an event that went unnoticed by the slick-talking pros. It was also the main clue that keeps me bullish into next week, but the bulls need a close below this level ahead of the weekend. Resistance is at 18.50-19, with wiggle room to 20.
From desk to press, futures look like this: Dow (+124); S&P 500 (+16); Nasdaq 100 (+43); Russell (+8).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 27-4 (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 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.
Mylan (MYL, $47.29, up $0.74)
MYL April 45 puts (MYL160415P00045000, $1.21, down $0.27)
Entry Price: $1.10 (3/10/2016)
Exit Target: $2.20
Stop Target: None
Action: Shares made a run to resistance at $49-$49.25 and the sloping 50-day moving average. I wanted to see this level hold before going “short,” but there is risk to $52-$54 if $50 is cleared and held. Shaky support is at $47-$46.50, with risk to $45-$44 on a close back below the latter.
A “mini” death cross is in the process of forming, with the 50-day moving average on the brink of falling below the 100-day moving average. This is usually a bearish setup that leads to lower lows.
Rambus (RMBS, $13.13, up $0.06)
RMBS April 13 calls (RMBS160415C00013000, $0.59, up $0.07)
Entry Price: $0.40 (3/7/2016)
Exit Target: $0.80
Stop Target: $0.45, raise to $0.50 (Stop Limit)
Action: Raise the Stop Limit from $0.45 to $0.50.
Yesterday’s low on the calls was $0.53. I will continue to raise the “trailing” Stop Limit to be below the day’s low to maximize profits.
Resistance is at $13.25-$13.50. Support is at $12.75-$12.60 and the 200-day moving average if $13 fails to hold.
Intel (INTC, $31.25, up $0.39)
INTC April 29 puts (INTC160415P00029000, $0.33, down $0.06)
Entry Price: $0.38 (3/7/2016)
Exit Target: $0.80
Stop Target: None
Action: Short-term resistance is at $31-$31.50. Support is at $30.50-$30.
You can view a chart for INTC and read my write-up in the March 7 New Trade Alert.
Green Dot (GDOT, $21.91, down $0.01)
GDOT June 22.50 calls (GDOT160617C00022500, $1.50, down $0.20)
Entry Price: $0.70 (2/24/2016)
Exit Target: $2.10 (Limit Order on first half)
Stop Target: $1.40 (Stop Limit)
Action: Support is at $21.75-$21.50. Multi-year resistance is at $22-$24.
Editor and Chief Options Strategist