Dear Momentum Options Subscriber,
The Ides of March was a “simple” way to say March 15th back in the day, and the anniversary of this day and how it relates to the stock market is an interesting subject. One of Shakespeare’s plays was called The Tragedy of Julius Caesar, in which Caesar is warned to “beware the ides of March.” Of course, along with the Ides of March come prophecies of doom on the famous day Caesar was assassinated.
I’m not sure which side of the Roman calendar the bulls or bears are on, but both seem nervous, as their short-term fate could be decided this week. Unlike Caesar, however, the bulls and bears always come back, and it’s our job to play the short- and longer-term “deaths.”
The Dow advanced 22 points on Tuesday, or 0.1%, to finish at 17,251. The blue-chips were once again weak at the open, with the bears pushing support at 17,200-17,000 following a low of 17,120. They struggled for the rest of the session to regain positive territory, but the index went out near its session high. Resistance is at 17,350-17,400, with a shot at 17,600 if those levels are cleared.
The S&P 500 gave back 3 points, or 0.2%, to end at 2,015. The index traded in negative territory throughout the day, with the bears pushing a low of 2,005. Support at 2,000 held on the pullback, but there is risk to 1,990-1,975 on a move below this level. Resistance is at 2,025-2,050.
The Nasdaq fell 21 points, or 0.5%, to close at 4,728. Tech also stayed in the red the entire session, with the bottom touching 4,712. Lower support at 4,725-4,700 held, but there could be trouble to 4,650 on a breach below the latter. Resistance remains at 4,750-4,775.
The Russell 2000 sank 17 points, or 1.6%, to settle at 1,066. The small-caps stumbled to a low of 1,065 intraday, and the close below support at 1,075-1,070 was slightly bearish. There is help at 1,060-1,050 if 1,065 cracks. Resistance is at 1,075-1,080.
The S&P 500 Volatility Index ($VIX, 16.84, down 0.08) stayed elevated throughout the session, with the high checking in at 17.85. Resistance at 17.50 continues to get stretched, but it looks like it wants to hold. If not, a test to 20 could still be in play. Support remains at 16.50-15.
From desk to press, futures look like this: Dow (-7); S&P 500 (-1.5); Nasdaq 100 (-1); Russell (-2.5).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 29-4 (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.
Mylan (MYL, $45.92, down $1.95)
MYL April 45 puts (MYL160415P00045000, $1.70, up $0.81)
Entry Price: $1.10 (3/10/2016)
Exit Target: $2.20
Stop Target: $1.25 (Stop Limit)
Action: Set a Stop Limit at $1.25 to protect profits.
Support is at $45 following yesterday’s close below $46.50 and tumble to $45.34. Resistance is at $46-$46.50, followed by $47.50.
You can read my original write-up in the March 11 Pre-Market Update.
Energous (WATT, $8.00, up $0.09)
WATT May 10 calls (WATT160520C00010000, $1.11, up $0.39)
Entry Price: $0.80 (3/15/2016)
Exit Target: $1.60-$2.40
Stop Target: None
Action: Shares held $8 into Tuesday’s close after reaching a peak of $8.50 intraday. Resistance is at $8.50-$9 on continued momentum. Short-term support is at $7.75-$7.50.
Apple (AAPL) does a lot of deals with companies that are hard to track. When it partners with a company, it’s for good reason. I mentioned that I would be working on a more detailed write-up for WATT and, to a degree, I still am. However, the main point is that Apple may be partnering with the company because it loves its technology, WattUp.
With Apple expected to officially announce the iPhone 7 this month or next, WattUp is expected to be an integral component that will allow the device to be recharged wirelessly from distances of up to 15 feet.
The 52-week high for the stock is at $11.18, and I hope this level comes into play over the next 2 months. I’m still researching the company’s earnings reports and hope to have a synopsis for you in today’s Mid-Market Update.
American Express (AXP, $59.23, down $0.34)
AXP April 62.50 calls (AXP160415C00062500, $0.40, down $0.20)
Entry Price: $0.60 (3/11/2016)
Exit Target: $1.20
Stop Target: None
Action: Support is at $58.50-$58 and the 50-day moving average. Near-term resistance is at $60-$62.50.
You can read my original write-up and view a chart in the March 14 Pre-Market Update.
Intel (INTC, $31.65, up $0.22)
INTC April 29 puts (INTC160415P00029000, $0.26, flat)
Entry Price: $0.38 (3/7/2016)
Exit Target: $0.80
Stop Target: None
Action: Resistance is at $32 and the 100-day moving average. Support is at $31.50-$31.25.
You can view a chart for INTC and read my write-up in the March 7 New Trade Alert.
Q: How should we handle a trade like WATT? This was obviously an extremely fast-moving option. If I am unable to enter it below your Limit Order price, is there a recommended price variance of, say, 5% that you recommend in order to get filled on such an order? — B.G.
A: I talked about entering trades beyond my Limit Orders last week, and the main thing I mentioned was that it would be up to you. At some point, you don’t want to chase a trade just to be in it, but I have given you the parameters to add a fresh position on a continued breakout.
I do target 100% returns for all of my trades, so it’s best for you to determine if you want to take on the extra risk to reach what may be a lesser return. If you do, I suggest that you always follow the parameters of the trade, especially if a Stop Limit is recommended or we exit a trade entirely, regardless of what price you got in.
I recognize that some of my trades can be fast-moving, so I’m so glad that you wrote in, especially if you are a new subscriber. WATT stock seems to be trading in tandem with AAPL, which appears to have made a nice semi-bullish breakout.
I also profiled a possible LEAP option trade on this name as a way to show how to play the longer-term action or for traders that may have missed the morning email right after the open. I officially recommended the WATT May 10 calls yesterday, but I’m also watching the WATT August 12.50 calls (WATT160819C00012500, $1.00, up $0.20) if shares clear $8.50-$8.75.
The aforementioned options could be used to piggyback our current trade, but, at this time, I like the action in our May calls. However, stay locked and loaded in case I take additional action.
Q: The S&P 500 failed to clear the 200-day moving average again on Tuesday. Do you still think the current rally has legs? — J.H.
A: The market has traded gingerly ahead of today’s expected Federal Open Market Committee (FOMC) announcement. I mentioned that this might be the case, and a tight trading range has been developing. Volume has also been light this week as traders wait for clues on which way interest rates could swing in the coming months and years.
The up-days this week in the Dow have been bullish signs, so I’m still hopeful that higher highs are in play. The action in the VIX has also been encouraging, and tech and the small-caps are holding fresh support levels.
A rising candlestick also appears to be in play on yesterday’s chart of the S&P, and this is usually a bullish development. The jitterbug moves around the 200-day moving average still look concerning, but other market factors are in play as well. More importantly, longer-term resistance levels might pose a threat, but we should get better clues about whether higher highs will come into play today.
Editor and Chief Options Strategist