Dear Momentum Stocks Weekly Subscriber,

The bears got aggressive into Wednesday’s close, as the major indices tested fresh lows for the week. Near-term support was violated, but backup help is waiting in the wings. The bulls still have a shot at winning the week, however, as the trading day ahead of Good Friday has been extremely bullish in recent years.

The Dow fell nearly 80 points, or 0.5%, to close at 17,502. The blue-chips traded in negative territory throughout the session, with the late-day low reaching 17,486. Support is at 17,400-17,350, and a close below the latter would be a bearish development. Resistance is at 17,600, followed by 17,800.

The S&P 500 dropped 13 points, or 0.6%, to settle at 2,036. The index opened in negative territory at 2,048 and failed to challenge resistance at 2,050. The close below 2,040 and dip to 2,034 opened the door for a continued backtest to 2,025-2,020. A close below the latter could lead to a retest of the 2,000 level.

The Nasdaq declined 52 points, or 1.1%, to finish at 4,768. Tech tried to crack positive territory on the open, but it failed and lost the 4,800 level within the first 30 minutes of trading. This level is now resistance. The move and close below support at 4,775 opened risk to 4,750-4,725. A close below 4,700 would likely signal a short-term market top.

The Russell 2000 tanked 21 points, or 2%, to end at 1,075. The small-caps led Wednesday’s pullback and got progressively weaker throughout the session. I mentioned that a move below 1,090 could lead to a backtest to 1,080-1,075, and that came quickly. There is wiggle room to 1,070-1,065 on today’s open, and a close below 1,060 will also be a good clue that next week could be rocky.

The S&P 500 Volatility Index ($VIX, 14.94, up 0.77) stayed elevated but controlled within a tight range throughout the day. The bears did claw their way above 15 to 15.03 for the first time in four sessions. However, the bulls held this level into the close for the sixth-straight trading day. I have said that we don’t need to get aggressively “short” until 17.50-20 comes into play. We also can’t get too aggressive with bullish trades until the bulls clear and hold 13.50-12.50.

I have three Trade Alerts listed below that I want you to be aware of. The first is for our position in Psychemedics (PMD), which triggered its Stop Limit during yesterday’s session. The other two Trade Alerts are for the two positions that are currently listed under the “Trades on Hold” section — Zynga (ZNGA) and Relypsa (RLYP) — so please be sure to check those out this morning.

From desk to press, futures look like this: Dow (-113); S&P 500 (-14); Nasdaq 100 (-27); Russell (-8).

Chapter 1. Momentum Stocks Weekly Play List

All prices given in this update are current as of Mar. 23, 2016. I hereby disclose that I will be participating in the following trade(s).

The Momentum Stocks Weekly Closed Trade Track Record is 1-5, for a 17% win rate for 2016 (145-30, or 83% win rate, overall since the start of 2011)

View the entire list of open and closed trades by clicking here.

 

Psychemedics (PMD, $13.17, down $0.45)

Original Entry Price: $15.67 (5/5/2015)

Lowered Price from dividends: $15.07

Exit Target: $15.25 (Limit Order)

Return: -10%

Stop Target: $13.50 (Stop Limit)

Dividend Yield: 4.2%

Action: The Stop Limit at $13.50 was triggered on Wednesday’s backtest towards $13, and we are now out of the position.

Although I still like the company for the longer term (and the dividend payment), I wanted to free up some capital and cut losses while moving on to faster-moving trades.

 

Hansen Medical (HNSN, $2.59, down $0.02)

Original Entry Price: $4.50 (2/2/2016)

Lowered Price from Selling Options: N/A

Exit Target: $6.00

Return: -42%

Stop Target: $2.00

Action: Support is at $2.50-$2.35 and the 50-day moving average. Resistance is at $2.75-$2.80 and the 100-day moving average.

 

Lattice Semiconductor (LSCC, $6.21, up $0.02)

Original Entry Price: $6.77 (12/29/2015)

Lowered Price from Selling Options: N/A

Exit Target: $9.00

Return: -8%

Stop Target: $3.50 (Stop Limit)

Action: Resistance is at $6.50-$6.75. Support is at $6, followed by $5.50-$5.25 and the 50- and 100-day moving averages.

 

Planet Fitness (PLNT, $15.42, down $0.13)

Entry Price: $17.85 (9/16/2015)

Lowered Price from Selling Options: N/A

Exit Target: $22.00

Return: -14%

Stop Target: $12.00

Action: Resistance is at $15.75-$16. Support is at $15, followed by $14.50 and the 50-day moving average.

You can read my write-up on PLNT in the Nov. 16 Issue.

 

Rave Restaurant Group (RAVE, $5.15, down $0.15)

Original Entry Price (First Position): $13.92 (7/9/2015)

Lowered Price from Selling Options: N/A

Exit Target: $20.00

Return: -63%

Stop Target: $4.00

 

Original Entry Price (Second Position): $11.70 (8/17/2015)

Lowered Price from Selling Options: N/A

Exit Target: $13.00+

Return: -56%

Stop Target: $4.00

Action: Support is at $5. Resistance is at $5.25-$5.50.

 

Huttig Building Products (HBP, $3.75, up $0.02)

Original Entry Price: $4.00 (8/13/2014)

Lowered Price from Selling Options: N/A

Exit Target: $4.15

Return: -6%

Stop Target: $2.00 (Stop Limit)

Action: Resistance is at $3.80-$3.90, and a move above the latter could lead to $4.00 or higher. Support is at $3.50-$3.40 and the 200-day moving average.

 

Trades on Hold (2): These are trades that are still open in the portfolio but are down from the original recommended price. These trades are on “hold” and are not a buy until I bring back coverage of the stock. This means I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly when a trade closes. I do not recommend adding to these positions or opening new positions.

Zynga (ZNGA, March 2014) — Close the trade at current levels this morning.

Relypsa (RLYP, January 2015) — Close the trade at current levels this morning.

Trade on!

Signed

Rick Rouse
Editor
Momentum Stocks Weekly