Dear Momentum Options Subscriber,

Futures were forecasting a weak open throughout the night while I was wrapping up my weekend research, and global markets were in the red. Much of the weakness was due to the drop in the price of oil, as the zombies across the world decided against a production cut in their latest meeting. To make a long story short, the bulls have blown off the negative reaction and the drop in oil prices today to push the market higher.

Today’s action looks strong, and the bulls are looking for a breakout this week. They have a heavy-hitter coming to the plate after today’s closing bell, as International Business Machines (IBM, $152.38, up $0.66) is scheduled to release its latest earnings numbers. IBM could be the wild card that leads the Dow past 18,000 if that level isn’t cleared today.

The stock has made an incredible run following the bounce off of the “double bottom” that formed just below $117.50 in late January and mid-February. A mini trading range has formed between $152.50 and $147.50 since the start of the month, and the stock is holding above a rising uptrend that started last week. A close above the top of this level ahead of earnings would be a bullish sign.

 

The major moving averages are also in a bullish uptrend, and the 50-day moving average is on track to clear the 200-day moving average. This would form a “golden cross,” which would be another bullish signal for the Dow, as IBM is a heavily-weighted component.

There are weekly and monthly options available to trade on IBM, but I will likely avoid an earnings trade this week, as the premiums are expensive.

Bullish traders could target the IBM May 152.50 calls (IBM160520C00152500, $4.00, up $0.15) as they are active today. At current levels, these slightly out-the-money call options would easily double if shares make a run past $160 this week, or technically $160.50, by late May. If IBM is at $160.50, these options would be $8 in the money.

Bearish traders could target the IBM May 152.50 puts (IBM160520P00152500, $5.00, down $0.10) for a drop below $150 and possible test to $140. These “in-the-money” put options would also double if shares fall below $142.50, technically, by the closing bell on May 20. These options would be at least $10 in the money if IBM shares are below $142.50.

These options are pricing in a possible 7%-8% stock move, and they would represent a “straddle” option trade if purchased together.

Analysts are expecting the company to earn $2.09 for the recently-ended quarter on revenue of $18.28 billion. The company has topped estimates over the past four quarters by $0.03, $0.04, $0.06 and $0.11, respectively. However, revenue has been shaky over the same time period and has previously fallen short of forecasts.

Perhaps this is the quarter that, with all of the share-buybacks and a higher revenue number, will lead to a breakout and additional fresh highs. The stock came into the year at $137.62, so the gains aren’t as impressive off of the double-bottom lows set earlier this year. However, I’m more bullish than bearish on IBM based on the chart and, possibly, better fundamentals going forward.

Looking ahead to tomorrow’s open, Goldman Sachs (GS, $158.33, down $0.19) will be announcing its latest numbers, which could keep the financial sector in an uptrend. Shares are battling a sloping 100-day moving average, but the 50-day moving average is curling slightly higher.

I will talk more about the financial stocks in the coming days, but IBM and GS would make for a good opening “1-2 punch” to start the week. We may have to watch for a late-day fade, as analysts and the market will want to see the results from these companies before possibly chasing momentum.

The Dow is currently gaining 68 points to 17,965, while the S&P 500 is adding 8 points to 2,089. The Nasdaq is higher by 8 points to 4,946, and the Russell 2000 is up 3 points to 1,134.

I’m coming to press a little early because I’m extremely busy researching New Trades. For now, I have updated our current trades below, so let’s go check the action. Stay locked and loaded into the closing bell in case I take additional action.

Momentum Options Play List

Closed Momentum Options Trades for 2016: 39-7 (85%). 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 11:50 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.

 

Halozyme Therapeutics (HALO, $12.08, up $0.11)

HALO May 13 calls (HALO160520C00013000, $0.90, flat)

Entry Price: $0.60 (4/13/2016)

Exit Target: $1.20-$1.80

Return: 50%

Stop Target: $0.65 (Stop Limit)

Action: Shares have traded to a high of $12.17 today. Continued closes above $12 would be bullish for a run at $12.50-$13 over the near term. Rising support is at $11.75-$11.50 and the 100-day moving average.

You can read my extended write-up on HALO in the April 15 Mid-Market Update.

 

Energous (WATT, $11.21, up $0.44)

WATT May 12.50 calls (WATT160520C00012500, $0.80, up $0.05)

Entry Price: $0.50 (4/13/2016)

Exit Target: $1.00

Return: 60%

Stop Target: $0.60 (Stop Limit)

Action: Resistance is at $11.25-$11.50. The 52-week high is at $11.44. Support is at $10.50-$10.

You can read my original write-up in the March 16 Pre-Market Update and a more extended review in the March 17 Mid-Market Update.

 

Nucor (NUE, $49.71, up $0.20)

NUE May 52.50 calls (NUE160520C00052500, $0.50, up $0.01)

Entry Price: $0.43 (4/13/2016)

Exit Target: $0.90

Return: 16%

Stop Target: None

Action: Today’s high has tapped $49.94. Short-term resistance is at $50, and the 52-week high is at $50.70. Support is at $48-$47.50.

 

Inovio Pharmaceuticals (INO, $9.56, up $0.07)

INO May 10 calls (INO160520C00010000, $0.66, flat)

Entry Price: $0.60 (4/13/2016)

Exit Target: $1.20

Return: 10%

Stop Target: None

Action: Short-term resistance is at $9.50-$9.75. Support is at $9-$8.75.

You can read my extended write-up on INO in the April 4 Pre-Market Update.

 

Wal-Mart Stores (WMT, $69.36, up $0.30)

WMT May 65 puts (WMT160520P00065000, $0.38, down $0.10)

Entry Price: $0.73 (4/12/2016)

Exit Target: $1.50

Return: -48%

Stop Target: None

Action: Resistance is at $69.50-$70. Support is at $68-$67.50.

 

Oracle (ORCL, $41.18, up $0.16)

ORCL May 42 calls (ORCL160520C00042000, $0.42, up $0.15)

Entry Price: $0.55 (3/29/2016)

Exit Target: $1.10

Return: -24%

Stop Target: None

Action: Support is at $41, followed by $40.75-$40.50. Resistance is at $42.50-$43.

I still like this trade going forward as long as $40 holds. A move below $39.50 would be a clear signal to exit.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options