Dear Momentum Options Subscriber,
The bulls pushed higher highs on Tuesday, but the lag in tech spoiled the session, as most of the overall gains were lost into the closing bell. Volatility was calm until the final hour of trading, with the bears pushing resistance. The mixed action still looked bullish, but, as always, I’m watching the warning signs.
The Dow added 18 points, or 0.1%, to end at 17,938. The blue-chips pushed upper resistance at 18,000 and reached an intraday peak of 18,003. Continued closes above this level should get 18,200 in the mix. Support is at 17,800-17,700 on a move back below 17,900.
The S&P 500 gained 2 points, or 0.1%, to settle at 2,112. The index held positive territory throughout the day, and the bulls tested the 2,119 level. Resistance at 2,120-2,125 held, and a close above the latter will likely lead to 2,140-2,150. Short-term support remains at 2,100-2,090.
The Nasdaq fell 7 points, or 0.1%, to finish at 4,961. Tech struggled with resistance at 4,975-5,000 after tapping 4,979 late in the afternoon. The fade to 4,960 into the closing bell held crucial support at 4,950. Backup help is at 4,925-4,900 if support is breached.
The Russell 2000 advanced 3 points, or 0.3%, to close at 1,179. The small-caps fell a point on the open to 1,175, but near-term support at 1,175-1,170 held. The run to 1,183 fell shy of longer-term resistance at 1,190-1,200.
The S&P 500 Volatility Index ($VIX, 14.05, up 0.40) tested a low of 12.72 shortly after the open, but it failed to clear 12.50 or hold 13.50. The index went out at its high, and resistance at 14.50-15 is now back in play.
From desk to press, futures look like this: Dow (+31); S&P 500 (+4); Nasdaq 100 (+7); Russell (+1).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 46-15 (75%). All trades are dated 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).
Tailored Brands (TLRD, $15.38, up $0.74)
TLRD July 15 calls (TLRD160715C00015000, $1.64, up $0.34)
Entry Price: $1.17 (6/3/2016)
Exit Target: $2.35
Stop Target: None
Action: The close above $15 and the 100-day moving average was bullish. Fresh resistance is at $15.75-$16 and the 50-day moving average. A surge to $17-$18 could come on a good quarterly report. Support is at $15-$14.75, with $14 serving as backup on potentially disappointing earnings.
The company is scheduled to announce its latest results after the close today. Depending how today’s action goes, I could close half of the trade to lock in profits and reduce risk. If I decide to take action, I will send out a Trade Alert.
Inovio Pharmaceuticals (INO, $11.09, down $0.24)
INO July 12 calls (INO160715C00012000, $0.55, down $0.05)
Entry Price: $0.80 (6/1/2016)
Exit Target: $1.60
Stop Target: None
Action: Support is at $11-$10.75. Resistance is at $11.50-$11.75.
PowerShares QQQ ETF (QQQ, $110.18, down $0.28)
QQQ July 112 calls (QQQ160715C00112000, $0.90, down $0.14)
Entry Price: $1.15 (5/31/2016)
Exit Target: $2.30
Stop Target: $0.55 (Stop Limit)
Action: Support is at $108.50-$108 if $110 fails to hold. Resistance is at $111.50-$112.
Q: Are you still looking at Microsoft (MSFT, $52.10, down $0.03) for a new trade this week? — J.M.
A: J.M., as you can see from the chart below, shares are pegged between the 50- and 100-day moving averages. I would like to see a close above $52.50-$53 as a signal to go long. I have the MSFT July 52.50 calls (MSFT160715C00052500, $1.05, down $0.03) and the MSFT July 55 calls (MSFT160715C00055000, $0.24, down $0.01) on my watch list. If I take action, I will send out a New Trade Alert.
Q: With the Nasdaq ending lower today while the other major indices were higher, how do you feel about our QQQ position? Thanks. — C.R.
A: C.R., I was slightly disappointed in tech’s performance yesterday, but these are longer-term options that expire in mid-July. If the QQQs fall below $110, there is a chance that $108 could come into play, which is where I would reevaluate the position.
Q: What catalysts do you see that could take the market to new highs? When do you think that could happen? — M.T.
A: M.T., the rise in the price of oil has been a big help for the transportation sector, which helped briefly nudge the Dow past 18,000 yesterday. I’m not sure how long this correlation will last, but, for now, the market and oil are trading in tandem.
Another factor coming up this month could be the “Brexit” vote, as Britain will decide whether it wants to leave or stay in the European Union. The vote is expected to be held on June 23, and the decision could impact global markets in a good or bad way.
Although it’s still early, I’m also looking forward to second-quarter earnings season, which starts in early July. A surprise interest rate hike by the Fed in June or July could also be a catalyst for higher highs or a backtest to lower support levels.
Editor and Chief Options Strategist