Dear Momentum Options Subscriber,
The bulls weathered Monday’s storm, but their home base at higher highs is being threatened once again. I mentioned that yesterday’s opening hour would be an interesting test for the bulls, and they did not fail to impress.
The bears did their expected part, however, as they pushed lower lows and backup support. It is still too early to call how the rest of the week might play out, especially with the start of the two-day Federal Open Market Committee (FOMC) meeting today, but I will be watching the action intensely as we begin to build out our next batch of trades.
The Dow dropped 132 points, or 0.7%, to settle at 17,732. The blue-chips opened lower before making a run into positive territory to reach a peak of 17,893. Resistance at 17,900-18,000 held before the 162-point backtest to 17,731. The close below 17,800 was bearish, and I mentioned that there would be risk to 17,600 if this level was breached.
The S&P 500 declined 17 points, or 0.8%, to close at 2,079. The index made a run to resistance at 2,100 despite the opening jitters, but it failed to clear this level. The 20-point pullback to 2,078 looked ugly, and the close below 2,080 was a bearish development. Support at 2,075-2,070 stuck like Chuck, but I mentioned that a red flag would be raised on a move below the latter.
The Nasdaq lost 46 points, or 0.9%, to finish at 4,848. However, tech did manage to stick its head above water after coming up for air at 4,894. The bulls’ attempt to clear short-term resistance at 4,900 looked good on paper, but the failed test likely points to a little more weakness into Wednesday afternoon. Remember that last sentence, as we need to be careful about opening new trades over the next 24-48 hours.
The Russell 2000 fell an ugly 13 points, or 1.1%, to end at 1,150. The small-caps kissed 1,165 and tried to hold resistance at 1,170-1,175, but my hopes for the index were dashed. The close right at 1,150 nailed my lower targets of 1,160-1,150 that I have been highlighting since the middle of last week. However, the bears did “stretch” this level by a point after reaching 1,149.
The S&P 500 Volatility Index ($VIX, 20.97, up 3.94) surged 23% to a high of 21.01 before closing at 20.97. The steady climb upwards and close above 20 was a bearish development. This opens up risk to 22-22.50 today, which are levels I expect to hold into Wednesday afternoon. I’m expecting some type of rebound today to keep Wall Street confused, but, if a rally fails to materialize, backup support for the major indices and the aforementioned higher VIX targets will likely come into play.
From desk to press, futures look like this: Dow (-39); S&P 500 (-6); Nasdaq 100 (-13); Russell (-4).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 48-16 (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).
Energous (WATT, $12.85, down $0.80)
WATT July 15 calls (WATT160715C00015000, $0.74, down $0.46)
Entry Price: $0.80 (6/8/2016)
Exit Target: $2.10 (Limit Order on first half)
Stop Target: $1.10 (Stop Limit)
Action: The Stop Limit at $1.10 was triggered on yesterday’s pullback into the close, and we are now out of the position.
The calls traded to a high of $1.65 before falling to a low of $0.65.
I had a feeling that shares might peak into Apple’s WWDC conference yesterday, which is why I wanted to try and lock in profits at $2.10 on the first half of the trade. The good news is that we made a profit by having our Stop Limit in place. The better news is the Wall Street “elite” still have no clue about WATT.
Shares traded to another fresh 52-week high of $14.78 on Monday. There was no news from Apple concerning WATT. However, the fact that shares failed to hold their gains after no partnership was announced shows that the “outsiders” like you and I know more about WATT than the Wall Street “insiders.” This is also why I told the story about my trip to Best Buy (BBY) yesterday.
Even better is that we can continue to make nice gains with this name by trading other options. We have won every trade we’ve made in this name this year, and WATT will continue to stay on my watch list. As such, don’t be surprised if we are back into WATT options today, this week or next week. If I decide to take action, I will send out a New Trade alert.
Short-term resistance is at $13-$13.25. Short-term support is at $12.75-$12.50. Yesterday’s low reached $12.43. Shares were last seen at $13 in extended trading last night, so stay locked and loaded.
SPDR Gold Shares ETF (GLD, $122.64, up $0.90)
GLD July 125 calls (GLD160715C00125000, $2.02, up $0.23)
Entry Price: $1.25 (6/8/2016)
Exit Target: $2.50 (closed first half at $2.11 on 6/13/2016)
Stop Target: $1.85 (Stop Limit)
Action: The Stop Limit at $1.85 held into yesterday’s close. The low was $1.90, so let’s leave it at $1.85 for now. Volume was ridiculous, as nearly 10,000 contracts traded.
We took profits on the first half of the trade yesterday as shares cleared and held the $122 level. I still expect to close the second half of the trade if GLD can clear $124 in the coming days or weeks. If shares fall back below $122-$121.75, we will likely get stopped out of the second half.
Shares traded to a high of $122.83 yesterday to split upper resistance at $122-$124. Support is at $120-$119.50 and the 50-day moving average.
Inovio Pharmaceuticals (INO, $10.20, down $0.42)
INO July 12 calls (INO160715C00012000, $0.29, down $0.06)
Entry Price: $0.80 (6/1/2016)
Exit Target: $1.60
Stop Target: None
Action: Yesterday’s low touched $10.17. Support is at $10.25-$10 and the 50-day moving average. Resistance is at $11-$11.25.
Editor and Chief Options Strategist