Dear Momentum Options Subscriber,
The bears pushed lower lows on Thursday, but the bulls refused to go away quietly. While the market did manage to make a trip into positive territory following the nasty open, the highs were lower than those that were made during Wednesday’s session. Lower lows and lower highs are usually bearish signals, but bullish clues are still in the mix as well.
The Dow gained 93 points, or 0.5%, to close at 17,733. The blue-chips were weak at the start of trading, with the bears pushing a low of 17,471. The move below 17,600 opened up risk to 17,400-17,350. The 283-point turnaround reached 17,754, but the index fell shy of upper resistance at 17,700-17,800.
The S&P 500 added 6 points, or 0.3%, to finish just below 2,078. The index kissed my backup targets of 2,060-2,050, as it fell below the former and held the latter shortly after the open. The bounce off of the 2,050 level was a very bullish signal, as was the close above 2,070-2,075. Short-term resistance is at 2,080-2,085, and a move above the latter will likely lead to 2,095-2,100.
The Nasdaq advanced 10 points, or 0.2%, to end just under 4,845. Tech opened at 4,808 and traded to a low of 4,778. Backup support at 4,800-4,775 was breached before the surge to 4,847. Resistance at 4,850 held, and there are additional hurdles at 4,875-4,900. I mentioned yesterday that I might use put options on the PowerShares QQQ ETF (QQQ, $108.04, up $0.32) if the index fell below 4,775. The QQQs tested a low of $106.50 before rebounding. I’m not ready to go long the QQQs, but I could if the index clears $109.50-$110.
The Russell 2000 slipped a point, or 0.1%, to settle at 1,148. The small-caps were weak throughout the session, with the low checking in at 1,133. The move below support at 1,140-1,135 was “stretched” before the 16-point turnaround to roughly 1,149. Resistance at 1,150 was kept in check. Additional trouble is at 1,155-1,160, if 1,150 is cleared.
The S&P 500 Volatility Index ($VIX, 19.37, down 0.77) fell 4% after tapping a high of 22.89. Upper resistance at 22-22.50 was breached, but it held in what was a slightly bullish sign. The test to 19.24 and close into the support area at 20-19 also looked bullish. Support is at 17.50 on a move below the latter.
I have set the parameters for our trades in Energous (WATT) and Viavi Solutions (VIAV) from yesterday afternoon, so let’s go check the action.
From desk to press, futures look like this: Dow (+0); S&P 500 (-2); Nasdaq 100 (-2); Russell (+1).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 49-16 (75%). All trades are dated so new subscribers can look at the past history to see how the trades have played out.
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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, $10.43, down $0.24)
WATT August 12.50 calls (WATT160819C00012500, $1.10, up $0.05)
Entry Price: $1.06 (6/16/2016)
Exit Target: $2.00-$2.50
Stop Target: None
Action: The Exit Targets are set at $2.00-$2.50, but these are not Limit Orders at this time.
Near-term support is at $10-$9.75. Resistance is at $10.75-$11. I wanted to get us back into WATT following the pullback from $14.78 earlier this week.
Viavi Solutions (VIAV, $6.95, up $0.09)
VIAV September 7 calls (VIAV160916C00007000, $0.50, up 0.08)
Entry Price: $0.48 (6/16/2016)
Exit Target: $1.00
Stop Target: None
Action: The Exit Target is set at $1.00, but it is not a Limit Order at this time.
The action in the VAIV July 7 calls (VIAV160715C00007000, $0.25, up $0.09) was explosive yesterday, as 7,200 contracts traded. I went with the VIAV September 7 calls to give the trade more time to play out.
Shares have been in a tight range of $6.80-$7 for the month, and a close above the latter would be a bullish development. The 52-week high is at $7.38. Near-term resistance is at $7-$7.25. Thursday’s high reached $7 on the stock.
Microsoft (MSFT, $50.39, up $.70)
MSFT July 48 puts (MSFT160715P00048000, $0.49, down $0.15)
Entry Price: $0.71 (6/16/2016)
Exit Target: $1.40
Stop Target: None
Action: Resistance is at $50.50-$51 and the 200-day moving average. Support is at $49.50-$49. A close below the latter would be a bearish development.
Inovio Pharmaceuticals (INO, $10.74, up $0.05)
INO July 12 calls (INO160715C00012000, $0.30, down $0.05)
Entry Price: $0.80 (6/1/2016)
Exit Target: $1.60
Stop Target: None
Action: Resistance is at $10.75-$11. Support is at $10.25-$10 and the 50-day moving average.
Editor and Chief Options Strategist