Dear Momentum Options Subscriber,
The market stayed strong from the start of trading into the closing bell on Thursday as Wall Street took early bets on a “positive” outcome from the Brexit vote. There weren’t many bearish bets being made that Britain would leave the European Union ahead of yesterday’s vote, although I mentioned that there could be a sell-the-news event afterwards. The good news is that the Brexit wait is over, and today’s action will most likely influence next week and possibly July.
The Dow soared 230 points, or 1.3%, to end at 18,011 on Thursday. The blue-chips opened at 17,844 and stayed in a steady range throughout the session before the late-day run past 18,000. The close above this level was a bullish development and gets 18,200 back in play. Support has moved up to 17,800, followed by 17,600.
The S&P 500 surged 28 points, or 1.3%, to finish at 2,113. The index made a steady march past 2,100 and went out at its peak. The close above this level gets 2,120-2,125 back on the map. Support is at 2,100-2,090.
The Nasdaq galloped 76 points higher, or 1.6%, to settle at 4,910. Tech cleared upper resistance at 4,875-4,900, and the close above these levels paves the way for a possible test to 4,925-4,950. Support is at 4,875-4,850 on a move back below 4,900.
The Russell 2000 zoomed 23 points, or 2%, to close at 1,172. The small-caps opened above the 1,150 level to push upper resistance at 1,170-1,175. The close at session highs and above 1,175 gets 1,185-1,190 in play. Support has moved up to 1,160-1,150.
The S&P 500 Volatility Index ($VIX, 17.25, down 3.92) tanked over 18% while closing at its session low. The move back below 20 and close below 17.50 also looked bullish. However, any extended rally will need the VIX to fall back below 15-14.50. Resistance is at 19-20, with another close above the latter being a bearish development.
I stayed up super late to see the results of the Brexit vote, and Britain has decided to leave the EU. The surprise vote to roll out rocked currency and global markets, and it will have a major impact on this morning’s open here in the U.S.
The backup support levels on the major indices I’ve mentioned previously will be blown away on the open, and a 4%-5% pullback is likely. I will talk more about this development in today’s Mid-Market Update. For new subscribers, don’t panic. For older subscribers, stay calm and carry on.
From desk to press, futures look like this: Dow (-521); S&P 500 (-74); Nasdaq 100 (-160); Russell (-56).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 51-16 (76%). 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).
Morgan Stanley (MS, $27.29, up $0.90)
MS August 28 calls (MS160819C00028000, $0.82, up $0.22)
Entry Price: $0.79 (6/23/2016)
Exit Target: $1.50
Stop Target: None
Action: The Exit Target is $1.50, but it is not a Limit Order at this time.
Shares made a strong move above the 50-day moving average on Thursday, which is why I wanted to get us into this trade. After the close, shares were up 1% after the Fed said that all 33 banks met minimum standards of supervisory stress test levels.
Resistance is at $27.50-$28 over the near term, followed by $28.25-$28.50 and the 200-day moving average. Support is at $27-$26.50.
Viavi Solutions (VIAV, $7.09, up $0.02)
VIAV September 7 calls (VIAV160916C00007000, $0.55, up $0.05)
Entry Price: $0.55 (6/23/2016)
Exit Target: $1.10
Stop Target: None
Action: The Exit Target is $1.10, but it is not a Limit Order at this time.
Near-term resistance is at $7-$7.25. The 52-week high is at $7.38. Support is at $6.80-$6.75.
iRobot (IRBT, $36.36, up $0.19)
IRBT July 38 calls (IRBT160715C00038000, $0.40, up $0.10)
Entry Price: $0.55 (6/20/2016)
Exit Target: $1.10
Stop Target: $0.20 (Stop Limit)
Action: Set a Stop Limit at $0.20 to limit potential losses.
Thursday’s high reached $36.87. Resistance is at $37-$37.25 and the 50-day moving average. Support is at $36-$35 and the 100-day moving average.
These options expire three weeks from today, and we will need a $2+ move, technically, by mid-July for the trade to make a profit. A $1+ move next week should get the trade back to even. However, due to time decay and today’s conditions, I decided to set a Stop Limit on the position to save the remaining premium for possible new trades.
Microsoft (MSFT, $51.91, up $0.92)
MSFT July 48 puts (MSFT160715P00048000, $0.17, down $0.15)
Entry Price: $0.71 (6/16/2016)
Exit Target: $1.45
Stop Target: $0.10 (Stop Limit)
Action: Support is at $50-49.50, which are levels that could be tested and breached today. Resistance is at $51-$51.50.
Inovio Pharmaceuticals (INO, $9.85, down $0.35)
INO July 12 calls (INO160715C00012000, $0.10, down $0.05)
Entry Price: $0.80 (6/1/2016)
Exit Target: $1.60
Stop Target: None
Action: Support is at $9.75-$9.50. Resistance is at $10-$10.25. I will have additional comments on this trade on Monday, as I plan to hold this position into July.
Editor and Chief Options Strategist