Dear Momentum Options Subscriber,
The market was weak throughout Tuesday’s session as a result of lower oil prices and concern about the Italian banks, according to the talking heads. The technical picture looked more promising, however, as support levels held before the rebound off of the lows into the close.
The Dow fell 108 points, or 0.6%, to end at 17,840. The blue-chips traded in negative territory throughout the session and bottomed at 17,785 intraday. Support at 17,800-17,750 and the 50-day moving average held. Resistance remains at 18,000-18,100.
The S&P 500 fell 14 points, or 0.7%, to finish at 2,088. The index opened below the 2,100 level at 2,095 and tested a low of 2,080 late in the day. Support at 2,075-2,070 and the 50-day moving average was challenged but held tight. Resistance is at 2,100-2,110.
The Nasdaq dropped 39 points, or 0.8%, to settle at 4,822. Tech stayed in a steady, slow drift lower until the afternoon to tap a low of 4,797. Support at 4,825-4,800 and the 50- and 200-day moving averages was stretched, but it held into the closing bell. Upper resistance at 4,875-4,900 is still in play on another move above 4,850.
The Russell 2000 declined 17 points, or 1.5%, to close at 1,139. The small-caps led Tuesday’s charge lower and reached a low of 1,133. I mentioned that there was risk to 1,140-1,135 and the 50-day moving average if 1,150 failed to hold. The close below 1,140 was slightly bearish, and it gets lower support levels at 1,125-1,120 back in play. Resistance is at 1,150.
The S&P 500 Volatility Index ($VIX, 15.58, up 0.81) traded to a high of 16.62, with the bulls holding resistance at 16.50-17.50. A close above the latter would be a bearish development. Support is at 15-14.50, which are levels the bulls need to clear and hold this week.
From desk to press, futures look like this: Dow (-103); S&P 500 (-12); Nasdaq 100 (-31); Russell (-8).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 54-18 (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).
Cisco Systems (CSCO, $28.33, down $0.47)
CSCO August 29 calls (CSCO160819C00029000, $0.58, down $0.12)
Entry Price: $0.55 (6/30/2016)
Exit Target: $1.10
Stop Target: $0.58 (Stop Limit)
Action: The Stop Limit at $0.58 triggered late on Tuesday, as the calls traded down to $0.57 ahead of the close, and we are now out of the position.
While I’m disappointed we couldn’t capture a larger percentage gain, I will keep CSCO on my watch list for a possible re-entry.
Altria Group (MO, $69.61, up $0.59)
MO August 70 calls (MO160819C00070000, $1.41, up $0.30)
Entry Price: $1.15 (7/5/2016)
Exit Target: $2.30
Stop Target: $1.20 (Stop Limit)
Action: Set a Stop Limit at $1.20 to protect profits.
Tuesday’s high of $70.14 was a fresh 52-week peak for the stock. Shares look poised to clear $70-$72 on a blue-sky breakout. Support is at $68.
Energous (WATT, $12.33, up $0.17)
WATT August 12.50 calls (WATT160819C00012500, $1.40, flat)
Entry Price: $1.57 (6/28/2016)
Exit Target: $3.15
Stop Target: $0.75
Action: Resistance is at $12.75-$13. Support is at $11 and the 50-day moving average if $12 fails to hold.
Morgan Stanley (MS, $25.00, down $0.92)
MS August 28 calls (MS160819C00028000, $0.23, down $0.12)
Entry Price: $0.79 (6/23/2016)
Exit Target: $1.50
Stop Target: None
Action: Support is at $25-$24.75. Resistance has moved down to $25.75-$26.
Viavi Solutions (VIAV, $6.44, down $0.17)
VIAV September 7 calls (VIAV160916C00007000, $0.22, down $0.06)
Entry Price: $0.55 (6/23/2016)
Exit Target: $1.10
Stop Target: None
Action: Support is at $6.50-$6.40. Near-term resistance is at $6.75-$7.
Editor and Chief Options Strategist