Dear Momentum Options Subscriber,

The bulls are on track for their third-straight week of gains following Thursday’s sweep of the major indices. The bears have laid low throughout the week, but they may come out of their caves today for July options expiration. However, volatility continues to sink and is forecasting that higher highs could be possible for a few more weeks.

The Dow jumped 134 points, or 0.7%, to close at 18,506. The blue-chips made another all-time intraday high at 18,537 while holding resistance at 18,500-18,600. A close above the latter should get fluff targets of 18,800-19,000 in play.

The S&P 500 soared 11 points, or 0.5%, to end at 2,163. The index followed the Dow’s lead and reached bluer skies at 2,168 while holding the 2,060 level. Upper resistance at 2,075-2,080 is now firmly in play. Support is at 2,050-2,040.

The Nasdaq jumped 28 points higher, or 0.6%, to finish at 5,034. Tech traded to up to near-term resistance at 5,025-5,050, which held into the closing bell. Support is at 5,000-4,975. A close below the latter would be bearish.

The Russell 2000 added a point, or 0.1%, to settle at 1,202. The small-caps made a run to 1,209.91 on Thursday but failed to clear 1,210, which was Wednesday’s high. The index closed less than a point off of its low, but it held positive territory the entire day. Support is at 1,190-1,185 if 1,200 fails to hold.

The S&P 500 Volatility Index ($VIX, 12.82, down 0.22) tested a low of 12.14 but failed to hold 12.50. The fact the VIX breached this level was bullish, as long as fresh resistance at 13.50 holds.

Our Cisco Systems (CSCO) trade was closed yesterday when the Stop Limit was triggered following the pullback in the stock, and I have the details below. I have another trade, or two, to take its place, so stay locked and loaded throughout the morning in case I take action.

From desk to press, futures look like this: Dow (+27); S&P 500 (+3); Nasdaq 100 (+3); Russell (+3).

Momentum Options Play List

Closed Momentum Options Trades for 2016: 58-18 (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).

 

Cisco Systems (CSCO, $29.76, up $0.01)

CSCO August 30 calls (CSCO160819C00030000, $0.68, down $0.04)

Entry Price: $0.62 (7/11/2016)

Exit Target: $1.25

Return: 5%

Stop Target: $0.65 (Stop Limit)

Action: The Stop Limit at $0.65 was triggered after yesterday’s intraday dip in the stock to $29.64, and we are now out of the position.

The trade was holding ahead of the Mid-Market Update, but shares were showing weakness while tech, overall, stayed strong into the close. CSCO did test $29.99, which fell shy of resistance at $30 by a penny. If this level is cleared, I could re-enter these call options or the August 31 strike calls.

 

Flextronics International (FLEX, $12.96, up $0.29)

FLEX August 13 calls (FLEX160819C00013000, $0.47, up $0.15)

Entry Price: $0.44 (7/14/2016)

Exit Target: $1.00

Return: 7%

Stop Target: None

Action: Resistance is at $13-$13.25. The 52-week high is at $13.23, and that was set in late June. A close above this level could lead to a run at $14. If achieved by mid-August, these call options will be at least $1 in the money and would double from current levels. Support is at $12.75-$12.50. Earnings are due out next week, and I will cover the expected numbers on Monday.

 

Rambus (RMBS, $12.62, flat)

RMBS August 13 calls (RMBS160819C00013000, $0.47, up $0.01)

Entry Price: $0.46 (7/13/2016)

Exit Target: $1.00

Return: 2%

Stop Target: None

Action: Thursday’s high tapped $12.81. Short-term resistance is at $12.75-$13. Support is at $12.25-$12.

 

Green Dot (GDOT, $24.13, up $0.16)

GDOT August 25 calls (GDOT160819C00025000, $0.95, up $0.12)

Entry Price: $0.80 (7/7/2016)

Exit Target: $1.60

Return: 19%

Stop Target: None

Action: Shares traded to a fresh 52-week high of $24.33, and the close above $24 for the first time was a bullish sign. Near-term resistance is at $24.25-$24.50. Support is at $23.50-$23.

 

Energous (WATT, $12.11, down $0.37)

WATT August 12.50 calls (WATT160819C00012500, $1.05, down $0.10)

Entry Price: $1.57 (6/28/2016)

Exit Target: $3.15

Return: -33%

Stop Target: $0.75

Action: Support is at $12.25-$12. Resistance is at $12.50-$12.75.

 

Viavi Solutions (VIAV, $7.00, up $0.06)

VIAV September 7 calls (VIAV160916C00007000, $0.43, up $0.07)

Entry Price: $0.55 (6/23/2016)

Exit Target: $1.10

Return: -22%

Stop Target: None

Action: Resistance is at $7.15-$7.25. Support is at $6.65-$6.60.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options