Dear Momentum Options Subscriber,

The market edged higher on Monday ahead of a number of key earnings reports. International Business Machines (IBM, $159.86, up $0.08) should give the blue-chips a lift today, as the company posted higher revenue on an earnings beat after the close. Goldman Sachs (GS, $163.33, up $1.69) could help or hinder futures once Wall Street processes the company’s numbers, which are due out ahead of this morning’s open.

The Dow added 16 points, or 0.1%, to finish at 18,533. The blue-chips traded to a low of 18,489 shortly after the open, with support at 18,400-18,350 holding. The run to 18,556 fell a point shy of setting another all-time record high. Upper resistance is at 18,500-18,600.

The S&P 500 climbed 5 points, or 0.2%, to settle at 2,166. The index pulled back to 2,159 on the opening weakness, with near-term support at 2,160-2,150 holding for the third-straight session. The push to 2,168 also fell shy of last week’s all-time high of 2,169 and my near-term targets at 2,175-2,180. There is blue-sky territory to 2,200 on a close above the latter.

The Nasdaq jumped 26 points higher, or 0.5%, to close at 5,055. Tech held positive territory throughout the session while making an intraday high of 5,063. The close above prior resistance at 5,025-5,050 gets 5,100-5,150 into play. Fresh support is at 5,025-5,000, with backup at 4,975-4,950.

The Russell 2000 gained 2 points, or 0.2%, to end at 1,207. The small-caps slipped 3 points to 1,202 during the first half of the action, with support at 1,200 standing tall for the fifth-straight session. The rebound to 1,210 was a higher high than the prior three trading days, which keeps upper resistance at 1,225-1,230 in the mix.

The S&P 500 Volatility Index ($VIX, 12.43, down 0.23) closed below 12.50 for the first time in 2016, which was something the talking heads failed to notice. This was a very bullish development and, as long as it holds, it should get 11.50-10 in the mix. Resistance is at 13.50, followed by 14.50-15.

From desk to press, futures look like this: Dow (+5); S&P 500 (-4); Nasdaq 100 (-12); Russell (-2).

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).

 

Energous (WATT, $11.92, down $0.04)

WATT August 12.50 calls (WATT160819C00012500, $0.80, down $0.10)

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

Exit Target: $3.15

Return: -49%

Stop Target: $0.75, lower to $0.50 (Stop Limit)

Action: Lower the Stop Target from $0.75 to $0.50 and make it a Stop Limit Order.

Support is at $11.75-$11.50, and yesterday’s low reached $11.60. Resistance is at $12-$12.25.

 

MGM Resorts International (MGM, $23.39, up $0.05)

MGM August 24 calls (MGM160819C00024000, $0.65, down $0.03)

Entry Price: $0.74 (7/15/2016)

Exit Target: $1.50

Return: -12%

Stop Target: None

Action: Support is at $23.25-$23 and the 50-day moving average. Near-term resistance is at $23.75-$24.

 

Flextronics International (FLEX, $12.87, down $0.02)

FLEX August 13 calls (FLEX160819C00013000, $0.40, flat)

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

Exit Target: $1.00

Return: -9%

Stop Target: None

Action: Support is at $12.75-$12.50. Resistance is at $13-$13.25. The 52-week high is at $13.23.

 

Rambus (RMBS, $12.81, up $0.06)

RMBS August 13 calls (RMBS160819C00013000, $0.52, up $0.02)

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

Exit Target: $1.00

Return: 13%

Stop Target: None

Action: Short-term resistance is at $12.75-$13. Support is at $12.50. The company topped estimates after Monday’s close by $0.02, with revenue also coming in higher. However, third-quarter guidance of $75-$80 million came in shy of forecasts for $84 million.

Management tends to play a cat-and-mouse game with analysts, and it said these numbers were dependent on adding new customers of mobile payments software and solutions agreements. While the lowered guidance could weigh on shares for a day or two, I’m hoping analysts discount the news and look at the solid earnings beat.

 

Green Dot (GDOT, $23.83, down $0.17)

GDOT August 25 calls (GDOT160819C00025000, $0.79, down $0.06)

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

Exit Target: $1.60

Return: -1%

Stop Target: None

Action: Near-term resistance is at $24.25-$24.50. Support is at $23.50-$23.

 

Viavi Solutions (VIAV, $7.03, flat)

VIAV September 7 calls (VIAV160916C00007000, $0.37, flat)

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

Exit Target: $1.10

Return: -33%

Stop Target: None

Action: Resistance is at $7.15-$7.25. Support is at $6.80-$6.75.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options