Dear Momentum Options Subscriber,
I live in a small city, and I was amazed by a recent trip I took downtown last week. Besides fighting through traffic to find a parking spot, I also had to navigate through pedestrians on nearly every street. Most of the jaywalkers used to lookout for traffic, but I noticed that not many were on this night. Instead, they were walking aimlessly, staring at their smartphones.
I was aware of the Pokémon Go craze a few weeks ago, although I still haven’t played it. However, my friends have shown it to me, and it was clear that most of the zombies I ran into that night were playing the game.
Nintendo shares have gone ballistic since the release of the augmented-reality game and recently traded to a high of 32,700 yen, or roughly $300 a share, last week. The stock trades on the Japanese stock exchange.
The game allows players to walk around the real world while seeking virtual Pokémon characters on their smartphones. It reminded me of a treasure hunt, but one that doesn’t make real money.
Users are playing the game 45 minutes a day on average, which has squeezed the popularity of WhatsApp and Instagram.
From what I have read and researched, a better way to play the game is through “smart glasses.” Vuzix (VUZI, $7.88, down $0.98) is the maker of M300 Smart Glasses that have started to ship and can be used for hands-free mobile computing.
The company is employing new “waveguide technology” in their glasses that will allow images to appear in the glass lens itself. This is a much better visual effect than the conventional smart glasses that project images into the user’s eye from the outside.
The company recently announced a partnership to sponsor drone racing and is in development deals with GoPro (GPRO). However, Vuzix is bleeding cash, as they have lost money for four-straight quarters. Losses in the past three quarters have come in worse than expected.
Vuzix doesn’t report numbers until mid-August and, while shares are in a strong uptrend, the risk/reward scenario makes our position a speculative trade due to the fundamentals. However, I’m looking for shares to continue their rally into August ahead of the announcement.
Turning to the market, futures were forecasting a strong open, but the enthusiasm has diminished heading into the final hours of trading. Tech has been strong, but the other indices have been a little choppy.
The Dow is currently down 23 points to 18,449, while the S&P 500 is lower by 7 points to 2,161. The Nasdaq is gaining 15 points to 5,125, and the Russell 2000 is off 2 points to 1,214.
I have updated our Vuzix (VUZI) trade below, and the Stop Limit on our MGM Resorts International (MGM) trade was triggered this morning, so let’s go check them out.
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Closed Momentum Options Trades for 2016: 60-18 (77%). 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 1:25 p.m. EST.
I hereby disclose that I will be participating in the following trade(s).
MGM Resorts International (MGM, $23.74, down $0.27)
MGM August 24 calls (MGM160819C00024000, $0.74, down $0.13)
Entry Price: $0.74 (7/15/2016)
Exit Target: $1.50
Stop Target: $0.79 (Stop Limit)
Action: The Stop Limit at $0.79 was triggered on the MGM August 24 calls during today’s pullback in the stock, and we are now out of the position.
Vuzix (VUZI, $7.88, down $0.98)
VUZI September 10 calls (VUZI160916C00010000, $0.64, down $0.14)
Entry Price: $0.97 (7/27/2016)
Exit Target: $2.00
Stop Target: None
Action: Support is at $8-$7.75. Resistance is at $8-$8.25.
Rambus (RMBS, $13.90, down $0.14)
RMBS September 14 calls (RMBS160916C00014000, $0.53, down $0.07)
Entry Price: $0.40 (7/22/2016)
Exit Target: $0.80
Stop Target: $0.45 (Stop Limit)
Action: Support is at $13.75-$13.50. Resistance is at $14.25-$14.50.
Flextronics International (FLEX, $12.66, down $0.22)
FLEX August 13 calls (FLEX160819C00013000, $0.13, down $0.10)
Entry Price: $0.44 (7/14/2016)
Exit Target: $0.50 (Limit Order)
Stop Target: None
Action: Support is at $12.75-$12.50. Resistance is at $13.25-$13.50.
Green Dot (GDOT, $24.10, up $0.15)
GDOT August 25 calls (GDOT160819C00025000, $0.71, flat)
Entry Price: $0.80 (7/7/2016)
Exit Target: $1.60
Stop Target: None
Action: Near-term resistance is at $24-$24.25. Support is at $23.75-$23.50.
Energous (WATT, $12.61, up $0.08)
WATT August 12.50 calls (WATT160819C00012500, $0.94, up $0.14)
Entry Price: $1.57 (6/28/2016)
Exit Target: $3.15
Stop Target: $0.50 (Stop Limit)
Action: Resistance is at $12.50-$12.75. Support is at $12.25-$12.
Viavi Solutions (VIAV, $7.10, down $0.04)
VIAV September 7 calls (VIAV160916C00007000, $0.49, up $0.04)
Entry Price: $0.55 (6/23/2016)
Exit Target: $1.10
Stop Target: None
Action: Resistance is at $7.15-$7.25. Support is at $6.80-$6.75 and the rising 50-day moving average.
Editor and Chief Options Strategist