Dear Momentum Options Subscriber,
The market followed its most recent trading pattern with another mixed close, led by Tech higher and the Dow lower. The biggest concern is that while the current divergence is happening in a widening trading range, the lower lows on the blue-chips remain a troubling sign.
The Dow dipped 27 points, or 0.2%, to settle at 18,404. The blue-chips traded to an intraday high of 18,467 but failed resistance at 18,500-18,600 for the 8th-straight session. The one slight bullish sign is that Monday’s high on the index was higher than Friday’s, but only by a point. The lower low at 18,355 held lower support at 18,400-18,350 by the lowest level the Dow has traded at since July 13th.
The S&P 500 slipped nearly 3 points, or 0.1%, to close at 2,170. The index set another all-time high at 2,178 and held lower resistance at 2,170-2,175. A close above the latter keeps 2,200 in focus. Support at 2,160 held following the low of 2,166.
The Nasdaq jumped 22 points, or 0.4%, to end at 5,184. Tech was slightly weak on the open following the morning test to 5,158. The 4-point pullback was a hiccup as the bulls held support at 5,150 for the third-straight session. The bears held upper resistance at 5,175-5,200 by a point with a close getting all-times highs back on the bulls’ map.
The Russell 2000 climbed 2 points, or 0.2%, to finish at 1,219. The small-caps also tested its low of 1,214 on Monday’s opening weakness with support at 1,210-1,200 holding for the 8th-straight session and 13 of the past 15 trading days. The run to 1,224 with resistance at 1,220-1,225 holding for the 4th-straight session.
Side note: The time to go short the small-caps will be when the Russell 2000 closes below 1,200-1,195. Write it down, and put it on your desktop or laptop. I could go long with near-term call options if the index clears 1,225 intraday, or closes above this level.
The S&P 500 Volatility Index ($VIX, 12.44, up 0.57) stayed elevated throughout the session following the opening pop to 12.98. Upper resistance at 13.50 held with the close below lower resistance at 12.50 offering a bullish clue for today. However, the VIX still needs to get below 11.50 to confirm possible higher, overall, market highs.
From desk to press, futures look like this: Dow (-24); S&P 500 (-4); Nasdaq 100 (-6.25); Russell (-1.90).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 61-19 (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 6:00 a.m. EST.
I hereby disclose that I will be participating in the following trade(s).
Rambus (RMBS, $13.68, up $0.16)
RMBS September 14 calls (RMBS160916C00014000, $0.40, up $0.04)
Entry Price: $0.40 (8/1/2016)
Exit Target: $0.80
Stop Target: None
Action: Shares have pulled back from their recent 52-week high north of $14 and there is continued weakness to $13.25-$13. However, the golden cross that formed last month with the 50-day moving average crossing above the 200-day moving average was a bullish sign. Near-term resistance is at $13.50-$13.75. A close above the latter, and yesterday’s peak, should lead to another possible push past $14+.
Vuzix (VUZI, $7.91, down $0.32)
September 10 calls (VUZI160916C00010000, $0.75, up $0.10)
Entry Price: $0.97 (7/27/2016)
Exit Target: $2.00
Stop Target: None
Action: Support is at $8-$7.50 with risk to $7 on a close below the latter. Resistance is at $8.25-$8.50. Despite the pullback in the stock, the options gained ground as volume topped 1,000 contracts yesterday. This was a slightly bullish sign as long as shares can recover $8-$8.25 today.
Green Dot (GDOT, $23.87, down $0.33)
GDOT August 25 calls (GDOT160819C00025000, $0.60, down $0.05)
Entry Price: $0.80 (7/7/2016)
Exit Target: $1.60
Stop Target: None
Action: Support is at $23.75-$23.50. Resistance is at $24-$24.25. Earnings are due out after Thursday’s close.
Energous (WATT, $12.65, up $0.23)
WATT August 12.50 calls (WATT160819C00012500, $0.80, up $0.10)
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. A close above the latter gets $13+ in play. Monday’s high reached $12.69. Support is at $12.25-$12 followed by $11.75 and the 50-day moving average. Earnings are due out next week, August 9th.
Viavi Solutions (VIAV, $7.13, flat)
VIAV September 7 calls (VIAV160916C00007000, $0.42, up $0.05)
Entry Price: $0.55 (6/23/2016)
Exit Target: $1.10
Stop Target: None
Action: Support is at $7 with $6.90-$6.85 and the 50-day moving average serving as backup. Resistance is at $7.25. Earnings are due out August 11th.
Editor and Chief Options Strategist