Dear Momentum Options Subscriber,

The bears gained additional supporters on Tuesday as more talking heads and slick talking pros abandoned the bullish vessel. While the waters are rocky, the bigger test for the bulls will be at the 50-day moving averages on continued weakness. I mentioned the start of August is historically weak and I’m neutral before getting aggressively short, for now.

The Dow dropped 90 points, or 0.5%, to close at 18,313. The blue-chips traded in negative territory throughout the session while testing a low of 18,247. The close below 18,350 gets backup support at 18,200-18,000 in play. Resistance is now at 18,350-18,400.

The S&P 500 sank 13 points, or 0.6%, to end at 2,157. The index was also underwater throughout Tuesday with the bottom reaching 2,147. Support at 2,160-2,150 was stretched but the close below the former was slightly bearish. There is risk to 2,140-2,125 on continued weakness. Resistance remains at 2,170-2,175 on a move back above 2,160.

The Nasdaq tanked 46 points, or 0.9%, to finish at 5,137. Tech tumbled to a low of 5,109 intraday with backup support at 5,100 holding. A breach of this level could lead to 5,000-4,950 on panic selling. Near-term resistance has moved down to at 5,150-5,175.

The Russell 2000 fell 16 points, or 1.4%, to settle at 1,202. The small-caps kissed an intraday low of 1,199 while holding lower support at 1,210-1,200. A close below 1,190 would be a bearish setup for the rest of the week. Resistance is at 1,220-1,225 if the bulls get over 1,210 today.

The S&P 500 Volatility Index ($VIX, 13.37, up 0.93) jumped over 7% after testing an intraday high of 14.24. Upper resistance at 14.50-15 held and the close below the 13.50 was a dim, bullish light. The opening low at 12.35 was an afterthought with support at 12.50-11.50 holding.

The portfolio will have three trades in play over this week and next. Depending on the earnings announcements, these trades will likely be closing depending on the action. This gives us two trades heading into mid-August and we’ll be in perfect shape to set up 10-15 new trades over the next few months.

From desk to press, futures look like this: Dow (-27); S&P 500 (-3.25); Nasdaq 100 (-7); Russell (-1.10).

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, $13.16, down $0.52)

RMBS September 14 calls (RMBS160916C00014000, $0.23, down $0.17)

Entry Price: $0.40 (8/1/2016)

Exit Target: $0.80

Return: -43%

Stop Target: None

Action: The options took a beating on yesterday’s 4% stock drop. I mentioned there was risk to lower support at $13.25-$13 but it doesn’t mean I like it. However, these are September options and I will likely be keeping the position open, regardless of price action, over the next few weeks. Resistance is at $13.25-$13.50.

 

Vuzix (VUZI, $7.64, down $0.27)

September 10 calls (VUZI160916C00010000, $0.50, down $0.25)

Entry Price: $0.97 (7/27/2016)

Exit Target: $2.00

Return: -48%

Stop Target: None

Action: Support is at $7.50 with risk to $7 on a close below this level. Resistance is at $8.

 

Green Dot (GDOT, $23.62, down $0.25)

GDOT August 25 calls (GDOT160819C00025000, $0.49, down $0.11)

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

Exit Target: $1.60

Return: -39%

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, $12.38, down $0.27)

WATT August 12.50 calls (WATT160819C00012500, $0.80, flat)

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

Exit Target: $3.15

Return: -49%

Stop Target: $0.50 (Stop Limit)

Action: Support is at $12.25-$12 followed by $11.75 and the 50-day moving average. Resistance is at $12.50-$12.75. Earnings are due out next week, August 9th.

 

Viavi Solutions (VIAV, $7.01, down $0.12)

VIAV September 7 calls (VIAV160916C00007000, $0.42, flat)

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

Exit Target: $1.10

Return: -24%

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.

 

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options