Dear Momentum Options Subscriber,

Semiconductor stocks, along with the overall market, were taken to the woodshed in June and bottomed following the Brexit news. Specifically, shares of Cypress Semiconductor (CY, $11.30, up $0.30) fell below their 50-day moving average to test $9 and the 200-day moving average a couple of months ago.

The rebound to a fresh 52-week peak of $12.32 in late July represented a gain of over 30%, although the stock recently pulled back to its now-flattened 50-day moving average. The 100-day moving average is in a solid uptrend, and the 200-day moving average is turning up slowly.

Short-term resistance is at $11.25-$11.50. Support is at $11-$10.75, but a close below $10.50-$10.25 would be a bearish development.

Earnings are due out in late October, and Wall Street is expecting a profit of $0.14 a share on revenue just south of $526 million. This will be an important update, as Cypress needs a strong quarter to break out of its pattern of penny-beats and flat results over the past four quarters.

The company pays an annual dividend of $0.44 a share, which equates to a 4% dividend yield at current levels. When money comes back into the market and off of the sidelines, like it has been, semiconductor stocks should do well, and I believe CY will rebound well from its current lows.

I have the CY September 12 calls (CY160916C00012000, $0.45, up $0.10) on my watch list, as well as the CY December 12 calls (CY161216C00012000, $0.80, up $0.06). I usually don’t profile options four months out, but what intrigues me about the CY December 12 calls is that there is open interest of 76,000 contracts. This is usually a good indicator for where traders are expecting shares to be by mid-December.

The CY December 12 calls would return 100% if shares clear $13.60, technically, by Dec. 16. I’m still researching a number of other names for possible trades ahead of the closing bell, and I would also like to see CY shares clear and hold $11.50 before getting too aggressive.

The Dow is currently gaining 78 points to 18,655, while the S&P 500 is higher by 9 points to 2,193. The Nasdaq is adding 37 points to 5,270, and the Russell 2000 is advancing 13 points to 1,243.

I issued a Trade Alert for our previous position in Vuzix (VUZI) earlier this afternoon, so be sure to check that out if you haven’t already. For now, I have updated the current action below, so let’s go check the tape.

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Closed Momentum Options Trades for 2016: 61-22 (74%). All trades are dated and time stamped 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 1:55 p.m. EST.

I hereby disclose that I will be participating in the following trade(s).

 

MGM Resorts International (MGM, $24.50, down $0.39)

MGM September 25 calls (MGM160916C00025000, $0.70, up $0.17)

Entry Price: $0.70 (8/8/2016)

Exit Target: $1.40

Return: 0%

Stop Target: None

Action: Resistance is at $24.75-$25. Support is at $24.25-$24.

 

Bank of America (BAC, $14.97, up $0.06)

BAC September 15 calls (BAC160916C00015000, $0.34, up $0.02)

Entry Price: $0.50 (8/8/2016)

Exit Target: $1.00

Return: -32%

Stop Target: None

Action: Short-term resistance is at $15-$15.25. Support is at $14.75-$14.50.

 

Rambus (RMBS, $13.77, up $0.17)

RMBS September 14 calls (RMBS160916C00014000, $0.35, up $0.08)

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

Exit Target: $0.80

Return: -12.5%

Stop Target: None

Action: Resistance is at $13.75-$14. Support is at $13.50-$13.25.

 

Viavi Solutions (VIAV, $7.59, up $0.28)

VIAV September 7 calls (VIAV160916C00007000, $0.69, up $0.26)

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

Exit Target: $1.10

Return: 25%

Stop Target: None

Action: Resistance is at $7.75-$8 following today’s 52-week peak at $7.80. Support is trying to move up to $7.25.

Trade on!

Rick Rouse
Editor and Chief Options Strategist
Momentum Options