Dear Momentum Options Subscriber,
The bears made some noise on Wednesday, with tech and the small-caps leading the move lower. Volatility also tested upper resistance, as Wall Street is preparing for Janet Yellen’s upcoming statements on Friday.
The Dow dropped 65 points, or 0.4%, to end at 18,481. The blue-chips stayed in the red from start to finish while bottoming at 18,448. The close below 18,500 was a bearish development, with resistance now at 18,500-18,600. Support at 18,400-18,350 held tight, but there is risk to 18,200 on a close below the latter.
The S&P 500 stumbled 11 points, or 0.5%, to settle at 2,175. The index traded in negative territory throughout the session, with the bears pushing a low of 2,171. Lower support held into the closing bell, as did the 2,170 level. A breach of this level could lead to additional weakness to 2,160-2,150. Resistance is at 2,185-2,190.
The Nasdaq tumbled 42 points, or 0.8%, to finish at 5,217. Tech made a 3-point run to hit a high just below 5,263, with resistance at 5,275-5,300 holding. Support at 5,225-5,200 came into play on the fade to 5,205. Backup help is at 5,175-5,150 on a move below 5,200.
The Russell 2000 declined 11 points, or 0.9%, to close at 1,237. The small-caps advanced half of a point in the opening minutes but failed to clear 1,249 and resistance at 1,250. Fresh support at 1,240-1,235 held on the backtest to yesterday’s low. There is risk to 1,225-1,220, if breached.
The S&P 500 Volatility Index ($VIX, 13.45, up 1.07) tested a low of 12.30 shortly after the open, with support at 11.50 holding. The late-day run to 14.01 cleared upper resistance at 12.50-13.50, and the bulls held the latter into the closing bell. I wouldn’t be surprised to see a test to 14.50-15 and a breach of the 50-day moving average today or tomorrow. How the dust settles afterwards and into Friday’s close will be key going into next week.
I have a Trade Alert for MGM Resorts International (MGM) below, and I have also placed a Stop Limit on our Bank of America (BAC) trade to start protecting profits.
From desk to press, futures look like this: Dow (-38); S&P 500 (-5); Nasdaq 100 (-12); Russell (-3).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 63-23 (73%). 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 8:00 a.m. EST.
I hereby disclose that I will be participating in the following trade(s).
MGM Resorts International (MGM, $23.55, down $0.76)
MGM September 25 calls (MGM160916C00025000, $0.15, down $0.13)
Entry Price: $0.70 (8/8/2016)
Exit Target: $1.40
Stop Target: $0.15 (Stop Limit)
Action: The Stop Limit at $0.15 was triggered into yesterday’s close, as shares finished the session down 3%, and we are now out of the position.
Bank of America (BAC, $15.40, up $0.05)
BAC September 15 calls (BAC160916C00015000, $0.57, up $0.06)
Entry Price: $0.50 (8/8/2016)
Exit Target: $1.00
Stop Target: $0.52 (Stop Limit)
Action: Set a Stop Limit at $0.52 to protect profits.
Near-term resistance is at $15.50-$15.75. Support has moved up to $15.25-$15.
Vuzix (VUZI, $7.31, down $0.01)
VUZI October 7.50 calls (VUZI161021C00007500, $0.99, down $0.01)
Entry Price: $0.95 (8/23/2016)
Exit Target: $1.90
Stop Target: None
Action: Resistance is at $7.50-$8. Support is at $7.25 and the 50-day moving average.
Energous (WATT, $16.49, up $0.65)
WATT November 17.50 calls (WATT161118C00017500, $1.90, up $0.35)
Entry Price: $1.15 (8/22/2016)
Exit Target: $2.30
Stop Target: $1.40 (Stop Limit)
Action: Shares traded to a fresh 52-week high of $17.41 yesterday. Near-term resistance is at $17.50-$18 on continued momentum. Fresh support is at $15.50-$15.
Viavi Solutions (VIAV, $7.75, down $0.08)
VIAV December 8 calls (VIAV161216C00008000, $0.45, down $0.06)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: None
Action: Support is at $7.75-$7.50. Resistance is at $8.
Rambus (RMBS, $13.71, down $0.07)
RMBS September 14 calls (RMBS160916C00014000, $0.21, down $0.04)
Entry Price: $0.40 (8/1/2016)
Exit Target: $0.80
Stop Target: None
Action: Support is at $13.50-$13.25. Resistance is at $14.
Editor and Chief Options Strategist