Dear Momentum Options Subscriber,
The bears got their second-straight win on Thursday, although the bulls held near-term support. Volatility stayed elevated but held resistance. The financial sector traded higher ahead of this morning’s Fed comments and is holding slight gains for the week. Given the circumstances, today’s close should offer great clues as to how next week and the beginning of September might play out.
The Dow dipped 33 points, or 0.2%, to settle at 18,448. The blue-chips traded up to 18,497 intraday, with lower resistance at 18,500-18,600 holding. Support at 18,400-18,350 came into play on the low of 18,431 during the second half of the action, and a close below the latter would be a bearish development for next week.
The S&P 500 slipped 3 points, or 0.1%, to finish at 2,172. The index made a slight run to near-term resistance at 2,185-2,190 after testing 2,179 during the first half of trading. The trip to 2,169 afterwards was a lower low than we saw on Wednesday, but it held the 2,070 level. Backup support is at 2,160-2,150.
The Nasdaq fell 5 points, or 0.1%, to close at 5,212. Tech showed some strength after reaching a peak of 5,230 shortly after the open, with fresh resistance at 5,225-5,250 holding. A close above the latter today would be a bullish clue for next week. Lower support at 5,225-5,200 held on the drop to 5,201 into the closing bell. Additional support is at 5,175-5,150 on a move below 5,200.
The Russell 2000 added nearly 3 points, or 0.2%, to end right on 1,240. The small-caps kissed 1,234 while stretching support at 1,240-1,235 by a point. I have warned of risk to 1,225-1,220 on a close below the latter. The rebound to 1,243 and positive close offer some bullish hope for today.
The S&P 500 Volatility Index ($VIX, 13.63, up 0.18) opened higher at 13.62 before testing a low of 13.29 Thursday morning. Support at 12.50-11.50 held, and a close below either level would be a bullish sign. The high of 14.09 was a higher high than we saw on Thursday, which keeps risk open to 14.50-15 and the 50-day moving average.
I have updated the parameters of yesterday’s bullish Nucor (NUE) trade below, and I’ve also raised the Stop Limit on our Bank of America (BAC) position, so let’s go check the action.
From desk to press, futures look like this: Dow (+1); S&P 500 (+0.25); Nasdaq 100 (-2); Russell (+0.6).
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).
Nucor (NUE, $48.81, down $0.12)
NUE October 52.50 calls (NUE161021C00052500, $0.59, flat)
Entry Price: $0.63 (8/25/2016)
Exit Target: $1.30
Stop Target: None
Action: The Exit Target for the trade is at $1.30, but it is not a Limit Order at this time. There is no Stop Limit at this time either.
Shares are trying to recover resistance at $49-$50 and the 100-day moving average. A close above the latter would be a bullish development. There is risk to $46 on a close below $48.
Bank of America (BAC, $15.53, up $0.05)
BAC September 15 calls (BAC160916C00015000, $0.67, up $0.10)
Entry Price: $0.50 (8/8/2016)
Exit Target: $1.00 (closed first half at $0.63 on 8/25/2016)
Stop Target: $0.52, raise to $0.55 (Stop Limit)
Action: Raise the Stop Limit from $0.52 to $0.55 on the second half of the position.
Thursday’s peak reached $15.54. Near-term resistance is at $15.50-$15.75. Support has moved up to $15.25-$15.
Vuzix (VUZI, $7.66, up $0.35)
VUZI October 7.50 calls (VUZI161021C00007500, $0.85, down $0.14)
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, $16.10, down $0.39)
WATT November 17.50 calls (WATT161118C00017500, $1.73, down $0.17)
Entry Price: $1.15 (8/22/2016)
Exit Target: $2.30
Stop Target: $1.40 (Stop Limit)
Action: Shares traded to a low of $15.70 before rebounding to hold $16. Support is trying to move up to $15.75-$15.50 if $16 fails again. Resistance is at $17-$17.50.
Viavi Solutions (VIAV, $7.73, down $0.02)
VIAV December 8 calls (VIAV161216C00008000, $0.46, up $0.01)
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, $13.90, up $0.19)
RMBS September 14 calls (RMBS160916C00014000, $0.29, up $0.08)
Entry Price: $0.40 (8/1/2016)
Exit Target: $0.80
Stop Target: None
Action: Resistance is at $14, with yesterday’s high tapping $14.01. Support is at $13.50-$13.25 on a close back below $13.75.
Editor and Chief Options Strategist