Dear Momentum Options Subscriber,
The bulls tried to rally the troops on Tuesday’s open, but the bears took over shortly afterwards and controlled the rest of the session. The late-day lows were blamed on weaker-than-expected economic figures and a rising dollar, according to the market pundits. However, the continued trading range is still the main theme of this market, although a possible breakout or breakdown could occur this week or next.
The Dow gave back 48 points, or 0.3%, to end at 18,454. The blue-chips traded up to 18,514 on the open but failed to hold upper and lower resistance at 18,500-18,600. The drift to 18,408 held near-term support at 18,400-18,350.
The S&P 500 slipped 4 points, or 0.2%, to settle at 2,176. The index made a 2-point run to 2,182 but fell well shy of resistance at 2,190-2,200. Lower support at 2,175-2,170 held for the second-straight session, which was a bullish sign.
The Nasdaq dropped 9 points, or 0.2%, to finish at 5,222. Tech tested upper resistance at 5,225-5,250 after kissing 5,241 on the open, but the close below the latter was a bummer. Short-term support at 5,200-5,175 is back in play, but a close below the latter would be a bearish development.
The Russell 2000 added a point, or 0.1%, to close at 1,246. The small-caps held positive territory for much of the day and reached a peak of 1,248 for the second-straight session. Resistance remains at 1,250-1,260, but a close above the latter would likely lead to a bullish breakout. Support is at 1,240-1,235.
The S&P 500 Volatility Index ($VIX, 13.12, up 0.18) edged higher to 13.60 to clear lower resistance at 13.50-14.50. The bulls held this level after making a run to 12.70 on the opening bell, with upper support at 12.50-11.50 holding.
I mentioned previously that the three-day holiday weekend is coming into play, as the market is closed next Monday, Sept. 5. This will effect September options and time decay in a major way starting next Tuesday, as they expire two weeks from this Friday.
This means that for our next batch of trades I will likely continue to use October, November and December options. This also means that I’ll have to redo the playbook and the math while figuring out market direction into September and October. Stay patient for New Trades, as my watch list has 15-20 bullish and bearish trades ready to roll over the next week or two.
I have raised the Stop Limits for our Energous (WATT) and Bank of America (BAC) trades below, so please adjust them in your trading accounts accordingly.
From desk to press, futures look like this: Dow (-8); S&P 500 (-0.5); Nasdaq 100 (+0); Russell (+0.4).
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).
Energous (WATT, $17.08, down $1.29)
WATT November 17.50 calls (WATT161118C00017500, $2.70 down $0.30)
Entry Price: $1.15 (8/22/2016)
Exit Target: $5.00 (closed first half at $2.50 on 8/29/2016)
Stop Target: $2.00, raise to $2.10 (Stop Limit)
Action: Raise the Stop Limit from $2.00 to $2.10 on the second half of the trade. This will ensure a 100% return.
Shares traded to a 52-week high of $19.29 on Tuesday. Resistance is at $18.50-$19, followed by $20. Support is at $16.50-$16.
Bank of America (BAC, $16.19, up $0.35)
BAC September 15 calls (BAC160916C00015000, $1.18, up $0.32)
Entry Price: $0.50 (8/8/2016)
Exit Target: $1.25 (closed first half at $0.63 on 8/25/2016)
Stop Target: $0.80, raise to $1.05 (Stop Limit)
Action: Raise the Stop Limit from $0.80 to $1.05 on the second half of the trade.
Tuesday’s high reached $16.23. Resistance is now at $16.25-$16.50. Support has moved up to $16-$15.75.
Nucor (NUE, $48.60, down $0.84)
NUE October 52.50 calls (NUE161021C00052500, $0.46, down $0.14)
Entry Price: $0.63 (8/25/2016)
Exit Target: $1.30
Stop Target: None
Action: Support has moved up to $48.50-$48. Resistance is at $49.50-$50.
Vuzix (VUZI, $8.38, down $0.21)
VUZI October 7.50 calls (VUZI161021C00007500, $1.45, down $0.25)
Entry Price: $0.95 (8/23/2016)
Exit Target: $2.50
Stop Target: $1.25 (Stop Limit)
Action: Shares traded to a high of $8.77 before fading to a low of $8.20. Resistance is at $8.75-$9. Support is at $8.25-$8, but a close below the latter will likely trigger our Stop Limit.
Viavi Solutions (VIAV, $7.83, up $0.05)
VIAV December 8 calls (VIAV161216C00008000, $0.48, up $0.02)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: None
Action: Monday’s high reached a 52-week peak at $7.89. Resistance is at $7.85-$8. Support is at $7.75-$7.50.
Rambus (RMBS, $13.92, up $0.13)
RMBS September 14 calls (RMBS160916C00014000, $0.29, up $0.09)
Entry Price: $0.40 (8/1/2016)
Exit Target: $0.80
Stop Target: None
Action: Resistance is at $14. Yesterday’s high touched $13.99. Support is at $13.75-$13.50.
Editor and Chief Options Strategist