Dear Momentum Options Subscriber,
The market was flat ahead of the Fed’s decision on interest rates yesterday, but it rallied into the close after rates were left unchanged. Although the zombies gave no plausible excuse to raise rates, they did say in their meeting minutes that the case to raise rates had strengthened, and Wall Street is now looking for a possible hike in November or December.
The Dow jumped 163 points, or 0.9%, to settle at 18,293. The blue-chips traded down to 18,121 mid-day, with support at 18,100-18,000 holding. The run to 18,307 tested the next layers of resistance at 18,350-18,400. A close above the latter should get 18,600 back in play. The bulls need to hold 18,200 on a pullback.
The S&P 500 surged 23 points, or 1.1%, to finish at 2,163. The index held near-term support at 2,140-2,135 following the quarter-point dip to 2,139 ahead of the Fed news. The push to 2,165 should get resistance at 2,175-2,180 back on the map. The 52-week and all-time high is at 2,193.81.
The Nasdaq zoomed 53 points, or 1%, to close at 5,295. Tech fell to an intraday low of 5,233, with support at 5,225-5,200 easily holding. The rebound to an all-time high of 5,299 easily cleared prior resistance at 5,250-5,275, although the latter will need to hold on any pullback. I have talked about a possible record run to 5,300-5,350 this month, and my chart work from late February showed a possible push past 5,500.
The Russell 2000 rocketed 16 points, or 1.4%, to end at 1,245. The small-caps almost held positive territory throughout the session, but they slipped briefly to 1,228 ahead of the Fed speak. Support at 1,225-1,220 held, but it has now moved up to 1,240-1,335 following yesterday’s momentum. Fresh resistance is at 1,250-1,260. A close above the latter will likely set a new 52-week high north of 1,261. The all-time high is just south of 1,300.
The S&P 500 Volatility Index ($VIX, 13.30, down 2.62) tanked 16% by the close after trading in negative territory throughout the session. The index dropped below the first wave of support at 15-14.50, which is now resistance. The move below 13.50 was super bullish and should get the 12.50 level back in play.
I mentioned earlier this week that we would need to see the VIX close below the 15 level for consecutive sessions before we could fully trust the bulls. Today’s close should give us better clues as to whether the other major averages will continue their breakouts and test all-time highs.
However, I do have a New Trade ready for us this morning on a name that has already been setting fresh 52-week peaks, so let’s go check it out.
From desk to press, futures look like this: Dow (+65); S&P 500 (+7); Nasdaq 100 (+19); Russell (+5).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 72-24 (75%). 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).
Finisar (FNSR, $28.93, up $0.65)
Buy to open the FNSR November 30 calls (FNSR161118C00030000) for a maximum price of $1.25.
Action: I like these call options at current levels, and you can use a Limit Order up to $1.25 to get the best fills this morning.
These are the regular monthly options that expire on Nov. 18. I will provide the parameters of the trade in today’s Mid-Market Update.
Kroger (KR, $30.84, down $0.25)
KR October 30 puts (KR161021P00030000, $0.40, down $0.02)
Entry Price: $0.78 (9/7/2016)
Exit Target: $1.60 (Limit Order on first half)
Stop Target: $0.20 (Stop Limit)
Action: Set a Stop Limit at $0.20 to preserve the remaining premium.
Shares traded down to $30.62 yesterday. Support is at $30.75-$30.50 and the 52-week low is at $30.45. Resistance is at $31-$31.25.
Vuzix (VUZI, $8.74, up $0.16)
VUZI October 10 calls (VUZI161021C00010000, $0.35, flat)
Entry Price: $0.68 (9/7/2016)
Exit Target: $1.40
Stop Target: $0.25 (Stop Limit)
Action: Resistance is at $8.75-$9. Wednesday’s peak reached $8.75. Support is at $8.50-$8.25.
Viavi Solutions (VIAV, $7.37, up $0.06)
VIAV December 8 calls (VIAV161216C00008000, $0.26, up $0.02)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: $0.15 (Stop Limit)
Action: Support is at $7.20-$7.15 and the 200-day moving average. Near-term resistance is at $7.50.
Editor and Chief Options Strategist