Dear Momentum Options Subscriber,
The bears got their second-straight win on Tuesday, and the market’s lower levels of support have now come back into play. If the bulls can’t rebound today, this week’s listless trading could last into next week, and there could be a continued pullback into the start of third-quarter earnings season.
The Dow dropped 85 points, or 0.5%, to finish at 18,168. The blue-chips made a run to 18,313 shortly after the open, with resistance at 18,350-18,400 holding. The close below 18,200 and the low of 18,116 were slightly bearish developments. There is additional risk to 18,000-17,800 if 18,100 fails to hold.
The S&P 500 stumbled 10 points, or 0.5%, to close at 2,150. The index opened at 2,163 and pushed 2,165, with resistance at 2,170-2,175 standing tall. The fade to 2,144 split support at 2,150-2,140, and a close below 2,135-2,130 would signal continued weakness.
The Nasdaq tumbled 11 points, or 0.2%, to end at 5,289. Tech tested a high of 5,323, with lower resistance at 5,325-5,350 holding. The drop to 5,271 late in the session split support at 5,300-5,250. I mentioned that continued closes below the latter would favor the bears, and there is risk to 5,225-5,200 if that level is breached.
The Russell 2000 fell 6 points, or 0.5%, to settle at 1,239. The small-caps managed a 4-point climb to 1,249, but resistance at 1,250-1,260 held for the seventh-straight session. Lower support at 1,240-1,235 held by a quarter of a point, but the bulls failed to hold upper support into the close. There is risk to 1,225-1,220 if the bears can get below 1,235.
The S&P 500 Volatility Index ($VIX, 13.63, up 0.06) traded down to 12.92 intraday, with lower support at 13.50-12.50 holding. Resistance at 14.50-15 also held following the push to 14.57. A move above the latter could lead to 16.50-17.50 this week.
I have updated the parameters for yesterday’s New Trade in Kroger (KR) below, so please set them in your trading accounts accordingly.
From desk to press, futures look like this: Dow (+34); S&P 500 (+5); Nasdaq 100 (+10); Russell (+3).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 74-25 (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).
Kroger (KR, $29.00, down $0.28)
KR November 27.50 puts (KR161118P00027500, $0.50, up $0.10)
Entry Price: $0.50 (10/4/2016)
Exit Target: $1.00
Stop Target: None
Action: The Exit Target for the trade is at $1.00, but it is not a Limit Order at this time. There is no Stop Target at this time.
Shares traded to a fresh 52-week low of $28.88 on Monday, while holding $29 into the close. Multi-year support is at $28-$27.50 and the 200-week moving average, as you can see from the chart below. A close below the latter could lead to $26-$24. If shares trade down to $26.50 by November, the trade will return 100% from current levels.
Halozyme Therapeutics (HALO, $11.86, down $0.38)
HALO November 13 calls (HALO161118C00013000, $0.80, down $0.10)
Entry Price: $1.07 (9/27/2016)
Exit Target: $2.15
Stop Target: $0.55 (Stop Limit)
Action: Monday’s low tapped $11.83. Near-term support is at $12-$11.75. A move below $11.50 will likely get our Stop Limit in play. Resistance is now at $12-$12.25.
Goodyear Tire & Rubber (GT, $32.23, down $0.28)
GT October 33 calls (GT161021C00033000, $0.46, down $0.09)
Entry Price: $0.75 (9/22/2016)
Exit Target: $1.50
Stop Target: $0.30 (Stop Limit)
Action: Support is at $32.25-$32. Resistance is at $32.75-$33. Yesterday’s low reached $32.11.
Viavi Solutions (VIAV, $7.25, down $0.06)
VIAV December 8 calls (VIAV161216C00008000, $0.22, flat)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: $0.15 (Stop Limit)
Action: Support is at $7.25-$7.20. Resistance is at $7.45-$7.50 and the 50-day moving average.
Editor and Chief Options Strategist