Dear Momentum Options Subscriber,
The bulls followed the game plan we drew in the sand ahead of Monday’s open, as the Dow halted its Monday losing streak at three. The major indices held most of their gains into the close, and volatility settled down despite the pop at the opening bell.
The Dow gained 88 points, or 0.5%, to end at 18,329. The blue-chips tested a high of 18,399 during the first 30 minutes of trading, with upper resistance at 18,350-18,400 holding. The failure to hold the 50-day moving keeps support at 18,200-18,100 in play.
The S&P 500 added nearly 10 points, or 0.5%, to settle at 2,163. The index traded to a morning high of 2,169 to push upper resistance at 2,165-2,170. The bulls failed to hold the 50-day moving average by a field goal, and support is at 2,150-2,140 on another move back below 2,160.
The Nasdaq jumped 36 points, or 0.7%, to finish at 5,328. Tech made a push to 5,340 shortly after the open, with lower resistance at 5,325-5,350 holding into the closing bell. The bulls fell two points shy of setting another all-time high, but there is fluff to 5,400-5,500 if the high is breached. Support has moved back up to 5,300-5,275.
The Russell 2000 soared 14 points, or 1.2%, to close above the 1,250 level. The small-caps kissed an intraday high of 1,253, with lower resistance at 1,250-1,260 holding. Continued closes above the latter should get 1,270-1,275 in the mix. Support remains at 1,240-1,235, and the close back above the 50-day moving average looked bullish.
The S&P 500 Volatility Index ($VIX, 13.38, down 0.10) surged to 14.36 at the start of trading, with resistance at 14.50-15 and the 100-day moving average holding. The close below 13.50 for the second-straight session was slightly bullish, but lower support at 12.50-11.50 needs to hold to keep a return to record highs on the map.
I have updated the parameters of our Finisar (FNSR) trade from yesterday, and I also have a New Trade in Apple (AAPL) listed below, so let’s go check out the details.
From desk to press, futures look like this: Dow (-38); S&P 500 (-6); Nasdaq 100 (-5); Russell (-4).
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).
Apple (AAPL, $116.05, up $1.99)
Buy to open the AAPL November 125 calls (AAPL161118C00125000) for a maximum price of $1.10.
Action: I like these call options at current levels, and you can use a Limit Order up to $1.10 to get the best fills.
I want us to get us into this trade at the open, as shares of AAPL appear to be on the verge of clearing $120 and making a November run towards $125-$130. Monday’s close above $115 has made me bullish on the stock over the near term.
These are the regular November calls that expire on Nov. 18. I will provide the parameters of the trade in today’s Mid-Market Update.
Finisar (FNSR, $30.64, down $0.02)
FNSR November 31 calls (FNSR161118C00031000, $1.28, down $0.02)
Entry Price: $1.28 (10/10/2016)
Exit Target: $2.60
Stop Target: $0.60
Action: The Exit Target for the trade is at $2.60, but it is not a Limit Order at this time. The Stop Target is at $0.60, but it is not a Stop Limit order at this time.
Shares traded to a fresh 52-week high of $31.34 on Monday. Resistance is at $31-$31.50. Support is at $30, but there is risk to $29-$28 if that support level is breached. The major moving averages remain in a solid uptrend, and my near-term price target is $33-$35 on continued strength.
Earnings aren’t due out until early December, so this headline event should not come into play while the trade is open.
You can read my detailed write-up on FNSR in the Sept. 22 Mid-Market Update.
Halozyme Therapeutics (HALO, $12.17, up $0.25)
HALO November 13 calls (HALO161118C00013000, $0.65, down $0.10)
Entry Price: $1.07 (9/27/2016)
Exit Target: $2.15
Stop Target: $0.55, lower to $0.40 (Stop Limit)
Action: Lower the Stop Limit from $0.55 to $0.40. With shares clearing $12 yesterday, I do not want the market makers or scalpers taking us out of the trade.
Shares reached an intraday peak of $12.27 on Monday. Resistance is at $12.25-$12.50. Near-term support is at $12-$11.75.
Goodyear Tire & Rubber (GT, $32.50, down $0.33)
GT October 33 calls (GT161021C00033000, $0.41, down $0.20)
Entry Price: $0.75 (9/22/2016)
Exit Target: $1.50
Stop Target: $0.30, lower to $0.20 (Stop Limit)
Action: Lower the Stop Limit from $0.30 to $0.20.
Support is at $32.75-$32.50. Resistance is at $33. Shares reached a morning high of $33.33 before the backtest to lower support. The options tapped $0.80.
Viavi Solutions (VIAV, $7.32, up $0.07)
VIAV December 8 calls (VIAV161216C00008000, $0.18, down $0.04)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: $0.15, lower to $0.05 (Stop Limit)
Action: Lower the Stop Limit from $0.15 to $0.05.
I usually don’t carry Stop Limits on options under $1, but I had set a few coming into October, as it is a historically volatile month. This has been one of our longest running trades for 2016, but I remain bullish on the stock. In the meantime, I’m placing the trade on “hold.” If I take action in the upcoming weeks or if the trade comes back, I will send out a Trade Alert.
Resistance is at $7.45-$7.50 and the 50-day moving average. Support is at $7.25-$7.15 and the 100-day moving average.
Kroger (KR, $29.05, up $0.05)
KR November 27.50 puts (KR161118P00027500, $0.40, down $0.04)
Entry Price: $0.50 (10/4/2016)
Exit Target: $1.00
Stop Target: None
Action: Resistance is at $29.25-$29.50. Near-term support is at $29-$28.75. Yesterday’s peak reached $29.39.
Editor and Chief Options Strategist