Dear Momentum Options Subscriber,
The bears made an appearance on Thursday, but they did little to disrupt my thesis of staying long. Volatility continued to fade, although it could get going again if October options expiration comes into play today. In recent months, the action has been less volatile on expiration days, and a VIX close below 13.50 would be a very bullish sign ahead of the weekend.
The Dow dropped 40 points, or 0.2%, to finish at 18,162. The blue-chips traded in a 110-point range, with the high checking in at 18,250 on the open. Near-term resistance at 18,350-18,400 easily held, but the close back below 18,200 keeps me cautious. Support is at 18,000-17,900.
The S&P 500 slipped 3 points, or 0.1%, to close at 2,141. The index made a slight 2-point push to 2,147, with upper resistance at 2,140-2,150 holding. Support is at 2,125-2,120 on a move back below 2,135.
The Nasdaq gave back 4 points, or 0.1%, to end at 5,241. Tech made a 6-point run to 5,262, with lower resistance at 5,250-5,275 holding for the eighth straight session. Support at 5,225-5,200 held on the backtest to 5,216.
The Russell 2000 stumbled 2 points, or 0.2%, to settle at 1,219. The small-caps traded in negative territory throughout the session, with the low tapping 1,213. Support at 1,210-1,200 has held since mid-July, and a close below the latter would be a very bearish development. Resistance remains at 1,225-1,230.
The S&P 500 Volatility Index ($VIX, 13.75, down 0.66) reached a peak of 14.72 shortly after the open, with near-term resistance at 14.50-15 holding. Support at 13.50-12.50 held on the fade to 13.74 into the closing bell.
The continued trading range has been a little frustrating following a fabulous September and a third-quarter in which we were ringing the cash register at a sweet pace. Although this month has been another see-saw game, I’m still looking for a breakout to all-time highs again.
From desk to press, futures look like this: Dow (-92); S&P 500 (-10); Nasdaq 100 (-9); Russell (-8).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 74-28 (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).
E*Trade Financial (ETFC, $28.20, down $0.28)
ETFC November 29 calls (ETFC161118C00029000, $0.67, down $0.13)
Entry Price: $0.90 (10/17/2016)
Exit Target: $1.80
Stop Target: None
Action: The company topped estimates by a whopping $0.15 after the closing bell yesterday. Revenues also came in at $486 million versus expectation for a print under $471 billion. Shares were up 2% in after-hours trading on Thursday, and I’m hoping momentum carries shares past $30 today.
Resistance is at $28.50-$28.75, with a close above $29 being a bullish development. Support is at $28-$27.75.
You can read my detailed write-up on ETFC in Wednesday’s Mid-Market Update.
PowerShares QQQ ETF (QQQ, $117.71, down $0.14)
QQQ November 120 calls (QQQ161118C00120000, $0.95, up $0.03)
Entry Price: $0.99 (10/13/2016)
Exit Target: $2.00
Stop Target: None
Action: Yesterday’s low tapped $117.03. Support is at $117.50-$117. Resistance is at $118 and the 50-day moving average, followed by $119-$120.
Lattice Semiconductor (LSCC, $6.49, down $0.02)
LSCC December 7.50 calls (LSCC161216C00007500, $0.30, down $0.05)
Entry Price: $0.30 (10/12/2016)
Exit Target: $0.60-$0.90
Stop Target: None
Action: Thursday’s range was $6.55-$6.44. Support is at $6.25. Resistance is at $6.75.
Apple (AAPL, $117.06, down $0.06)
AAPL November 125 calls (AAPL161118C00125000, $0.66, down $0.08)
Entry Price: $1.10 (10/11/2016)
Exit Target: $2.20
Stop Target: None
Action: Support is at $117-$116.50. There is risk to $114-$113.75 on a close below the latter. Resistance is at $118-$118.25. Yesterday’s low tapped $116.33.
Finisar (FNSR, $29.68, up $0.03)
FNSR November 31 calls (FNSR161118C00031000, $0.61, down $0.09)
Entry Price: $1.28 (10/10/2016)
Exit Target: $2.60
Stop Target: $0.30 (Stop Limit)
Action: Resistance is at $29.75-$30, with Thursday’s peak reaching $29.71. Support is at $29-$28.75.
Viavi Solutions (VIAV, $7.29, down $0.06)
VIAV December 8 calls (VIAV161216C00008000, $0.16, flat)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: $0.05 (Stop Limit)
Action: 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.
Editor and Chief Options Strategist