Dear Momentum Options Subscriber,
I know I have sounded like a broken record all month by continually hinting that the market could possibly return to all-time highs. Well, the bulls were almost there, and they were looking for Apple (AAPL) to help take them back to the promised land. However, a disappointing report has caused another “skip” in the record, and that has Wall Street preparing for another pullback.
The Dow dropped 53 points, or 0.3%, to settle at 18,169. The blue-chips made a run to 18,241 shortly after the open, but they failed to clear Monday’s high of 18,275. More importantly, resistance at 18,300-18,350 and the 50-day moving average held and has been holding since early September. Support at 18,100-18,000 stuck following the backtest to 18,151. A close below the latter would be a bearish development.
The S&P 500 gave back 8 points, or 0.4%, to finish at 2,143. The index briefly traded into positive territory to 2,151 about 30 minutes after the open, with upper resistance at 2,145-2,150 easily holding. Support at 2,135-2,125 held on the mid-day pullback to 2,141, but there is risk to 2,100 on a close below the latter.
The Nasdaq stumbled 26 points, or 0.5%, to close at 5,283. Tech traded a half-point higher to 5,310 on the opening scuffle, with resistance at 5,325-5,350 easily holding. The fade to 5,278 late in the session split support at 5,300-5,250. A move below the latter could lead to a quick trip to 5,200-5,150.
The Russell 2000 tumbled 10 points, or 0.8%, to end at 1,216. The small-caps traded in negative territory throughout the day, with the low tapping 1,214. Lower support at 1,220-1,215 held into the closing bell, but there is risk to 1,200-1,195 on a close below the latter. Resistance remains at 1,225-1,235.
The S&P 500 Volatility Index ($VIX, 13.46, up 0.44) tested a low of 12.73 but failed to clear support at 12.50 in classic fashion. Near-term resistance at 13.50 held into the close following the late-day push to 13.86. Another move or close above 13.50 should get 14.50-15 back in play.
Getting back to Apple, the company topped estimates by a penny after Tuesday’s close but missed on revenue, and shares are near $115 as we head to press. We could have several trades in play this morning, so stay close to your email inboxes for possible Trade Alerts and/or New Trades.
From desk to press, futures look like this: Dow (-41); S&P 500 (-7); Nasdaq 100 (-19); Russell (-5).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 75-28 (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).
Apple (AAPL, $118.25, up $0.60)
AAPL November 125 calls (AAPL161118C00125000, $0.80, up $0.03)
Entry Price: $1.10 (10/11/2016)
Exit Target: $2.20
Stop Target: $0.20 (Stop limit)
Action: Set a Stop Limit at $0.20 to save the remaining premium.
With shares below $115 last night, a $10 move will need to be made up by mid-November. That is not likely to happen given prior resistance and today’s pullback.
PowerShares QQQ ETF (QQQ, $119.19, down $0.38)
QQQ November 120 calls (QQQ161118C00120000, $1.24, down $0.18)
Entry Price: $0.99 (10/13/2016)
Exit Target: $2.00 Limit Order (closed first half @$1.29 on 10/25/2016)
Stop Target: $1.10 (Stop Limit)
Action: Set a Limit Order to close the second half of the trade at $2.00.
The Stop Limit at $1.10 could be triggered today if tech falters on the Apple earnings news. I have set the Limit Order on the second half at $2.00 in case we aren’t stopped out and a run towards record highs comes back into play for the Nasdaq. However, that isn’t likely to happen today.
Support is at $118. Resistance is at $119.50-$120.
Six Flags Entertainment (SIX, $51.25, down $0.50)
SIX November 50 puts (SIX161118P00050000, $1.52, up $0.52)
Entry Price: $1.46 (10/25/2016)
Exit Target: $3.00 (Limit Order on first half)
Stop Target: None
Action: SIX is down 5% in pre-market trading following earnings this morning. Resistance is at $51.75-$52. Support is at $50.50-$50, with a close below the latter being a bearish development.
If our Limit Order on the first half triggers after the open, I will likely update the trade with a protective stop to protect profits. If shares zoom higher, I will deliver the bad news in the Mid-Market Update or issue a Trade Alert later this morning.
Lattice Semiconductor (LSCC, $6.49, down $0.07)
LSCC December 7.50 calls (LSCC161216C00007500, $0.25, up $0.01)
Entry Price: $0.30 (10/12/2016)
Exit Target: $0.60-$0.90
Stop Target: None
Action: LSCC traded up to $6.63 yesterday and was up $0.22 in after-hours trading to $6.71.
Near-term resistance is at $6.60-$6.75. Support is at $6.30-$6.25 and the 50-day moving average.
Finisar (FNSR, $29.45, down $0.41)
FNSR November 31 calls (FNSR161118C00031000, $0.40, down $0.20)
Entry Price: $1.28 (10/10/2016)
Exit Target: $2.60
Stop Target: $0.30 (Stop Limit)
Action: Support is at $29-$28.75. Resistance is at $30-$30.25. The Stop Limit at $0.30 could come into play on additional weakness today.
Viavi Solutions (VIAV, $7.22, down $0.07)
VIAV December 8 calls (VIAV161216C00008000, $0.16, down $0.03)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: $0.05 (Stop Limit)
Action: Support is at $7.10-$7 and the 100-day moving average. Resistance is at $7.25-$7.35 and the 50-day moving average.
Editor and Chief Options Strategist