Dear Momentum Options Subscriber,
Although the bulls held support and the blue-chips finished the session higher on Wednesday, the lower lows for the week are a cause for concern. Additional weakness and a move below last week’s lows could lead to some end-of-month drama and provide more momentum for the bears.
The Dow gained 30 points, or 0.2%, to finish at 18,199. The blue-chips tested a low of 18,062, but they held last Friday’s low of 18,049 and, more importantly, support at 18,100-18,000. The rebound to 18,236 was the third-straight lower low, with resistance at 18,300-18,350 easily holding.
The S&P 500 fell 3 points, or 0.2%, to settle at 2,139. The index traded down to 2,131 on the open, with support at 2,135-2,125 getting split. The mid-day run to 2,145 pushed lower resistance at 2,145-2,150, but it failed to hold, and the close below 2,140 was a bearish signal.
The Nasdaq dropped 33 points, or 0.6%, to end at 5,250. Tech stayed in the red throughout the session, with the bottom checking in at 5,237. Lower support at 5,250 held into the close, but risk to 5,200-5,150 is back in play on additional selling pressure.
The Russell 2000 sank 11 points, or 0.9%, to close at 1,204. The small-caps also traded in negative territory throughout Wednesday’s session, while finishing a point off of their low of 1,203. Backup support at 1,200-1,195 held, but there is risk to 1,175 on a move below the latter. Fresh resistance is at 1,215-1,220.
The S&P 500 Volatility Index ($VIX, 14.24, up 0.78) jumped 6% but held crucial resistance at 14.50-15 following the intraday high of 14.80. A close above the latter could lead to a quick spike to 16.50-17.50. Support remains at 13.50-12.50, which are levels the bulls need to get back below ahead of the weekend.
I have set a Stop Limit on our Six Flags Entertainment (SIX) position below, and I could have New Trades this morning depending on the action, as we have plenty of room in the portfolio.
I can see a possible continued trading range ahead of the presidential election, providing near-term support holds. However, if lower lows come into play today or tomorrow, get ready to possibly go “short” with put options.
From desk to press, futures look like this: Dow (+27); S&P 500 (+6); Nasdaq 100 (+14); Russell (+4).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 76-29 (72%). 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).
Six Flags Entertainment (SIX, $53.89, up $2.64)
SIX November 50 puts (SIX161118P00050000, $0.29, down $1.23)
Entry Price: $1.46 (10/25/2016)
Exit Target: $3.00 (Limit Order on first half)
Stop Target: $0.15 (Stop Limit)
Action: Set a Stop Limit at $0.15 to save the remaining premium.
Fresh resistance is at $54-$54.25, but there is risk to $55 on a close above the latter. Support is at $53.50 and the 200-day moving average, which are levels I would like to see the stock get below ahead of the weekend.
Lattice Semiconductor (LSCC, $6.27, down $0.22)
LSCC December 7.50 calls (LSCC161216C00007500, $0.24, down $0.01)
Entry Price: $0.30 (10/12/2016)
Exit Target: $0.60-$0.90
Stop Target: None
Action: Support is at $6.30-$6.25 and the 50-day moving average. Wednesday’s low tapped $6.26. Near-term resistance is at $6.60-$6.75.
Finisar (FNSR, $29.49, up $0.04)
FNSR November 31 calls (FNSR161118C00031000, $0.40, flat)
Entry Price: $1.28 (10/10/2016)
Exit Target: $2.60
Stop Target: $0.30 (Stop Limit)
Action: Yesterday’s peak reached $29.90. Resistance is at $30-$30.25. Support is at $29-$28.75.
Viavi Solutions (VIAV, $7.25, up $0.03)
VIAV December 8 calls (VIAV161216C00008000, $0.14, down $0.02)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: $0.05 (Stop Limit)
Action: Resistance is at $7.25-$7.35 and the 50-day moving average. Wednesday’s high reached $7.34. Support is at $7.10-$7 and the 100-day moving average.
Editor and Chief Options Strategist