Dear Momentum Options Subscriber,
The Dow hasn’t made a triple-digit move in 11 sessions, and the lack of 1% moves in the overall market has confirmed the trading range that I warned about at the start of last week. I followed up those comments this morning by saying that the tight action could continue into the presidential election, but the lower lows, I warned, are concerning.
October has been known for historical selloffs, but the month is usually a good time to start buying weakness in tech, according to seasonal patterns. A trading range usually signals that a bigger breakout or breakdown is forthcoming, so it is still too early to say how the longer-term picture will look for the market.
The good news is that the next batch of trades over the coming three weeks should carry us into late December and early January as I look to put a cherry on top of another fantastic year. Although October has been extremely difficult with a 2-3 track record for trades opened this month, I made sure to keep the portfolio light to prepare for the current trading range.
It is important NOT to overtrade or try to force a trade during this kind of slack action, and timing a market top is never easy. Although I’m still hopeful for higher highs and a positive October, the charts are hinting otherwise, which is why I went with today’s index option trade in the PowerShares QQQ Trust (QQQ).
The Dow is higher by 11 points to 18,210, while the S&P 500 is slipping by half of a point to 2,139. The Nasdaq is declining 18 points to 5,231, and the Russell 2000 is down 10 points to 1,194.
I have updated the parameters of the QQQ trade below, and I also have a Trade Alert for our position in Finisar (FNSR), as the Stop Limit has been triggered.
Momentum Options Play List
Closed Momentum Options Trades for 2016: 76-30 (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 2:05 p.m. EST.
I hereby disclose that I will be participating in the following trade(s).
Finisar (FNSR, $28.20, down $1.29)
FNSR November 31 calls (FNSR161118C00031000, $0.25, down $0.15)
Entry Price: $1.28 (10/10/2016)
Exit Target: $2.60
Stop Target: $0.30 (Stop Limit)
Action: The Stop Limit was triggered during today’s pullback in the stock, and we are now out of the position.
PowerShares QQQ Trust (QQQ, $118.15, down $0.23)
QQQ November 115 puts (QQQ161118P00115000, $0.82, up $0.05)
Entry Price: $0.82 (10/27/2016)
Exit Target: $1.65
Stop Target: None
Action: The Exit Target for the trade is at $1.65, but it is not a Limit Order at this time. There is no Stop Target at this time.
Near-term support is at $118-$117.50. Resistance is at $118.75-$119.
Six Flags Entertainment (SIX, $53.62, down $0.27)
SIX November 50 puts (SIX161118P00050000, $0.27, down $0.02)
Entry Price: $1.46 (10/25/2016)
Exit Target: $3.00 (Limit Order on first half)
Stop Target: $0.15 (Stop Limit)
Action: Support is at $53.50 and the 200-day moving average. Resistance is at $54-$54.25, but there is risk to $55 on a close above the latter.
Lattice Semiconductor (LSCC, $6.32, up $0.05)
LSCC December 7.50 calls (LSCC161216C00007500, $0.15, down $0.09)
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. Near-term resistance is at $6.60-$6.75.
Viavi Solutions (VIAV, $7.14, down $0.11)
VIAV December 8 calls (VIAV161216C00008000, $0.12, down $0.02)
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