Dear Momentum Options Subscriber,
Today is the 85th anniversary of the worst two-day stretch ever on Wall Street, in which the Dow lost a whopping 23% of its value. I was reminded of this 1929 nugget of history while I was doing my homework last week, and it’s one reason why I said it would be imperative the bulls clear resistance by the end of this week. So far, that hasn’t happened.
Leading into today’s action, the bearish signs were rapidly progressing throughout the week, especially yesterday, which is why I wanted to start adding put options to the portfolio.
The “symmetrical triangle” patterns I said were forming in the indices from last week, and the Dow chart from this morning, were very important pieces of information that I wanted to convey ahead of the weekend. Also, remember that the wacky action of a two-month-long trading range could continue into the second week of November and the presidential election.
Although the portfolio has taken some hits with call options, this can be expected when trying to predict market tops during trading ranges. With the Nasdaq coming within 1% of an all-time high on Tuesday’s close, it still remains to be seen if this will be the final highest highs of the year.
That is why this weekend’s work will be fun for me, as my forecast on the bigger picture for the market could be playing out. With the October lows back in play, there could be some weakness into the closing bell.
Bullish traders will need to decide if they want to buy on Monday or give the month to the bears given today’s tight action. The Dow is lower by 51 points to 18,117, while the S&P 500 is down 10 points to 2,122. The Nasdaq is down 24 points to 5,191, and the Russell 2000 is off a point to 1,188.
I could have a New Trade ahead of the closing bell. However, if you don’t hear from me within the next hour, have a great and safe weekend, and I will be back on Monday with a full report.
Momentum Options Play List
Closed Momentum Options Trades for 2016: 77-31 (71%). 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 2:10 p.m. EST.
I hereby disclose that I will be participating in the following trade(s).
PowerShares QQQ Trust (QQQ, $116.89, down $0.95)
QQQ November 115 puts (QQQ161118P00115000, $1.20, up $0.11)
Entry Price: $0.82 (10/27/2016)
Exit Target: $1.65
Stop Target: $0.87 (Stop Limit)
Action: The Stop Limit at $0.87 was triggered today, and we are now out of the position.
I’m disappointed by the action, but we can target these options, or perhaps December puts, on Monday morning. I could take action ahead of the close, but I don’t like rushing trades without doing the numbers. Going into the weekend with a light portfolio is also a relief to some degree.
Six Flags Entertainment (SIX, $53.85, up $0.57)
SIX November 50 puts (SIX161118P00050000, $0.33, up $0.04)
Entry Price: $1.46 (10/25/2016)
Exit Target: $3.00 (Limit Order on first half)
Stop Target: $0.15 (Stop Limit)
Action: The Stop Limit at $0.15 has triggered today, and we are now out of the position.
Lattice Semiconductor (LSCC, $6.15, down $0.11)
LSCC December 7.50 calls (LSCC161216C00007500, $0.20, flat)
Entry Price: $0.30 (10/12/2016)
Exit Target: $0.60-$0.90
Stop Target: None
Action: Support is at $6. Resistance is at $6.25-$6.35.
Viavi Solutions (VIAV, $7.12, down $0.03)
VIAV December 8 calls (VIAV161216C00008000, $0.11, 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.
This has been one of our longest-running trades of the year, and I like the fundamentals of this small-cap company. We should know next week on how this trade is going to play out into December, as earnings are due out on Tuesday.
Editor and Chief Options Strategist