Dear Momentum Options Subscriber,
The market pulled back on Tuesday, with the major indices falling below the previous October lows. The stretch below support and the lower lows could lead to further weakness, as Wall Street is finally noticing the spike in volatility.
The Dow dropped 105 points, or 0.6%, to end at 18,037. The blue-chips opened higher and made a run to 18,177 in the opening minutes, with resistance at 18,200 easily holding. It was all downhill afterwards, with the low checking in at 17,940 intraday. Support at 18,100-18,000 was stretched but held into the closing bell. It was the first dip below the 18,000 level since the mid-October low of 17,959. Additional help is at 17,900-17,800.
The S&P 500 sank 14 points, or 0.7%, to close at 2,111. The index tested a high of 2,131 on the open but failed to clear lower resistance at 2,135-2,140. I mentioned that a move below 2,125 could lead to further weakness to 2,100-2,075, with Tuesday’s low reaching 2,097.
The Nasdaq tumbled 35 points, or 0.7%, to finish at 5,153. Tech cleared near-term resistance at 5,200 after reaching a high of 5,201 during the first 10 minutes of trading. The fade to 5,112 intraday held lower support at 5,150-5,100, and the close above 5,150 looks neutral.
The Russell 2000 stumbled 13 points, or 1.1%, to settle at 1,177. The small-caps made an opening 3-point trip to 1,194, with resistance at 1,195-1,200 holding strong. The backtest to 1,170 breached near-term support at 1,180-1,175, and there is risk to 1,160-1,150 on a close below the latter.
The S&P 500 Volatility Index ($VIX, 18.56, up 1.50) closed higher for the sixth-straight session after testing a high of 20.43. Upper resistance at 20-22 held, but the close above 17.50 keeps these levels in play. Support is at 16.50-16 if the bulls can get back below 17.50.
From desk to press, futures look like this: Dow (-24); S&P 500 (-1); Nasdaq 100 (+1); Russell (-1).
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.
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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).
Microsoft (MSFT, $59.80, down $0.12)
MSFT December 57.50 puts (MSFT161216P00057500, $0.88, up $0.13)
Entry Price: $0.86 (11/1/2016)
Exit Target: $1.75
Stop Target: None
Action: The Exit Target is at $1.75, but it is not a Limit Order at this time. There is no Stop Target at this time.
Tuesday’s low tapped $59.25. Shaky support is at $59.50, and a backtest to $58-$57.75 and the 50-day moving average is possible on a close below this level. Resistance is at $60-$60.50.
You can read my previous comments on MSFT in the Oct. 31 Mid-Market Update.
Lattice Semiconductor (LSCC, $6.31, up $0.24)
LSCC December 7.50 calls (LSCC161216C00007500, $0.30, up $0.08)
Entry Price: $0.30 (10/12/2016)
Exit Target: $0.60-$0.90
Stop Target: None
Action: Yesterday’s peak reached $6.35. Resistance is at $6.25-$6.30 and the 50-day moving average. Support is at $6.05-$6 and the 100-day moving average.
The company is scheduled to announce earnings next Monday, and I will have a preview ready by Friday.
Viavi Solutions (VIAV, $7.11, down $0.01)
VIAV December 8 calls (VIAV161216C00008000, $0.12, up $0.01)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: $0.05 (Stop Limit)
Action: Support is at $7-$6.90, with risk to $6.75 and the 200-day moving average on a move below the latter. Resistance is at $7.20-$7.25 and the 100-day moving average.
The company beat estimates by a penny, with revenue also topping expectations.
Editor and Chief Options Strategist