Dear Momentum Options Subscriber,
The market pundits were accurate in predicting that the Fed would stand pat on raising interest rates, and the December meeting is now in focus. Still on the radar for this week is Friday’s unemployment report, which could come in weaker-than-expected based on another private sector jobs report released on Wednesday.
The Dow fell 77 points, or 0.4%, to end at 17,959. The blue-chips made a brief 7-point intraday run to 18,044 but fell shy of lower resistance at 18,100-18,200. The close below 18,000 was a bearish development and the first since early July. Support is at 17,900-17,800, with a move below the latter opening the flood gates to 17,600.
The S&P 500 gave back 13 points, or 0.7%, to close just under 2,098. The index saw a little daylight but made a gain of less than a point shortly after the open, with fresh resistance at 2,115-2,120 holding. The drop to 2,094 and close below the 2,100 level after the Fed news opened weakness to 2,075-2,060.
The Nasdaq tanked 48 points, or 0.9%, to finish at 5,105. Tech tested a high of 5,156, but the 3-point gain failed to clear lower resistance at 5,175-5,200. The bears pushed a low of 5,097, and I warned of risk to 5,100 if 5,150 failed to hold. Additional help levels are at 5,075-5,050, with a close below the latter likely leading to much lower lows.
The Russell 2000 sank 15 points, or 1.3%, to settle at 1,162. The small-caps traded in the red throughout the session, with the low checking in at 1,161. Upper support at 1,160-1,150 held, with the latter being the last line of hope for a bullish comeback this week. The 1,150 level is just a couple points above the 200-day moving average.
The S&P 500 Volatility Index ($VIX, 19.32, up 0.76) stayed elevated throughout Wednesday’s session, with the bears pushing a high of 19.82. The fact that the bulls held the 20 level was a minor victory, but there is still risk to 22. Support is at 18-17.50.
The close below 18,000 on the Dow and 2,100 on the S&P 500 were the first since early July. I have index options ready to play additional weakness, but I want to ensure that there is no rebound, as one could eventually materialize depending on Friday’s jobs report.
From desk to press, futures look like this: Dow (+36); S&P 500 (+4); Nasdaq 100 (+0.25); Russell (+5).
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 8:00 a.m. EST.
I hereby disclose that I will be participating in the following trade(s).
Microsoft (MSFT, $59.43, down $0.37)
MSFT December 57.50 puts (MSFT161216P00057500, $0.98, up $0.10)
Entry Price: $0.86 (11/1/2016)
Exit Target: $1.75
Stop Target: None
Action: Shares traded to a low of $59.30 on Tuesday. The close below near-term support at $59.50 gets $58-$57.75 and the 50-day moving average in play. Resistance is at $60-$60.50. The “island cluster” appears to be cracking, and the lower lows are good signs.
You can read my previous comments on MSFT in the Oct. 31 Mid-Market Update.
Lattice Semiconductor (LSCC, $6.37, up $0.06)
LSCC December 7.50 calls (LSCC161216C00007500, $0.28, down $0.02)
Entry Price: $0.30 (10/12/2016)
Exit Target: $0.60-$0.90
Stop Target: None
Action: Shares reached a peak of $6.53 yesterday. Fresh resistance is at $6.50-$6.55. A close above the latter should lead to a return run to $6.75-$7. Support is at $6.30-$6.25 and the 50-day moving average.
The company is scheduled to announce earnings next Monday, and I will have a preview ready by Friday.
Viavi Solutions (VIAV, $7.17, up $0.06)
VIAV December 8 calls (VIAV161216C00008000, $0.11, down $0.01)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: $0.05 (Stop Limit)
Action: Resistance is at $7.20-$7.25 and the 100-day moving average. Support is at $7-$6.90, but another backtest to these levels will likely trigger the Stop Limit at a nickel. This has been our longest-running trade of the year, but we still have over five weeks for shares to make a run past $8.
Editor and Chief Options Strategist