Dear Momentum Options Subscriber,
The bulls registered their best session since March following Monday’s blowout rally, which put an end to a nine-session slide. The bears were caught off guard, and they gave back more than half of the losses over that time period, but they still hold an edge as additional layers of resistance come into play.
The Dow jumped 371 points, or 2.1%, to close at 18,259. The blue-chips opened at 17,994 while reaching a peak of 18,263 into the closing bell. Fresh resistance is at 18,350-18,400, with a close above the latter being a very bullish development. Support has moved up to 18,200-18,100, with a close back below 18,000 providing another warning, or opportunity, to go “short.”
The S&P 500 surged 46 points, or 2.2%, to finish at 2,131. The index opened at the 2,100 level while trading to an intraday high of 2,132. The close above 2,130 should get near-term resistance at 2,140-2,150 back in play. Support has moved up to 2,120-2,115, with a close below 2,110-2,100 being a bearish development.
The Nasdaq zoomed nearly 120 points, or 2.4%, to settle at 5,166. Tech made a run to 5,169 late in the day, and the close above 5,150 was slightly bullish. Additional resistance is at 5,175-5,200. Support is at 5,125-5,100 on a move back below 5,150.
The Russell 2000 soared 28 points, or 2.5%, to end at 1,192. The small-caps led Monday’s charge higher and reached a peak of 1,193 ahead of the close. Lower resistance at 1,190-1,200 held, with a close above the latter likely leading to more short-covering. Support has moved up to 1,180-1,175. A close below 1,170 this week would favor the bears going forward.
The S&P 500 Volatility Index ($VIX, 18.71, down 3.80) sank 17% after tumbling to a low of 18.39 mid-day. The close below 20-19.50 was a bullish signal, and these are levels that now represent short-term resistance. Fresh support is at 18-17.50.
From desk to press, futures look like this: Dow (-14); S&P 500 (-3); Nasdaq 100 (-6); Russell (-3).
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).
Starbucks (SBUX, $54.49, up $1.74)
SBUX January 47.50 puts (SBUX170120P00047500, $0.38, down $0.21)
Entry Price: $0.95 (11/3/2016)
Exit Target: $1.90
Stop Target: None
Action: Monday’s peak reached $54.68. Resistance is at $54.50-$55. Support is at $54-$53.50.
Microsoft (MSFT, $60.42, up $1.71)
MSFT December 57.50 puts (MSFT161216P00057500, $0.64, down $0.62)
Entry Price: $0.86 (11/1/2016)
Exit Target: $1.75
Stop Target: None
Action: Shares traded to a high of $60.52 yesterday. Resistance is at $60-$60.50. Support is at $60-$59.
You can read my previous comments on MSFT in the Oct. 31 Mid-Market Update.
Lattice Semiconductor (LSCC, $7.86, up $0.11)
LSCC December 7.50 calls (LSCC161216C00007500, $0.45, up $0.10)
Entry Price: $0.30 (10/12/2016)
Exit Target: $0.70 (Limit Order)
Stop Target: None
Action: Resistance is at $7.75-$8. Support is at $7.50.
You can read my previous comments on LSCC and the buyout offer of $8.30 a share in Friday’s Pre-Market Update.
Viavi Solutions (VIAV, $7.50, up $0.20)
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 $7.50-$7.60. Support is at $7.40-$7.35.
Editor and Chief Options Strategist