Dear Momentum Options Subscriber,
The market shrugged off a rocky start and some overnight jitters to push higher highs and additional layers of resistance yesterday, registering its third-straight win. The gains helped put all-time highs back in reach, and the VIX closed below 15 for the first time since late October.
The Dow zoomed 257 points, or 1.4%, to settle at 18,589. The blue-chips fell 80 points to a low of 18,252 before rebounding to reach a peak of 18,650. Resistance is at 18,600-18,800, with the all-time high at 18,722. Continued closes above these levels could lead to a run at 19,000. Support has moved up to 18,400-18,350, followed by 18,200.
The S&P 500 soared 23 points, or 1.1%, to end at 2,163. The index traded down to 2,125 on the open, but the 14-point fade did little damage. The surge past 2,140-2,150 now represents fresh support following the close above 2,160. The run to 2,170 into the closing bell pushed additional resistance at 2,170-2,175, with a close above the latter likely leading to 2,200. The lifetime high is at 2,193.
The Nasdaq jumped 57 points, or 1.1%, to close at 5,251. Tech slipped to a low of 5,143 before making a 115-point turnaround to reach a high of 5,258. The close above 5,250 was a slightly bullish sign and gets resistance at 5,275-5,300 in play. A close above the latter could lead to a run towards 5,325-5,350. The record high is at 5,342. Support has moved up to 5,225-5,200, with backup help at 5,150.
The Russell 2000 rallied 37 points, or 3.1%, to finish at 1,232. The small-caps made a backtest to 1,188 before easily outperforming the other major indices and testing a high of 1,233. The close above 1,230 was a bullish signal, with fresh resistance at 1,240-1,250. Short-term support has moved up to 1,225-1,220, but a close below 1,215 would be a cause for concern.
The S&P 500 Volatility Index ($VIX, 14.38, down 4.36) tanked 23% after spiking past the 20 level to a high of 21.48. The tumble to 14.33 and close below 15-14.50 was a very bullish development. These levels now represent short-term resistance, with backup help at 16.50-17.50. Prior support at 13.50-12.50 will be the next areas of focus for the remainder of the week.
From desk to press, futures look like this: Dow (+112); S&P 500 (+12); Nasdaq 100 (+33); Russell (+15).
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, $54.58, down $0.04)
SBUX January 47.50 puts (SBUX170120P00047500, $0.32, down $0.04)
Entry Price: $0.95 (11/3/2016)
Exit Target: $1.90
Stop Target: None
Action: Shares tested a low of $52.80 yesterday. Resistance is at $54.75-$55. Support is at $54-$53.50.
Microsoft (MSFT, $60.17, down $0.30)
MSFT December 57.50 puts (MSFT161216P00057500, $0.62, up $0.01)
Entry Price: $0.86 (11/1/2016)
Exit Target: $1.75
Stop Target: None
Action: Resistance is at $60.25-$60.50. Support is at $60-$59. Wednesday’s low tapped $59.20.
Lattice Semiconductor (LSCC, $7.70, down $0.05)
LSCC December 7.50 calls (LSCC161216C00007500, $0.30, flat)
Entry Price: $0.30 (10/12/2016)
Exit Target: $0.70 (Limit Order)
Stop Target: None
Action: Support is at $7.50. Resistance is at $7.75-$8.
Viavi Solutions (VIAV, $7.82, up $0.26)
VIAV December 8 calls (VIAV161216C00008000, $0.22, up $0.11)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: $0.05 (Stop Limit)
Action: Shares reached a peak of $7.83 on Wednesday. Fresh resistance is at $7.75-$8. The 52-week high is at $7.94. Support has moved up to $7.60-$7.50.
Editor and Chief Options Strategist