Dear Momentum Options Subscriber,
The market continued its run to record highs yesterday, as the bulls got off to another good start for the week. I have been talking about the early hibernation by the bears into December and, with volatility falling below a key level of support, this week looks “all clear” to stay long.
The Dow jumped 88 points, or 0.5%, to settle at 18,956. The blue-chips held positive territory throughout the session, while reaching an all-time intraday peak of 18,960. Upper resistance at 18,900-19,000 is within spitting distance, and there is fluff to 19,200-19,325 on a close above the latter. Support is trying to move up to 18,900-18,800.
The S&P 500 surged 16 points, or 0.8%, to end at 2,198. The index opened at 2,186, while reaching a record high of 2,198.70. Upper resistance at 2,190-2,200 held, and the fresh all-time closing high keeps 2,225-2,250 in play. Rising support is at 2,185-2,180.
The Nasdaq climbed 47 points, or 0.9%, to close at 5,368. Tech tested another record high of 5,369 into the closing bell and is within a stone’s throw of my near-term target of 5,400. My year-end target remains at 5,500, and picking a precise market top might actually be a little easier than making that prediction in February. Short-term support has moved up to 5,325-5,300.
The Russell 2000 added another 6 points, or 0.5%, to finish at 1,322. The small-caps peaked at another lifetime high of 1,323.72 shortly after the open to push my upper near-term resistance target of 1,315-1,325. Continued closes above the latter could lead to 1,350 by late December or mid-January.
The S&P 500 Volatility Index ($VIX, 12.42, down 0.43) sank another 3% after kissing 13.44 shortly after the open. The fact that the bulls held lower resistance at 13.50 while pushing an intraday bottom of 12.16 was a very positive sign. The close below upper support at 12.50-11.50 was also a bullish signal.
I have a Trade Alert for our position in Viavi Solutions (VIAV) this morning, as the Stop Limit was triggered into yesterday’s closing bell. I also have a New Trade this morning on a tech stock that is looking to join the all-time high crowd, so let’s get to it.
From desk to press, futures look like this: Dow (+55); S&P 500 (+6); Nasdaq 100 (+23); Russell (+5).
Momentum Options Play List
Closed Momentum Options Trades for 2016: 78-32 (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, $60.86, up $0.51)
Buy to open the MSFT December 62.50 calls (MSFT161216C00062500) for a maximum price of $0.60.
Action: I like these call options at current levels, and you can use a Limit Order up to $0.60 this morning to get the best fills.
These are the regular monthly options that expire on Dec. 16. I will provide the parameters of the trade in today’s Mid-Market Update.
Viavi Solutions (VIAV, $7.87, down $0.07)
VIAV December 8 calls (VIAV161216C00008000, $0.14, down $0.06)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: $0.14 (Stop Limit)
Action: The Stop Limit at $0.14 was triggered into yesterday’s close, and we are now out of the position.
This was the longest running trade of the year and, while I’m glad the ride is over, I’m disappointed we had to exit the position for a loss. If shares can clear $8, I may consider another long position, as the company is one of my favorites for a buyout offer in 2017.
Apple (AAPL, $111.73, up $1.67)
AAPL January 115 calls (AAPL170120C00115000, $2.04, up $0.33)
Entry Price: $1.24 (11/15/2016)
Exit Target: $2.50
Stop Target: $1.55, raise to $1.75 (Stop Limit)
Action: Raise the Stop Limit from $1.55 to $1.75.
Shares reached a peak of $111.99 yesterday. Resistance is at $112-$112.50. Support is at $110, followed by $108-$107.75 and the 100-day moving average.
Array BioPharma (ARRY, $8.04, up $0.11)
ARRY January 7 calls (ARRY170120C00007000, $1.45, flat)
Entry Price: $0.78 (11/14/2016)
Exit Target: $2.50-$3.00
Stop Target: $1.05, raise to $1.15 (Stop Limit)
Action: Raise the Stop Limit from $1.05 to $1.15.
Resistance is at $8-$8.25. Monday’s high was $8.19, which was a fresh 52-week peak. Rising support is at $7.75-$7.50.
Tower Semiconductor (TSEM, $18.23, up $0.23)
TSEM January 19 calls (TSEM170120C00019000, $0.55, down $0.01)
Entry Price: $0.50 (11/16/2016)
Exit Target: $1.00
Stop Target: $0.39 (Stop Limit)
Action: Monday’s high tapped $18.33. Resistance is at $18.25-$18.50. Support is at $18-$17.75.
Starbucks (SBUX, $56.10, up $0.33)
SBUX January 47.50 puts (SBUX170120P00047500, $0.16, down $0.02)
Entry Price: $0.95 (11/3/2016)
Exit Target: $1.90
Stop Target: $0.12 (Stop Limit)
Action: Fresh resistance is at $56.25-$56.50. Support is at $55.75-$55.50. The Stop Limit could trigger today on continued strength.
Lattice Semiconductor (LSCC, $7.48, down $0.06)
LSCC December 7.50 calls (LSCC161216C00007500, $0.11, down $0.04)
Entry Price: $0.30 (10/12/2016)
Exit Target: $0.60 (Limit Order)
Stop Target: None
Action: Support is at $7.50-$7.25. Resistance is at $7.75-$8.
Editor and Chief Options Strategist