MomentumOptions.com Pre-Market Update for 3/16/2017

Market Rallies on Fed Hike

8:00am (EST)

The Fed did what was widely expected by raising the interest rate a quarter-point and signaling three more possible hikes this year and three next year. The market took this as good news as some analysts were expecting as many as four rate hikes this year. However they want to spin the news is irrelevant as the technical indicators I follow penciled-in the possible rebound. The key will be if the bulls can handle the sudden momentum swing and show they are in charge the rest of the week, or, if the bears just let them get up off the mat for a breather.

The Dow jumped 112 points, or 0.5%, to finish at 20,950. The blue-chips were steady into the Fed announcement and traded to a high of 20,977 afterwards while holding positive territory throughout the session. Lower resistance at 21,000-21,200 held with the all-time high at 21,169. Support is at 20,800-20,750.

The S&P 500 soared nearly 20 points, or 0.8%, to settle at 2,385. The index opened at 2,370 and made a run to 2,390 late in the day. Fresh resistance is at 2,400 and the lifetime high with a possible run to 2,425-2,450 on a close above this level. Support will try to hold at 2,370-2,365 on a pullback. A close below 2,360 would be a sign to possibly go short if there is no follow through the rest of the week.

The Nasdaq advanced 43 points, or 0.7%, to close at 5,900. Tech just missed a fresh record high by a half-point after clearing 5,911 ahead of the closing bell. I have talked about a possible run to 6,000 with fresh resistance now at 5,950. Key support remains at 5,850 with backup help at 5,825-5,800.

The Russell 2000 zoomed 20 points, or 1.5%, to end at 1,382. The small-caps also held positive territory throughout the session with the high tapping 1,385. The close above prior resistance at 1,370-1,375 and the 50-day moving average will now serve as near-term support. Fresh hurdles are at 1,390-1,400 with the all-time high just south of 1,415.

The S&P 500 Volatility Index ($VIX, 11.63, down 0.67) traded in the red from the open with the low reaching 11.60. I wanted to see a close below the 11.50 level to get support at 11-10.50 back in the mix. However, the failure to hold 11.50 keeps resistance at 12.50-13.50 in play.

I have updated the current VIAV positions along with a detailed write-up on why I like the stock and why I went with near-term and longer-term options.

From desk to press, futures look like this: Dow (+37); S&P 500 (+4); Nasdaq 100 (+14).

 

Momentum Options Play List

Closed Momentum Options Trades for 2017: 18-3 (86%). All trades are dated and time stamped for verification. New subscribers can look at the past history to see how the trades have played out or to research our Track Records.

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 8am and 12pm–2pm (EST) updates. Also, I will usually give you a heads-up if I think I’m going to send a Trade Alert outside of these time frames.

 

Viavi Solutions (VIAV, $9.90, up $0.26)

VIAV April 10 calls (VIAV170421C00010000, $0.43, up $0.13)

Entry Price: $0.45 (3/15/2017)
Exit Target: $0.90
Return: -4%
Stop Target: None

VIAV June 11 calls (VIAV170616C00011000, $0.40, up $0.09)

Entry Price: $0.40 (3/15/2017)
Exit Target: $0.80
Return: 0%
Stop Target: None

Action: Set an Exit Target at 90 cents for the VIAV April 10 calls. Set an Exit Target at 80 cents for the VIAV June 11 calls. There are no Stop Targets.

I wanted to get back into VIAV following the recent backtest and hold of the 50-day moving average. Shares held near-term support at $9.50 with risk to $9.25-$9 on a close below this level. Resistance is at $10- $10.25 with Wednesday’s high reaching $10.02.

Our first two bullish call trades made 240% and 75%, respectively, and I have been recommending positions in VIAV over the past year.

One of the reasons, aside from rising earnings, I like VIAV is because it is one of my favorite takeover targets this year. While I was correct in calling the surge past $10 by March, I have talked about the potential for shares to trade to the mid to high teens.

Although I’m not a Wall Street analyst, it was good to see one of the suit-and-ties follow my lead on Tuesday after initiating coverage of the stock. Even more impressive than the Buy rating was the $17.50 Price Target. Shares hardly reacted to the news on Tuesday but gained 3% yesterday.

Out of the 10 analysts, there is one Strong Buy, three Buy ratings, and six Hold recommendations. The company has topped earnings estimates by 3 cents, 2 cents, and a penny, twice, over the past four quarters.

The next earnings announcement isn’t until early May so there shouldn’t be any headline risk to this event over the near-term. There could be if the company raises, or lowers, guidance going forward with the former likely occurring.

The April 10 calls will easily double from current levels if shares clear $10.90, technically, by April 21st. The June 11 calls will double from current levels if shares clear $11.80, technically, by mid-June. The recent 52-week peak is at $10.89.

 

Starbucks (SBUX, $54.54, up $0.27)

April 52.50 puts (SBUX170421P00052500, $0.33, down $0.07)

Entry Price: $0.40 (3/10/2017)
Exit Target: $0.80
Return: -18%
Stop Target: None

Action: Near-term resistance is at $54.75-$55 with Wednesday’s high reaching $54.65. Support is at $54-$53.50.

 

Amicus Therapeutics (FOLD, $7.19, up $0.16)

FOLD April 8 calls (FOLD170421C00008000, $0.30, flat)

Entry Price: $0.60 (3/2/2017)
Exit Target: $1.20
Return: -50%
Stop Target: None

Action: Yesterday’s high reached $7.29. Resistance is at $7.25-$7.50. Support is at $7-$6.75.

 

Tower Semiconductor (TSEM, $23.08, up $0.60)

TSEM April 24 calls (TSEM170421C00024000, $0.40, up $0.15)

Entry Price: $0.65 (3/1/2017)
Exit Target: $1.30
Return: -38%
Stop Target: None

Action: Fresh resistance at $23.25-$23.50 following the run to $23.15 and close back above $23. Support will try to hold at $22.75-$22.50 on a backtest.

 

Flex (FLEX, $16.88, up $0.09)

FLEX April 17 calls (FLEX170421C00017000, $0.35, up $0.02)

Entry Price: $0.35 (2/15/2017)
Exit Target: $0.70
Return: 0%
Stop Target: None

Action: Shares traded to a fresh 52-week of $16.95 on Wednesday. Resistance is at $17-$17.25 with a run to $18-$20 possibly in the mix. Rising support is at $16.75-$16.50.

 

TherapeuticsMD (TXMD, $6.83, up $0.09)

TXMD June 7.50 calls (TXMD170616C00007500, $0.95, flat)

Entry Price: $0.75 (1/18/2017)
Exit Target: $1.50
Return: 27%
Stop Target: None

Action: Resistance is at $7-$7.25 following yesterday’s run to $6.86. Support is trying to move up to $6.75-$6.50.