Mid-Market Update for 3/23/2017

X Shares Worth a Look

1:30pm (EST)

Shares of United States Steel (X) have struggled maintaining the 50-day moving average this month and are currently holding the 100-day moving average following Tuesday’s nearly 8% plunge from north of $37 to south of $34. You can see from the chart below, support at $34 has been holding since early February with the past two session lows reaching $33.72 and $33.84, respectively. Today’s low has tapped $33.40. Multi-month support is at $32 on a close below $33.50-$33.25. Current resistance is at $35.50-$36.

While the 50-day moving average has leveled out, the 100/200-day moving averages are still in a nice uptrend, it is too early to say a bottom might be forming. Aggressive traders can target bullish positions at current levels if $34 holds today and tomorrow. More conservative traders can wait for shares to clear $36-$36.25 before possibly using call options. If the prior aforementioned levels are cleared, a possible run towards $38-$40 could come quickly. A stop can be used if shares fall below $33.25.

There are a number of ways to play X options as weekly and monthly options are available. I have mentioned weekly options have wider bid/ ask prices and often times, thinner volume. The monthly options usually have spreads of less than a nickel and are much more liquid.

In any event, the X April 36 (X170421C00036000, $1.20, down $0.20) look appealing and would double from current levels if shares clear $38.40, technically, by April 21st. The X April 38 calls (X170421C00038000, $0.75, down $0.10) are slightly cheaper and are roughly $4 “out-of-the-money” but would more than double from current levels if shares make a run at $40 over the next month. If shares clear $40, the X April 36 calls would be $4 “in-of-the-money” while the X April 38 calls would be worth at least $2.

Aside from the technical picture, earnings have been erratic over the past four quarters with huge beats and misses. The company topped estimates by 26 cents last quarter but missed by 40 cents and 92 cents in two, while beating estimates by 18 cents in the other.

Analysts have been bullish on the stock in recent months, with JP Morgan picking X as its top pick in the sector. The suit-and-tie said Steel companies are poised for stronger earnings growth over the next several quarters. US Steel raised its 2017 outlook in late January for earnings of $3.08 a share, if the market conditions remained at then current levels. Wall Street was expecting $1.86 a share for the year.

Steel imports have been trending lower since President Trump’s election victory as shares in the sector have rallied nicely off their October 2016 lows. Other names in the sector include Steel Dynamics (STLD), Nucor (NUE) and AK Steel (AKS).

I have traded both X and NUE over the years and I have added them to my Watch List. Although I didn’t cover NUE in detail, bullish options can be targeted, as well, if shares clear $63.75-$64 and continue holding their 50-day moving average.

Turning our focus to the market, continued choppiness was almost a given as the talking heads, and to some degree, the market await tonight’s vote on the Healthcare bill. It is hard to say what impact it will have if the bill gets shot down, or approved, but Friday will likely be volatile as traders prepare for the news and the upcoming weekend.

The Dow is up 42 points to 20,704 while the S&P 500 is gaining 4 points to 2,352. The Nasdaq is higher by 6 points to 5,828 and the Russell 2000 is adding 12 points to 1,358. The action in the small-caps is very encouraging.

I have updated our current trades so let’s go check the tape. Stay locked-and-loaded into the close in case I take action on X, or perhaps another position.


Momentum Options Play List

Closed Momentum Options Trades for 2017: 20-3 (87%). 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, $10.78, down $0.03)

VIAV April 11 calls (VIAV170421C00011000, $0.38, flat)

Entry Price: $0.42 (3/20/2017)
Exit Target: $0.85
Return: -10%
Stop Target: None

VIAV June 11 calls (VIAV170616C00011000, $0.75, flat)

Entry Price: $0.40 (3/15/2017)
Exit Target: $1.20
Return: 88%
Stop Target: 60 cents (Stop Limit)

Action: Resistance is at $10.75-$11. Support is at $10.50-$10.25.


Starbucks (SBUX, $56.05, up $0.16)

April 52.50 puts (SBUX170421P00052500, $0.10, down $0.02)

Entry Price: $0.40 (3/10/2017)
Exit Target: $0.80
Return: -75%
Stop Target: None

Action: Resistance is at $56-$56.50. Support is at $55.50-$55.


Amicus Therapeutics (FOLD, $7.15, up $0.08)

FOLD April 8 calls (FOLD170421C00008000, $0.20, flat)

Entry Price: $0.60 (3/2/2017)
Exit Target: $1.20
Return: -67%
Stop Target: None

Action: Resistance is at $7.25. Support is at $6.75-$6.50.


Tower Semiconductor (TSEM, $22.94, down $0.02)

TSEM April 24 calls (TSEM170421C00024000, $0.30, up $0.05)

Entry Price: $0.65 (3/1/2017)
Exit Target: $1.30
Return: -54%
Stop Target: None

Action: Resistance is at $23-$23.25. Support is at $22.50-$22.25.


Flex (FLEX, $16.68, up $0.-8)

FLEX April 17 calls (FLEX170421C00017000, $0.20, flat)

Entry Price: $0.35 (2/15/2017)
Exit Target: $0.70
Return: -43%
Stop Target: None

Action: Resistance is at $16.50-$16.75. Support is at $16.25-$16.