MomentumOptions.com Mid-Market Update for 4/6/2017

VIX Deflates/ AMD Sinks

1:10pm (EST)

The major indexes are trying to bounce back from Wednesday’s late afternoon pullback and have done a good job holding positive territory. There was some sloppiness on the open, and there is still another half of trading to go, but a positive close would be slightly bullish heading into tomorrow’s session.

Volatility has also relaxed as the S&P 500 Volatility Index ($VIX, 12.07, down 0.82) is down 6% and back below the 12.50 level.

Shares of Advanced Micro Devices (AMD, $13.06, down $1.11) are down 8% following a nasty research note from an analyst that works for Goldman Sachs. The pullback is the result of a “Sell” rating as the firm initiates coverage on the stock saying the current risk-return is unfavorable.

The Price Target for AMD was set at $11 despite acknowledgement by the analyst of the successful turnaround over the past few years. He went on to say the current valuation multiples are hard to justify and that the market has already priced in the sharp improvement in the company’s competitive and financial position.

To complicate the story, the analyst also told clients that AMD’s current valuation reflects a “very bullish” 2018 scenario. The reason for the confusion is simple. He missed the boat and the triple-digit gains the stock has returned over the past few years. By issuing a Sell rating and a price target that was 22% below yesterday’s close above $14, the slick talking pro is looking for an entry point.

Today’s drop below $13 and the 50-day moving average was a slightly bearish development with shares trading to a low of $12.83. Longer-term support is at $12.75-$12.50 and levels that served as prior resistance in December and early February. A close below the latter would be a bearish development that could lead to $12-$11.75 and the 100-day moving average. Resistance is at $13.25-$13.50.

We did well with 2 bullish AMD trades this year (+42% and 4%) but shares have a history of volatility and why I love trading the stock with options. I still like AMD longer-term but will wait for shares to clear $13.50 before possibly going long again. On the flip side, I could get aggressive with put options on a close below $12.75-$12.50.

The Dow is up 49 points to 20,697 while the S&P 500 is gaining 4 points to 2,357. The Nasdaq is higher by 8 points to 5,873 and the Russell 2000 is adding 5 points to 1,357.

I’m working on a possible bearish New Trade for the portfolio but I’m still doing some chart work and math to find the best put options. In the meantime, I have updated our current positions so let’s go check the tape.

 

Momentum Options Play List

Closed Momentum Options Trades for 2017: 21-4 (84%). 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.

 

STMicroelectronics (STM, $15.34, up $0.15)

STM May 15 calls (STM170519C00015000, $1.00, flat)

Entry Price: $1.15 (3/31/2017)
Exit Target: $2.30
Return: -13%
Stop Target: 55 cents

Action: Resistance is at $15.50-$15.75. Support is at $15-$14.75.

 

TherapeuticsMD (TXMD, $8.15, up $0.18)

TXMD May 7.50 calls (TXMD170519C00007500, $1.35, up $0.15)

Entry Price: $0.80 (3/27/2017)
Exit Target: $1.60
Return: 69%
Stop Target: 85 cents (Stop Limit)

Action: Resistance is at $8-$8.25. Support is at $7.75-$7.50.

 

Viavi Solutions (VIAV, $10.22, up $0.30)

VIAV May 12 calls (VIAV170519C00012000, $0.10, flat)

Entry Price: $0.29 (3/27/2017)
Exit Target: $0.60
Return: -66%
Stop Target: None

VIAV April 11 calls (VIAV170421C00011000, $0.05, flat)

Entry Price: $0.42 (3/20/2017)
Exit Target: $0.85
Return: -88%
Stop Target: None

Action: Resistance is at $10.25-$10.50. Support is at $9.75-$9.50.

 

Amicus Therapeutics (FOLD, $6.90, down $0.07)

FOLD April 8 calls (FOLD170421C00008000, $0.10, flat)

Entry Price: $0.60 (3/2/2017)
Exit Target: $1.20
Return: -83%
Stop Target: None

Action: Support is at $6.75. Resistance is at $7-$7.25.

 

Tower Semiconductor (TSEM, $22.47, up $0.11)

TSEM April 24 calls (TSEM170421C00024000, $0.10, flat)

Entry Price: $0.65 (3/1/2017)
Exit Target: $1.30
Return: -85%
Stop Target: None

Action: Resistance is at $22.50-$22.75. Support is at $22.25-$22.

 

Flex (FLEX, $16.37, down $0.04)

FLEX April 17 calls (FLEX170421C00017000, $0.10, flat)

Entry Price: $0.35 (2/15/2017)
Exit Target: $0.70
Return: -71%
Stop Target: None

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