Mid-Market Update for 4/18/2017

Goldman Sachs Gets Whacked/ New Trade (VIAB)

2:00pm (EST)

Shares of Goldman Sachs Group (GS) are down 5% following an earnings miss ahead of this morning’s open. The company missed expectations by 16 cents after reporting a profit of $5.15 a share on revenue $8.03 billion. Wall Street was looking for earnings of $5.31 a share on revenue of $8.45 billion.

The misstep was a slight surprise given the results from some of the other names in the sector. The problem was Goldman’s trading action as results severely underperformed despite a bullish first-quarter for the market.

I have talked about the underperformance of most hedge funds and venture capitalists over the past few years so Goldman’s issues weren’t too surprising to me. The chart was also showing a bearish outlook following last month’s break below both the 50/100-day moving averages. Given today’s action, there is clear risk to $200 and the 200-day moving average on continued weakness. Fresh resistance is at $215-$220 going forward.

The pullback in GS has had a major impact on the Dow as it is one of the the index’s largest components. The GS April 220 puts (GS170421P00220000, $6.20, up $5.40) expire this Friday and are rewarding lottery payday winners on traders that bought these options ahead of yesterday’s closing bell. The aforementioned puts went out at 80 cents and are zooming 665% on the news.

The GS May 200 puts (GS170519P00200000, $1.44, up $0.81) have been actively traded as nearly 3,000 contracts have traded. These puts closed at 63 cents yesterday and are up nearly 130%. I’m not a chaser but these puts options would still double from current levels if GS shares fall below $197 by May 19th.

The lack of follow through is somewhat concerning for the bulls but the bigger picture continues to show a longer-term trading range. However, additional downside weakness is still in play along with a possible retest of the March lows.

The Dow is off 120 points to 20,516 while the S&P 500 is lower by 7 points to 2,341. The Nasdaq is down 13 points to 5,843 and the Russell 2000 is off 4 points to 1,357.

I have a New Trade for the portfolio so let’s get on it.


Momentum Options Play List

Closed Momentum Options Trades for 2017: 22-9 (71%). 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.

New Trade

Viacom (VIAB, $43.80, down $0.16)

Buy to Open VIAB June 47.50 calls (VIAB170616C00047500, $0.55, down $0.05)

Action: I like these call options at current levels and you can use a Limit Order up to 70 cents to get the best fills. These are the regular VIAB June 47.50 calls that expire on June 16th, 2017. I will provide the parameters of the trade in in tomorrow’s Pre-Market update.

Current Trades

Best Buy (BBY, $48.77, up $0.41)

BBY May 45 puts (BBY170519P00045000, $0.45, down $0.10)

Entry Price: $0.57 (4/13/2017)
Exit Target: $1.15
Return: -21%
Stop Target: None

Action: Resistance is at $48.75-$49. Support is at $48-$47.50.


STMicroelectronics (STM, $14.49, down $0.36)

STM May 15 calls (STM170519C00015000, $0.55, down $0.15)

Entry Price: $1.15 (3/31/2017)
Exit Target: $2.30
Return: -52%
Stop Target: 55 cents

Action: Support is at $14.50-$14.25. Resistance is at $14.75-$15 and the 50-day moving average.