MomentumOptions.com Pre-Market Update for 5/16/2017
Small-Caps Fail 1,400 Level
The bulls got off to a good start for the week with fresh record highs being set in Tech and the S&P 500. The action in the small-caps was especially encouraging but the stumble near the 1,400 level was slightly frustrating as the bears held key resistance. Volatility stayed low with many of the talking heads finally figuring out the market can still go higher on a historically low VIX.
The Dow gained 85 points, or 0.4%, to end at 20,981 on Monday. The blue-chips held positive territory throughout the day with the high reaching 21,000. Upper resistance at 20,975-21,000 was stretched by nearly a point with additional hurdles at 21,150-21,200. Support remains at 20,800-20,700 and the 50-day moving average.
The S&P 500 added 11 points, or 0.5%, to settle 2,402. The index set a fresh all-time intraday high just north of 2,404 with upper resistance at 2,400-2,405 holding by a point. I mentioned a move above the latter gets 2,425-2,430 in play and the close above 2,400 was slightly bullish. Support remains at 2,390-2,385 with a drop below 2,380 likely leading to a backtest to 2,370-2,365 and the 50-day moving average.
The Nasdaq jumped 28 points, or 0.5%, to close at 6,149. Tech made another record run to 6,153 shortly after the open to lower resistance and my near-term fluff targets of 6,150-6,175. A close above the latter gets 6,200-6,225 in play. For new subscribers, I predicted a possible run towards 6,300-6,350 back in February. Support remains at 6,100-6,075 despite yesterday’s slight pop.
The Russell 2000 advanced 11 points, or 0.8%, to finish just under 1,394. The small-caps opened a half-point higher at 1,383 and raced to a top of 1,398.99 ahead of Wall Street’s lunch break. Upper resistance at 1395-1,400 held by a point with a close above the latter being a bullish development. Support remains at 1,380-1,375 and the 50/100-day moving averages.
The S&P 500 Volatility Index ($VIX, 10.39, down 0.01) peaked at 10.88 with lower resistance at 10.50-11.50 holding into the closing bell. Support is at 10-9.50 with yesterday’s low tapping 10.25.
I have updated the parameters of our STM from yesterday with an initial Exit Target set at $1.30. I have also raised the Exit Target in IMAX with a Limit Order on half. I could have another New Trade shortly after the open so stay close to your email inboxes. Good news, I’m working on getting text alerts again, hopefully within the next few weeks, so stay tuned.
From desk to press, futures look like this: Dow (-6); S&P 500 (11); Nasdaq 100 (-2).
Momentum Options Play List
Closed Momentum Options Trades for 2017: 29-10 (74%). 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, $16.89, up $0.26)
STM July 17.50 calls (STM170721C00017500, $0.65, up $0.10)
Entry Price: $0.65 (5/15/2017)
Exit Target: $1.30
Stop Target: None
Action: Set an Exit Target at $1.30. There is no Stop Target.
Fresh resistance is at $17-$17.25 following yesterday’s 52-week high of $16.92. Support is at $16.50-$16.25. Continued closes above $17 could carry shares toward $18-$20. Below is a 20-year chart for STM that shows tremendous upside and a stock we will likely be trading throughout the year. If my upper aforementioned near-term target is met by mid-July, these options will be at least $2.50 in-the-money.
The company’s chips are used in Samsung’s Galaxy S8 and will be included in Apple’s (AAPL) iPhone 8. There has also been continued strong demand for the Nintendo Switch that also uses STM’s chips along with ongoing strength in the company’s connected car business. If shares clear $17, I could “piggy-back” this trade with additional longer-term options.
Imax (IMAX, $27.90, down $1.20)
IMAX June 28 puts (IMAX170616P00028000, $0.95, up $0.50)
Entry Price: $0.40 (5/12/2017)
Exit Target: $0.80, raise to $1.10 (Limit Order on half)
Stop Target: 80 cents (Stop Limit)
Action: Raise the Exit Target from 80 cents to $1.10 with a Limit Order to close half the trade, if triggered. Set a Stop Limit at 80 cents to protect triple-digit profits.
Shares traded to a fresh low of $27.85 on Monday with support now at $27.75-$27.50. Lowered resistance is at $28.25-$28.50.
Viavi Solutions (VIAV, $11.59, down $0.07)
June 12 calls (VIAV170616C00022500, $0.35, down $0.05)
Entry Price: $0.35 (5/5/2017)
Exit Target: $0.70-$1.05
Stop Target: None
Action: Shares traded to a fresh 52-week peak of $11.89 yesterday before finishing in the red. Resistance is at $11.75-$12. Support is at $11.50-$11.25.
You can read my detailed writeup along with my thoughts on the 10-year chart in the 5/15/17 Pre-Market update.
iShares Russell 2000 (IWM, $138.58, up $1.07)
IWM June 134 puts (IWM170616P00134000, $0.95, down $0.30)
Entry Price: $1.40 (5/2/2017)
Exit Target: $2.10-$2.80
Stop Target: 70 cents (Stop Limit)
Action: IWM shares kissed $139.25 to split resistance at $139-$139.50. Support is at $138.25-$138.
Cypress Semiconductor (CY, $13.64, up $0.19)
CY June 14 calls (CY170616C00014000, $0.40, up $0.05)
Entry Price: $0.85 (4/20/2017)
Exit Target: $1.70
Stop Target: 25 cents
Action: Monday’s run to $13.82 cleared lower resistance at $13.75-$14 but a level that failed to hold. Support is at $13.50-$13.25.