Dear Momentum Options Subscriber,
The bulls had another successful session on Thursday despite the mixed action as the bulls continue to push fresh highs. Today is February option expiration, so the action could increase as traders square up positions.
The Dow declined 44 points, or 0.2%, to finish at 17,985. The blue-chips traded in negative territory throughout the day with the bears pushing a low of 17,924. Support at 17,900-17,800 continues to hold with backup at 17,600. Resistance is at 18,100 with fluff up to 18,300-18,500, if cleared.
The S&P 500 slipped 2 points, or 0.1%, to end at 2,097. The index tested near-term support at the 2,090 level I have been highlighting before a rebound to 2,102 and another all-time intraday high. The bulls failed to hold the 2,100 level into the close for the second-straight session but the higher high was bullish. Continued closes above 2,100 should get 2,125-2,150 in the mix.
The Nasdaq added 18 points, or 0.4%, to settle at 4,924. Tech fell 6 points to test support at 4,900 but immediately recovered positive territory with the first 15 minutes of trading. The bulls pushed another 15-year high of 4,929 and are just 2% away from tripping 5,000.
The Russell 2000 dipped a twentieth of a point, or 0.0%, to close at 1,227.91. The small-caps were also weak at the start and tested support at 1,220 after trading down to 1,222. The late day rebound reached a fresh all-time peak of 1,230 despite the negative finish. The next waves of resistance are at 1,235-1,250.
The S&P 500 Volatility Index ($VIX, 15.29, down 0.16) traded to a high of 16.22 on the opening pullback with resistance at 17.50 holding. The bulls came close to getting below 15 after pushing a low of 15.10. A close below this level would signal continued strength in the market.
From desk to press, futures look like this: Dow (-26.00); S&P 500 (-4.50); Nasdaq 100 (-3.00).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 11-1 (92%). All trades are dated and time stamped so new subscribers can look at the past history to see how the trades have played out.
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 9 a.m. and 12 p.m. – 1 p.m. updates. Also, I will usually give you a heads-up if I think I’m going to send an email outside of these time frames.
All prices given in this update are current as of 8:30 a.m. EST.
Every new Momentum Options recommendation is listed with the price at which I entered my own position. If the price is slightly different than my recommended entry or exit price when you receive the alert, don’t let that keep you from getting into or out of a trade. Occasionally, you might even get a better “fill” price than what is posted in the Open Trades and Closed Trades.
Marvell Technology (MRVL, $16.40, up $0.17)
MRVL May 18 calls (MRVL150515C00018000, $0.55, up $0.03)
Entry Price: $0.50 (2/18/2015)
Exit Target: $1.00
Return: 10%
Stop Target: None
Action: Shares were down 3% in after-hours trading last night following an earnings miss.
The company reported a profit of $0.25 a share on revenue of $857 million. Wall Street was looking for $0.24 a share on sales of $890 million.
I mentioned an earnings miss could have shares testing $15.50-$15.25 and the 50-day moving average. Although I’m disappointed the company came up short, I mentioned I was excited about the Marvell’s latest chip that could replace Qualcomm’s Snapdragon that is currently being used by Samsung.
These options will take a hit at the open but I went with the May calls in case there was weakness following the earnings release. I still like the trade as long as support holds, and we have three months to wait for a rebound.
Western Union (WU, $19.27, down $0.03)
WU March 19 calls (WU150320C00019000, $0.60, down $0.05)
Entry Price: $0.40 (2/13/2015)
Exit Target: $0.80 (closed half at $0.60 on 2/19/2015)
Return: 50%
Stop Target: 40 cents (Stop Limit)
Action: Set a Stop Limit of 40 cents on the other half of the trade. Yesterday’s low reached 53 cents.
Shares traded to a low of $19.18 on Thursday. Resistance is at $19.75-$20. Near-term support is at $19.25-$19 on a pullback.
Brocade Communications Systems (BRCD, $12.58, down $0.01)
BRCD March 13 calls (BRCD150320C00013000, $0.30, down $0.05)
Entry Price: $0.24 (2/13/2015)
Exit Target: $0.50 (Limit Order on half)
Return: 25%
Stop Target: None
Action: Set a Limit Order to close half of the trade at 50 cents on this morning’s open.
Shares were pushing $12.75 in after-hours trading last night following an earnings beat.
The company reported a profit of $0.27 a share on revenue of $576 million. Wall Street was looking for $0.24 a share on revenue of $570 million.
Sony (SNE, $27.37, down $0.65)
SNE March 28 calls (SNE150320C00028000, $0.80, down $0.30)
Entry Price: $0.60 (2/12/2015)
Exit Target: $1.80 (closed half at $0.80 on 2/19/2015)
Return: 33%
Stop Target: 60 cents (Stop Limit)
Action: Set a Stop Limit of 60 cents on the other half of the trade. Yesterday’s low was 70 cents.
I have a near-term target of $30 for the stock. Support is at $27-$26. A drop below $27 will likely stop us out of the other half of the trade.
Boston Scientific (BSX, $16.45, down $0.23)
BSX March 15 calls (BSX150320C00015000, $1.55, down $0.15)
Entry Price: $0.45 (2/10/2015)
Exit Target: $2.50 (closed half at $1.34 on 2/18/15)
Return: 221%
Stop Target: $1.25 (Stop Limit)
Action: Thursday’s low reached $16.27. Support is at $16.25-$16. Resistance is at $17-$18 over the near-term.
AT&T (T, $34.09, down $0.40)
T March 36 calls (T150320C00036000, $0.07, down $0.03)
Entry Price: $0.26 (2/4/2015)
Exit Target: $0.75
Return: -73%
Stop Target: None
Action: Support is at $34.25-$34 and the 200-day moving average. Resistance is at $34.75-$35. My near-term target is calling for a run to $37 by mid-March. The 52-week high is at $37.48. I still like this position but I’m placing the trade on hold until $35 clears.
CBOE Holdings (CBOE, $61.96, down $0.17)
CBOE March 67.50 calls (CBOE150320C00067500, $0.10, flat)
Entry Price: $0.80 (2/4/2015)
Exit Target: 60 cents on the other half (Limit Order), (closed half at $1.10 on 2/5/15)
Return: -25%
Stop Target: None
Action: Support is at $61 and the 100-day moving average. A close below these levels could force me to exit the trade for a slight loss. A close above $64 and the 50-day moving average would be bullish
Trades on Hold — other 2015 Portfolio Open positions (2): These are trades that are still open in the portfolio but are down over 50%. They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around. This means I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly when the trade closes or if the options expire. Click on the Open Trades and Closed Trades pages to see all open and closed positions.
JDS Uniphase (JDSU) March 14 calls (From January 2015) — Continue to hold.
Philip Morris (PM) March 75 puts (From January 2015) — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options