Dear Momentum Options Subscriber,
The blue-chips fell for the second Monday in a row, but there were pockets of strength that held together in what the experts are now calling a fragile market. I mentioned that the bearish talk would heat up this week, but the bulls are looking large and are still in charge.
The Dow dipped 23 points, or 0.1%, to settle at 18,116 on Monday. The blue-chips traded down to 18,054 on the open, but support at 18,000-17,900 held for the seventh-straight session. The close above 18,100 keeps 18,300-18,500 in play.
The S&P 500 slipped less than a point, or 0.03%, to close at 2,109. The index tested a low of 2,103 on the open while holding the 2,100 level for the second-straight session. The bulls came within a fraction of a point of getting back to even ahead of the close, but they ran out of time. There is continued fluff up to 2,125-2,150 over the near term.
The Nasdaq added 5 points, or 0.1%, to finish at 4,960. Tech opened lower, but the brief pop into positive territory shortly afterwards was a good sign that any market losses would be limited. The bulls pushed another 15-year high after tripping 4,960 intraday. The index remains on track to test 5,000-5,100 into March (or sooner) as long as 4,950-4,900 holds as support. Monday’s low touched 4,939.
The Russell 2000 finished flat and closed just under 1,232. The small-caps fell to 1,222 shortly after the open but made a steady climb off of the low to reach positive territory by the closing bell. Support at 1,225-1,220 held for the seventh-straight session. The bulls are still gunning for 1,250 once they clear 1,235-1,240.
The S&P 500 Volatility Index ($VIX, 14.56, up 0.26) traded past 15 to 15.48 before finishing below this level for the second-straight session. A close below 13.50 would confirm higher highs into March.
The Dow Jones Transportation Average ($TRAN, 9,143, up 12) continues to show strength, and it is a sector that could lead the Dow blue-chips into continued blue-sky territory. The recent 52-week peak is at 9,310, which triggered in late November.
This was one of the main reasons for yesterday’s New Trade, as I wanted to get into the sector with a bullish call option.
From desk to press, futures look like this: Dow (+12); S&P 500 (-0.5); Nasdaq 100 (-2).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 12-1 (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.
CH Robinson Worldwide (CHRW, $73.14, up $0.64)
CHRW March 75 calls (CHRW150320C00075000, $0.60, up $0.15)
Entry Price: $0.50 (2/23/2015)
Exit Target: $1.00-$1.50
Return: 20%
Stop Target: None
Action: The close above $73 and the 50-day moving average was bullish. Near-term resistance is at $75. Support is at $72-$71.
The 52-week high is at $77.49. If shares reach $76, these options will double from the recommended entry price. At $76.50, the options will be worth at least $1.50, which would represent a 200% return.
Shares can be volatile and are prone to huge price sings. If momentum sticks, I’m expecting a run at $80 by mid-March.
The company recently reported earnings, so that headline risk is removed. Earnings checked in a penny higher than Wall Street’s expectations at $0.77 a share. Revenue came in at $3.36 billion for the quarter versus a forecast for $3.34 million. The earnings beat represented the fourth-straight quarter the suit-and-ties underestimated the company.
I love the risk/reward this trade offers, which is why I was excited to get in ahead of yesterday’s close.
GrubHub (GRUB, $40.42, down $0.94)
GRUB March 45 calls (GRUB150320C00045000, $0.50, down $0.25)
Entry Price: $0.55 (2/20/2015)
Exit Target: $1.10
Return: -9%
Stop Target: None
Action: The company’s President is leaving in August, which caused some weakness. GrubHub has a strong management team, so the effect should be minimal. Short-term support is at $40. Yesterday’s low touched $40.22.
Shares formed a “double-top” last August near $46, and overhead resistance is at $42. A close above this level should lead to a retest of $45-$46. The 52-week high is at $45.80. All three major moving averages are “curling” higher, with the 50-day crossing over the 100- and 200-day moving averages. The “golden crossover” looks bullish for a possible run to $50.
Gogo (GOGO, $16.04, down $0.18)
GOGO March 18 calls (GOGO150320C00018000, $0.40, down $0.10)
Entry Price: $0.45 (2/20/2015)
Exit Target: $0.90
Return: -11%
Stop Target: None
Action: Support is at $16-$15.75. Monday’s low reached $15.90.
A move above $16.50 and the 200-day moving average could lead to a run towards $18.
Earnings are due out on Thursday, and you can read my thoughts on what to expect in Monday’s Pre-Market Update.
Marvell Technology (MRVL, $16.09, down $0.20)
MRVL May 18 calls (MRVL150515C00018000, $0.35, down $0.10)
Entry Price: $0.50 (2/18/2015)
Exit Target: $1.00
Return: -30%
Stop Target: None
Action: Near-term support is at $16. There is additional help at $15.50 and the 50-day moving average. Resistance is at $16.50-$16.75.
These options have three months before they expire, and I’m expecting a run to $18-19 by mid-May.
Western Union (WU, $19.27, down $0.18)
WU March 19 calls (WU150320C00019000, $0.50, down $0.20)
Entry Price: $0.40 (2/13/2015)
Exit Target: $0.80 (closed half at $0.60 on 2/19/2015)
Return: 38%
Stop Target: $0.40 (Stop Limit)
Action: Resistance is at $20, with fluff up to $22. Support is at $19.25-$19.
Brocade Communications Systems (BRCD, $11.95, down $0.11)
BRCD March 13 calls (BRCD150320C00013000, $0.10, flat)
Entry Price: $0.24 (2/13/2015)
Exit Target: $0.50-$0.75
Return: -58%
Stop Target: None
Action: Support is at $12-$11.75. Resistance is at $12.25-$12.50.
Boston Scientific (BSX, $16.31, down $0.16)
BSX March 15 calls (BSX150320C00015000, $1.40, down $0.15)
Entry Price: $0.45 (2/10/2015)
Exit Target: $2.50 (closed half at $1.34 on 2/18/15)
Return: 204%
Stop Target: $1.35, lower to $1.30 (Stop Limit)
Action: Lower the Stop Limit to $1.30 in case the options open below the current $1.35 Stop Limit.
Shares were testing $16 in after-hours trading last night. I want to make sure we are out of the position on further weakness below this level, while also giving the trade a little wiggle room if support at $16 holds.
Shares traded down to $16.25 on Monday, with the options reaching a low of $1.38. Resistance is at $16.50-$17.
CBOE Holdings (CBOE, $63.00, up $0.39)
CBOE March 67.50 calls (CBOE150320C00067500, $0.15, up $0.05)
Entry Price: $0.80 (2/4/2015)
Exit Target: $0.60 on the second half (Limit Order), (closed half at $1.10 on 2/5/15)
Return: -22%
Stop Target: None
Action: A close above $64 and the 50-day moving average would be bullish. 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.
JDS Uniphase (JDSU, $13.35, down $0.18)
JDSU March 14 calls (JDSU150320C00014000, $0.30, down $0.05)
Entry Price: $0.78 (1/8/2015)
Exit Target: $0.50-$0.75
Return: -62%
Stop Target: None
Action: Resistance is at $13.75-$14. The breakeven point for the trade is at $14.25.
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.
Philip Morris (PM) March 75 puts (From January 2015) — Continue to hold.
AT&T (T) March 36 calls (From February 2015) — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options