Dear Momentum Options Subscriber,
Fed Chair Janet Yellen gave all of the right comments on Tuesday to keep the bullish momentum going, with round two coming today. My “fluff” targets for February continue to come into play as the indexes blaze their way towards further record highs.
The Dow jumped 92 points, or 0.5%, to close at 18,209. The blue-chips made a slight dip into negative territory on the open following a quick trip to 18,098. Support is moving up and held at 18,100-18,000. The 18-point loss was quickly recovered as the index reached a peak of 18,231 into the close, which was another all-time high. The bulls remain on track to test 18,300-18,500 over the near term.
The S&P 500 added nearly 6 points, or 0.3%, to finish at 2,115. The index opened lower and tested 2,105, with support holding at 2,100 for the third-straight session. The bulls pushed a high north of 2,117, and momentum could carry the S&P to 2,125-2,150 over the near term.
The Nasdaq gained 7 points, or 0.1%, to end at 4,968. Tech was weak at the start of trading and tested 4,945, but the index held support at 4,950. The higher low than Monday’s 4,939 level was also bullish, as the index reached a high of 4,971 and another 15-year peak. Resistance is at 5,000-5,100.
The Russell 2000 climbed 2 points, or 0.2%, to settle just below 1,234. The small-caps were a little choppier than the other indexes, as the bears pushed 1,230 late in the session. The bulls easily held support at 1,225 while pushing a high of 1,236 intraday. The run into the 1,235-1,240 zone was bullish, with additional fluff up to 1,250.
The S&P 500 Volatility Index ($VIX, 13.69, down 0.87) fell 6% and traded down to 13.53. The VIX traded up to 14.63 during the early morning weakness, with the bulls holding 15. A have said that a close below 13.50 would confirm higher highs into March, and the bulls have three days left this month to make that happen. It is too early to say if the VIX will test single-digits this year, but I’m throwing the possibility out there like I did last year. I came close to nailing that prediction with the 52-week low at 10.28.
From desk to press, futures look like this: Dow (-1); S&P 500 (-2); Nasdaq 100 (-7).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 13-1 (93%). 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.
Flextronics (FLEX, $12.40, up $0.19)
FLEX April 12 calls (FLEX150417C00012000, $0.70, up $0.15)
Entry Price: $0.67 (2/24/2015)
Exit Target: $1.35
Return: 0%
Stop Target: None
Action: Shares traded to a fresh 52-week high of $12.44 on Tuesday. Volume in the FLEX April 13 calls was explosive, as over 5,000 contracts traded. I nearly added them as well, but I wanted to use in-the-money call options in case shares stall at $13.
We traded two bullish positions back in January when shares were below $11. We were stopped out for double-digit gains ahead of last month’s overall market pullback, and shares have stayed steady since.
Flextronics is on track to clear $13 and could possibly make a run at $15 if Wall Street finds that the shares are cheap. Short-term support is at $12.25-$12 on a pullback.
CH Robinson Worldwide (CHRW, $73.98, up $0.84)
CHRW March 75 calls (CHRW150320C00075000, $0.80, up $0.20)
Entry Price: $0.50 (2/23/2015)
Exit Target: $1.00-$1.50 (Limit Order at $1.00 on the first half of the position)
Return: 60%
Stop Target: None
Action: Set a Limit Order to close the first half of the trade at $1.00.
I have two exit targets for this trade, and I want to lock in half-profits at $1.00 to make this a risk-free trade going forward.
Shares traded to a high of $74 yesterday. Near-term resistance is at $75. Support is at $72-$71. The 52-week high is at $77.49.
GrubHub (GRUB, $40.96, up $0.54)
GRUB March 45 calls (GRUB150320C00045000, $0.60, up $0.10)
Entry Price: $0.55 (2/20/2015)
Exit Target: $1.10
Return: 9%
Stop Target: None
Action: Tuesday’s peak reached $41.49. 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. Support is at $40.
Gogo (GOGO, $16.58, up $0.54)
GOGO March 18 calls (GOGO150320C00018000, $0.50, up $0.10)
Entry Price: $0.45 (2/20/2015)
Exit Target: $0.90
Return: 11%
Stop Target: None
Action: The move above $16.50 and the 200-day moving average opens the door for a run at $18. Support is at $16.25-$16 on a backtest.
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, $16.18, up $0.09)
MRVL May 18 calls (MRVL150515C00018000, $0.35, flat)
Entry Price: $0.50 (2/18/2015)
Exit Target: $1.00
Return: -30%
Stop Target: None
Action: Resistance is at $16.50-$16.75. Near-term support is at $16. There is additional help at $15.50 and the 50-day moving average.
Western Union (WU, $19.33, up $0.06)
WU March 19 calls (WU150320C00019000, $0.55, up $0.05)
Entry Price: $0.40 (2/13/2015)
Exit Target: $0.80 (closed half at $0.60 on 2/19/2015)
Return: 44%
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, $12.42, up $0.47)
BRCD March 13 calls (BRCD150320C00013000, $0.12, up $0.02)
Entry Price: $0.24 (2/13/2015)
Exit Target: $0.50-$0.75
Return: -50%
Stop Target: None
Action: Resistance is at $12.50-$12.75. Support is at $12.25-$12.
CBOE Holdings (CBOE, $62.69, down $0.31)
CBOE March 67.50 calls (CBOE150320C00067500, $0.10, down $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: -25%
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. Since the loss is “capped,” I will be placing this trade on “hold” in subsequent issues, as it doesn’t need daily coverage until we get near even.
JDS Uniphase (JDSU, $13.51, up $0.16)
JDSU March 14 calls (JDSU150320C00014000, $0.30, flat)
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