Dear Momentum Options Subscriber,
Futures have shown lower starts each day this week, with the indexes testing support on the open before pushing new highs. This is usually a bullish signal, and today’s session is following suit.
The hunt for “cheap” or “undervalued” stocks is on, as most fund managers believe stocks are in overbought territory. While this may be true with some stocks, others are undervalued and under-discovered and represent great buying opportunities.
The suit-and-ties make these excuses because they don’t do technical analysis, or fundamental research for that matter, and fail to trade what is in front of them.
The run to higher highs has caught them off guard, and the Negative Nancy’s are dying for a pullback to get some skin in the game.
I spent much of Sunday and early Monday morning drawing up this week’s chart work. Overall, it was a 14-hour day, but it should only take you minutes to read and learn how the market really works. They say pictures are worth a thousand words, and I urge those of you that really want to study and learn the market to review the charts in Monday’s Pre-Market Update.
Some traders like to take time off from the market or wait for the action to come to them. Well, if you do this, you are late to the party. Additionally, if and when this market turns south, don’t bail on finding trades. At some point this year, there will be an opportunity to go short, and I want you to be there with me.
I have only recommended one bearish position this year (the PM March 75 puts, which are still open) out of 25 trades, and that was in January. I have learned over the years not to bet against a trend and, if you do, it should be short in nature.
If you stay with me all year, you will truly learn the nuances of the market, and that is my goal, as well as to make you money. Luckily, I do all of the homework for you, but it is important to research and study the charts to become a successful trader or investor. It also means grinding it out each and every week and, in my opinion, there is no better job than going on the hunt and making a game plan. To me, the market never gets boring.
I know I have rambled on, but I wanted to prep everyone on what could be a tremendous upcoming “sweet spot,” followed by a potential pullback.
The point I want to make is that the technical indicators I cover every week have been golden in calling the market’s upside breakout and the four-month trading range. The same indicators will also easily give me the clues on when a possible pullback could be coming.
Heading into the second half of trading, the Dow is advancing 12 points to 18,221, while the S&P 500 is down less than a point to 2,115. The Nasdaq is higher by 2 points to 4,970, and the Russell 2000 is up a point to 1,235.
It’s been a busy day, and I have another Profit Alert below. I could also have a New Trade into the close, so be sure to stay on your toes.
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 12:45 p.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, $12.30, down $0.10)
FLEX April 12 calls (FLEX150417C00012000, $0.65, down $0.05)
Entry Price: $0.67 (2/24/2015)
Exit Target: $1.35
Return: -3%
Stop Target: None
Action: Flextronics is on track to test $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, $73.78, down $0.20)
CHRW March 75 calls (CHRW150320C00075000, $0.70, down $0.10)
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: 40%
Stop Target: None
Action: The Limit Order to close the first half of the trade at $1.00 nearly triggered, as the options traded up to $0.95.
Shares reached a peak of $74.53 on the open but have since faded. Near-term resistance is at $75. Support is at $72-$71. The 52-week high is at $77.49.
GrubHub (GRUB, $42.48, up $1.52)
GRUB March 45 calls (GRUB150320C00045000, $0.95, up $0.40)
Entry Price: $0.55 (2/20/2015)
Exit Target: $1.10
Return: 73%
Stop Target: None
Action: Take profits and sell to close half of the GRUB March 45 calls at current levels. GRUB has cleared $43 today.
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, $17.90, up $1.32)
GOGO March 18 calls (GOGO150320C00018000, $1.00, up $0.50)
Entry Price: $0.45 (2/20/2015)
Exit Target: $0.90, raise to $2.00 (closed half at $1.00 on 2/25/2015)
Return: 122%
Stop Target: $0.40 (Stop Limit)
Action: Raise the Exit Target from $0.90 to $2.00 for the second half of the trade. Also, set a Stop Limit at $0.40 to protect profits.
Shares have traded to a high of $18.02 today after announcing a deal with Delta Air Lines (DAL).
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, $16.30, up $0.12)
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, $19.62, up $0.29)
WU March 19 calls (WU150320C00019000, $0.80, up $0.20)
Entry Price: $0.40 (2/13/2015)
Exit Target: $0.80 (closed half at $0.60 on 2/19/2015)
Return: 75%
Stop Target: $0.40 (Stop Limit)
Action: Resistance is at $19.50-$20, with fluff up to $22. Support is at $19.25-$19.
Brocade Communications Systems (BRCD, $12.43, up $0.01)
BRCD March 13 calls (BRCD150320C00013000, $0.12, flat)
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.
JDS Uniphase (JDSU, $13.42, down $0.09)
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 (3): 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.
CBOE Holdings (CBOE) March 67.50 calls (From February 2015) — Closed first half at $1.10 on 2/5/15 –Continue to hold the second half.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options