Dear Momentum Options Subscriber,
Wednesday was another choppy day for the indexes, as the bulls and bears each got a piece of the market pie. The mixed close was slightly bullish despite the continued bearish sentiment on Wall Street.
The Dow gained 15 points, or 0.1%, to finish at 18,224. The blue-chips traded down to 18,182 on the open, with fresh support holding at 18,100-18,000. The rebound to 18,244 set another all-time intraday high, and the chart is still looking good for a pop to 18,300-18,500 over the near term.
The S&P 500 slipped nearly 2 points, or 0.1%, to end at 2,114. The index tested 2,110 at the start of trading before reaching an all-time intraday peak of 2,119. The fade to 2,109 in the second half held short-term support at 2,110-2,100. The bulls remain on track to test 2,125-2,150 by mid-March.
The Nasdaq declined a point, or 0.02%, to settle at 4,967. Tech tested support at 4,950 shortly after the opening bell before reaching an intraday high of 4,984. The fade into the close snapped a 10-session win streak that I must have jinxed with the headline of yesterday’s Pre-Market Update. Resistance remains at 5,000-5,100.
The Russell 2000 added a point, or 0.1%, to close at 1,235. The small-caps tagged another all-time intraday high of 1,236.88 before fading to 1,230 late in the session. Support at 1,230-1,225 held on the pullback. The close into the 1,235-1,240 zone keeps my near-term target of 1,250 in play.
The S&P 500 Volatility Index ($VIX, 13.84, up 0.15) came close to getting below 12.50 after kissing 12.86. However, it was a tease, as the VIX stayed above 13.50. The bears pushed a high of 14.06 but didn’t have the muscle to push 15.
There are a number of updates to our current trades below, so make sure you check the limit orders and adjust the stop limits appropriately to protect profits.
From desk to press, futures look like this: Dow (+15); S&P 500 (+2.5); Nasdaq 100 (+6).
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.
Western Union (WU, $19.60, up $0.27)
WU April 20 calls (WU150417C00020000, $0.35, up $0.09)
Entry Price: $0.36 (2/25/2015)
Exit Target: $0.75
Return: -3%
Stop Target: None
WU March 19 calls (WU150320C00019000, $0.75, up $0.15)
Entry Price: $0.40 (2/13/2015)
Exit Target: $0.80 (closed half at $0.60 on 2/19/2015)
Return: 69%
Stop Target: $0.40, raise to $0.48 (Stop Limit)
Action: Raise the Stop Limit on the WU March 19 calls from $0.40 to $0.48.
Resistance at $19.50 was cleared on yesterday’s run to $19.67. Shares are on the verge of tripping $20 once $19.75 clears. There is additional fluff from the 6-year chart up to $22 on closes above $20. Support is at $19.50-$19.25.
American Express (AXP, $82.17, up $1.31)
AXP March 84 calls (AXP150320C00084000, $0.78, up $0.22)
Entry Price: $0.75 (2/25/2015)
Exit Target: $1.25
Return: 4%
Stop Target: None
AXP April 87.50 calls (AXP150417C00087500, $0.60, up $0.23)
Entry Price: $0.56 (2/25/2015)
Exit Target: $1.15
Return: 7%
Stop Target: None
Action: I have the AXP March 84 calls as a short-term trade that I would like to close in the next week or so. The March options expire in 22 days, and I usually like to buy options with more than a month of time premium. However, larger percentage returns can be gained by using nearer-term options, but the risks increase as well. I always try to get a double for all of my option trades, but if we can get out of the March calls this week, or next, for a decent double-digit profit, I’ll take it.
Longer-term, I added the AXP April 87.50 calls, as I would love to see a run back towards $90. That might be asking a lot with overhead resistance, but there is value in AXP at these levels.
The bank stress tests are scheduled to be released next Thursday, and Wall Street has yet to look ahead towards the big event. I will talk more about this possible bullish development next Monday.
Resistance for AXP is at $82.50, followed by $84. Support is at $80 on a pullback.
Flextronics (FLEX, $12.29, down $0.11)
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, $73.55, down $0.43)
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: $0.55 (Stop Limit)
Action: Set a Stop Limit at $0.55 to protect profits. Yesterday’s low was $0.62 following the pullback to $73.48.
Shares reached a peak of $74.53 before the negative close, with the calls reaching $0.95. We just missed closing the first half of the trade by a nickel, and I would like to see momentum return today.
Near-term resistance is at $75. Support is at $72-$71. The 52-week high is at $77.49.
GrubHub (GRUB, $42.46, up $1.50)
GRUB March 45 calls (GRUB150320C00045000, $0.95, up $0.40)
Entry Price: $0.55 (2/20/2015)
Exit Target: $1.10, raise to $2.00 (closed first half at $0.95 on 2/25/2015)
Return: 73%
Stop Target: None
Action: Raise the Exit Target from $1.10 to $2.00 for the second half of the trade. Do not set a Limit Order at this level. If I decide to take profits on a move above $2.00, I will send out a Profit Alert.
GRUB traded to a high of $43.02 on Wednesday, with the options peaking at $1.10. Shares were pushing $43.50 in after-hours trading last night following a Morgan Stanley (MS) rating upgrade to overweight with a $50 price target. Imagine that. Perhaps they read my comments below and looked at my chart work from Monday’s Pre-Market Update.
Shares formed a “double-top” last August near $46, and overhead resistance is at $42. The 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, $17.49, up $0.91)
GOGO March 18 calls (GOGO150320C00018000, $0.85, up $0.35)
Entry Price: $0.45 (2/20/2015)
Exit Target: $2.00, raise to $3.25 (Limit Order) (closed half at $1.00 on 2/25/2015)
Return: 106%
Stop Target: $0.40 (Stop Limit)
Action: Raise the Exit Target on the second half of the trade from $2.00 to $3.25 and make it a Limit Order.
Shares traded to a high of $18.14 yesterday after announcing a deal with Delta Air Lines (DAL). The options reached $1.05. Shares were back above $18 in after-hours trading last night.
My new Exit Target is very aggressive, but I would love to see shares zoom 20% on this morning’s open. If so, shares will clear $21 and these options will be worth at least $3.00.
Earnings are due out this morning. There is a Stop Limit at $0.40 on the second half of the trade as well, in case Gogo’s earnings disappoint Wall Street.
I could have an additional update just ahead of the opening bell if there is an adjustment to the parameters of the trade change. If not, roll with the current changes.
Marvell Technology (MRVL, $16.34, up $0.16)
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: Shares reached a high of $16.44 on Wednesday. Resistance is at $16.50-$16.75. Near-term support is at $16.
Brocade Communications Systems (BRCD, $12.46, up $0.04)
BRCD March 13 calls (BRCD150320C00013000, $0.15, up $0.03)
Entry Price: $0.24 (2/13/2015)
Exit Target: $0.50-$0.75
Return: -38%
Stop Target: None
Action: Resistance is at $12.50-$12.75. Yesterday’s high reached $12.57. Support is at $12.25-$12.
JDS Uniphase (JDSU, $13.39, down $0.12)
JDSU March 14 calls (JDSU150320C00014000, $0.28, down $0.02)
Entry Price: $0.78 (1/8/2015)
Exit Target: $0.50-$0.75
Return: -64%
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