Dear Momentum Options Subscriber,
The bears are trying to end the month on a high note, but that is a serious understatement given the market’s performance for February. The selling pressure coming into the month was extreme, and Wall Street was bracing for lower lows.
I went out on a limb and said that the Dow would move 1,000 points this month. The suit-and-ties all say no one can predict the market. I tend to slightly disagree with this statement because I do believe chart work and homework can help to guide you in predicting where the market could move.
While technical analysis is a great tool, figuring out true market sentiment and short-term nuances are the greater challenge. The emotional aspect of trading is even more challenging, but, once you set parameters for the market or a trade, the game becomes easier.
I had an established game plan coming into the year and knew we had to be careful given the two-month long trading ranges. Continued patience was needed in January, as the bottom of the ranges came into play, and February — a historically weak month — was on deck.
I have mentioned that the longer the trading range lasts, the bigger the breakout (or breakdown) will be in a stock or index. The technical indicators came together beautifully and, needless to say, we had a tremendous month once the indexes broke out of their ranges.
While I’m still extremely bullish heading into March, I have continued to protect profits ahead of a potential pullback. Nobody knows how mild or severe a backtest will be, or when it will come. For the time being, we will continue to stay bullish and light on our toes.
Today’s action has mirrored this week’s choppiness, with new support being tested following fresh highs. The higher highs and higher lows are looking good, and an up-Friday for the blue-chips would be a nice sign to see ahead of the weekend.
Heading into the second half of trading, the Dow is down 16 points to 18,198, while the S&P 500 is higher by a point to 2,112. The Nasdaq is slipping 5 points to 4,982, and the Russell 2000 is off a point to 1,238.
I have updated all of the current trades, and I don’t expect any additional Trade Alerts ahead of the close, but it is possible that I may have one. If you don’t hear from me again, have a great weekend, and enjoy this month’s profits.
I will be back on Monday with the next set of charts and an idea of what to expect in March.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 16-1 (94%). 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 12:50 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.
Yahoo! (YHOO, $44.29, down $0.16)
YHOO April 47 calls (YHOO150417C00047000, $0.75, down $0.05)
Entry Price: $0.80 (2/26/2015)
Exit Target: $1.60
Return: -6%
Stop Target: None
Action: Shares are forming a solid base at $43-$44. A move above $45 should lead to a run to $46-$50. The 50-day moving average is at $47, and I’m expecting a test to this level by mid to late March.
CH Robinson Worldwide (CHRW, $74.55, up $0.34)
CHRW April 75 calls (CHRW150417C00075000, $1.60, up $0.15)
Entry Price: $1.30 (2/26/2015)
Exit Target: $2.60
Return: 23%
Stop Target: $0.65
Action: I have set a Stop Target at $0.65, but it is not a Stop Limit. Near-term resistance is at $75. Fresh support will try to hold at $73.50, and there is additional help at $72-$71. The 52-week high is at $77.49.
Western Union (WU, $19.72, up $0.13)
WU April 20 calls (WU150417C00020000, $0.40, flat)
Entry Price: $0.36 (2/25/2015)
Exit Target: $0.75
Return: 11%
Stop Target: None
WU March 19 calls (WU150320C00019000, $0.85, up $0.05)
Entry Price: $0.40 (2/13/2015)
Exit Target: $0.80 (closed first half at $0.60 on 2/19/2015)
Return: 81%
Stop Target: $0.58 (Stop Limit)
Action: Shares are on the verge of tripping $20 once $19.75 clears. There is additional fluff from the six-year chart up to $22 on closes above $20. Support is at $19.50-$19.25.
American Express (AXP, $82.25, down $1.00)
AXP April 87.50 calls (AXP150417C00087500, $0.55, down $0.20)
Entry Price: $0.56 (2/25/2015)
Exit Target: $1.15
Return: -2%
Stop Target: $0.25
Action: I have set a Stop Target at $0.25, but it is not a Stop Limit. Support is at $82 and prior resistance on a pullback, followed by $80. The next layers of resistance for AXP are at $83.50-$84.
Flextronics (FLEX, $12.23, down $0.05)
FLEX April 12 calls (FLEX150417C00012000, $0.60, flat)
Entry Price: $0.67 (2/24/2015)
Exit Target: $1.35
Return: -10%
Stop Target: None
Action: Shares are on track to test $13 and could possibly make a run at $15. Short-term support is at $12.25-$12 on a pullback.
Gogo (GOGO, $17.60, down $0.60)
GOGO March 18 calls (GOGO150320C00018000, $0.60, down $0.30)
Entry Price: $0.45 (2/20/2015)
Exit Target: $3.25 (Limit Order) (closed first half at $1.00 on 2/25/2015)
Return: 78%
Stop Target: $0.60 (Stop Limit)
Action: The Stop Limit of $0.60 has triggered. While disappointing, locking in nearly a triple-digit gain isn’t. I will be back to play GOGO again, as I do believe shares are headed past $20. For now, I’m out.
Marvell Technology (MRVL, $16.17, up $0.07)
MRVL May 18 calls (MRVL150515C00018000, $0.30, flat)
Entry Price: $0.50 (2/18/2015)
Exit Target: $1.00
Return: -40%
Stop Target: None
Action: Resistance is at $16.50-$16.75. Near-term support is at $16.
Brocade Communications Systems (BRCD, $12.61, down $0.24)
BRCD March 13 calls (BRCD150320C00013000, $0.20, down $0.07)
Entry Price: $0.24 (2/13/2015)
Exit Target: $0.50-$0.75
Return: -17%
Stop Target: None
Action: A close above $13 would be very bullish for a push towards $13.50-$14. Support is at $12.50-$12.25 on a backtest.
JDS Uniphase (JDSU, $13.66, up $0.34)
JDSU March 14 calls (JDSU150320C00014000, $0.35, up $0.12)
Entry Price: $0.78 (1/8/2015)
Exit Target: $0.50-$0.75, raise to $1.00
Return: -55%
Stop Target: None
Action: I have raised the Exit Target from $0.50-$0.75 to $1.00, but it is not a Limit Order. Resistance is at $13.75-$14. The breakeven point for the trade is at $14.78.
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