Dear Momentum Options Subscriber,
Shares of Smith & Wesson Holding (SWHC, $13.05, down $0.69) are volatile today and will likely be on the move again tomorrow, as the gun-maker will be reporting earnings following the close.
The company is expected to report a profit of $0.11 a share on revenue of $123.3 million. They have beat Wall Street’s expectations in the past four quarters by $0.02, $0.01, $0.07 and $0.06, respectively.
Shares tend to make large moves following the earnings releases.
The stock has traded in a 52-week range of between $9 and $17+ and are currently in the middle of that zone. With the zombies now controlling the internet, expect gun laws to get even tighter. Guns and ammo could be a hot commodity over the next few months as long as you-know-who is in charge, and the threat of ISIS continues to be a major concern.
While the nearer-term options look sexy for a possible trade, I like the SWHC June 14 calls (SWHC150619C00014000, $0.65, down $0.25) for a longer-term run back to the high teens over the next three months.
This is not an official trade for the portfolio, as I have another earnings trade in play after today’s close. I will check back on these call options at a later date this week and see how they performed along with the company’s results.
Bearish traders can look at the SWHC April 12 puts (SWHC150417P00012000, $0.40, up $0.15) for a possible drop below $12 on an earnings miss.
Both aforementioned call and put options could be used to create a strangle option trade. Longer-term traders might just want to buy and hold shares at current levels.
As far as the market, there is weakness today, and the pullback is being blamed on geopolitical concerns. From a technical aspect, as long as fresh support holds, today is a buying opportunity for possible new trades.
The Dow is currently down 124 points to 18,165, while the S&P 500 is lower by 15 points to 2,101. The Nasdaq is tumbling 45 points to 4,962, and the Russell 2000 is off 11 points to 1,231.
I have updated the current trades, so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 18-2-1 (86%). 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 12:55 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.
Gogo (GOGO, $19.10, up $0.67)
GOGO May 20 calls (GOGO150515C00020000, $1.20, up $0.30)
Entry Price: $0.85 (3/2/2015)
Exit Target: $1.70
Return: 41%
Stop Target: None
Action: Shares have traded to a high of $19.48 today. Short-term resistance is at $19-$20. Near-term support is at $18-$17.50.
BlackBerry (BBRY, $11.22, up $0.17)
BBRY June 13 calls (BBRY150619C00013000, $0.65, up $0.05)
Entry Price: $0.60 (3/2/2015)
Exit Target: $1.20
Return: 8%
Stop Target: None
Action: Today’s peak has reached $11.45. Resistance is at $11.25-$11.50 over the near term. A close above the latter could lead to a test $12, and the 52-week high is at $12.63. Support is at $10.75 on a drop back below $11. These options will double if shares are above $14 by mid-June.
TiVo (TIVO, $11.24, down $0.14)
TIVO May 12 calls (TIVO150515C00012000, $0.60, down $0.02)
Entry Price: $0.42 (2/27/2015)
Exit Target: $0.85 (Limit Order on Half)
Return: 43%
Stop Target: None
Action: Take profits and sell to close the first half of the TIVO May 12 calls at current levels. I want to reduce our risk a little, and these gains are too good to pass up.
The next waves of resistance are at $11.75-$12 and the 100-day moving average. Near-term support is at $11-$10.75.
You can read my preview of today’s earnings announcement and why I like the risk/reward this trade offers in Monday’s Pre-Market Update.
Yahoo! (YHOO, $42.70, down $1.41)
YHOO April 47 calls (YHOO150417C00047000, $0.40, down $0.20)
Entry Price: $0.80 (2/26/2015)
Exit Target: $1.60
Return: -50%
Stop Target: None
Action: Shares are forming a solid base at $43-$44. A move above $45 could lead to a run to $46-$47. The 50- and 100-day moving averages are just below $47, which is where a major battle could occur. I’m expecting a test to this level by mid-April as long as the 50-day moving average does not fall below the 100-day moving average. If $47 clears, shares could easily test $50. If shares fall below $43-$42, I will likely close the trade.
Western Union (WU, $19.65, down $0.39)
WU April 20 calls (WU150417C00020000, $0.40, down $0.10)
Entry Price: $0.36 (2/25/2015)
Exit Target: $0.75
Return: 11%
Stop Target: $0.40
Action: Support is at $19.75-$19.50 on a pullback.
American Express (AXP, $81.33, down $0.70)
AXP April 87.50 calls (AXP150417C00087500, $0.30, down $0.10)
Entry Price: $0.56 (2/25/2015)
Exit Target: $1.15
Return: -46%
Stop Target: $0.25, change to None
Action: I am removing the Stop Target on the AXP April 87.50 calls. Support is at $82-$81.50, followed by $80.
Flextronics (FLEX, $12.05, down $0.18)
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: Short-term support is at $12.25-$12. Resistance is at $12.50-$12.75.
You can read my thoughts on FLEX in this morning’s Pre-Market Update.
Marvell Technology (MRVL, $16.03, down $0.38)
MRVL May 18 calls (MRVL150515C00018000, $0.25, down $0.10)
Entry Price: $0.50 (2/18/2015)
Exit Target: $1.00
Return: -50%
Stop Target: None
Action: Near-term support is at $16. A close below this level could lead to a backtest to $15.75-$15.50 and the 50-day moving average. Resistance is at $16.25-$16.50.
Brocade Communications Systems (BRCD, $12.40, down $0.20)
BRCD March 13 calls (BRCD150320C00013000, $0.12, down $0.04)
Entry Price: $0.24 (2/13/2015)
Exit Target: $0.50-$0.75
Return: -50%
Stop Target: None
Action: Resistance is at $12.75-$13. Support is at $12.25-$12 and the 50-day moving average on another close below $12.50.
JDS Uniphase (JDSU, $13.71, down $0.10)
JDSU March 14 calls (JDSU150320C00014000, $0.35, flat)
Entry Price: $0.78 (1/8/2015)
Exit Target: $1.00
Return: -55%
Stop Target: None
Action: Support is at $13.40 and the 50-day moving average on a pullback. The breakeven point for the trade is at $14.78. This is one of our longest running trades, and I would like to see a close above $14 this week.
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) — Support is at $34 and the 200-day moving average. Resistance is at $34.75-$35 — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options