Dear Momentum Options Subscriber,
The bears made another attempt at cracking support on Wednesday, as the indexes tested fresh lows for the week. However, the bulls continue to hold a strong base of support that has formed in recent weeks following the continued run to all-time highs.
The Dow declined 106 points, or 0.6%, to end at 18,096. The blue-chips spent their second-straight session underwater and tested a low of 18,029. Support at 18,100-18,000 held, but the close below 18,100 was slightly bearish, as it snapped an eight-session stay above this level. Additional support is at 17,800-17,600 if the action gets ugly. Resistance is at 18,200-18,300.
The S&P 500 sank 9 points, or 0.4%, to settle at 2,098. The index stayed weak throughout the session after bottoming at 2,087 shortly after the open. I was cheerleading for a hold above the 2,100 level for the ninth-straight session, but that failed to materialize. The close below this level gets 2,075-2,050 in play on continued weakness. Resistance is at 2,100-2,125.
The Nasdaq gave back a 12-pack, or 0.3%, to close at 4,967. Tech struggled on the open and kissed 4,938 but showed continued improvement on the rebound during the second half of trading. The index failed to make it into positive territory and hold 4,975-4,950 on the close and session low. There is additional risk to 4,925-4,900 on another dip below 4,950. A recovery of 4,975-5,000 would be a bullish sign.
The Russell 2000 fell 3 points, or 0.3%, to finish at 1,231. The small-caps were also shaky at the start after trading to a low of 1,224. The bears stretched near-term support at 1,230-1,225 by a half of a point, but the bulls held the upper end of this zone for the 12th-straight session. Resistance is 1,235-1,240, with additional upside to 1,250-1,260 if the latter is cleared.
The S&P 500 Volatility Index ($VIX, 14.27, up 0.37) tangoed with 15 after reaching a peak of 15.33. The bulls held 15 into the closing bell, but it could be a “yellow light” to lighten up on bullish positions. I won’t get nervous until the VIX clears 17.50, and I might flinch at 20, but otherwise I’m staying relaxed despite the spike. A close below 13.50-12.50 today or ahead of the weekend would be a bullish sign again.
It has been a busy week, and “Plan A” from Monday’s Pre-Market Update is holding up well. I mentioned that I wanted to close out a number of older trades this week, as the March options expire two weeks from tomorrow.
Support has been holding up, which is why I continue to open “longer-term” bullish trades, despite much of Wall Street begging for a 5%-10% pullback. I have also been trading stocks I know and ones that are showing momentum.
Being on the outside looking in has been frustrating for the suit-and-ties and, if the bulls can make it through this week, the “smart” money might have to start chasing.
This does not necessarily mean that the current market environment will be smooth sailing, but I’m still holding out for my upside fluff targets to trigger before worrying about a correction or 5%-10% pullback.
From desk to press, futures look like this: Dow (+29); S&P 500 (+3); Nasdaq 100 (+5).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 19-2-1 (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 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.
Atmel (ATML, $8.82, up $0.20)
ATML May 9 calls (ATML150515C00009000, $0.60, up $0.15)
Entry Price: $0.40 (3/4/2015)
Exit Target: $1.00
Return: 50%
Stop Target: None
Action: Shares made a nice late-day recovery on Wednesday after trading down to $8.46. Fresh support at $8.50-$8.40 held, and the rebound back towards $9 was bullish. The 50-day moving average made a recent crossover above the 200-day moving average and formed what technicians call a “golden cross.”
A run to $10 should lead to a pot of gold for this trade, as these options will be worth $1.00 or more if this price target is reached by mid-May or sooner.
The company recently reported a fourth-quarter profit of $0.12 a share on revenues of $346 million. Wall Street was looking for $0.11 a share on sales just below $347 million.
Shares fell 7% from $8.40 to close at $7.82 following the announcement in early February. The headlines from that day may have caused a little confusion. Some investors took the news as an earnings beat, while other deemed it a miss.
The pullback created a nice buying opportunity, but I wanted to wait for the technical picture to improve before possibly going long. I like the businesses Atmel has its hands in, as they are a manufacturer of microcontrollers for mobile touch screens.
The 52-week high is $9.76 for ATML, which is why I think shares can easily reach double-digits on continued momentum.
Gogo (GOGO, $19.63, up $0.16)
GOGO May 20 calls (GOGO150515C00020000, $1.40, flat)
Entry Price: $0.85 (3/2/2015)
Exit Target: $2.25 (Limit Order on Half)
Return: 65%
Stop Target: $1.05 (Stop Limit)
Action: Set a Stop Limit at $1.05 to protect profits. I will raise it if and when shares clear $20, or possibly on weakness.
Shares traded to a high of $19.88 on Wednesday. Short-term resistance is at $20. If cleared, a run to $22 is likely. Near-term support is moving up and will try to hold at $19.25-$19 on a pullback.
BlackBerry (BBRY, $10.84, down $0.13)
BBRY June 13 calls (BBRY150619C00013000, $0.55, down $0.05)
Entry Price: $0.60 (3/2/2015)
Exit Target: $1.20
Return: -8%
Stop Target: None
Action: Support is at $10.75 was tested following yesterday’s dip to $10.71. Resistance is at $11 over the near term.
Yahoo! (YHOO, $43.99, up $1.37)
YHOO April 47 calls (YHOO150417C00047000, $0.65, up $0.25)
Entry Price: $0.80 (2/26/2015)
Exit Target: $1.60
Return: -19%
Stop Target: None
Action: The run back to resistance at $44 was encouraging, as shares peaked at $44.38. Support at $43-$42 held on the open after shares sank to a low of $41.97.
Western Union (WU, $19.65, down $0.07)
WU April 20 calls (WU150417C00020000, $0.35, flat)
Entry Price: $0.36 (2/25/2015)
Exit Target: $0.75
Return: -3%
Stop Target: None
Action: Support is at $19.50. Wednesday’s low touched $19.57. Additional help is at $19.25-$19. Resistance is at $19.75-$20.
American Express (AXP, $80.63, down $1.28)
AXP April 87.50 calls (AXP150417C00087500, $0.25, down $0.15)
Entry Price: $0.56 (2/25/2015)
Exit Target: $1.15
Return: -55%
Stop Target: None
Action: Support is at $80, and a close below this level could lead to $78. While this would give me the blues, these are April options. I’m expecting near-term volatility to remain for another week or so, but it’s too early to let Wall Street shake us out of the trade. Resistance is at $81.50-$82.
Flextronics (FLEX, $11.95, up $0.03)
FLEX April 12 calls (FLEX150417C00012000, $0.40, flat)
Entry Price: $0.67 (2/24/2015)
Exit Target: $1.35
Return: -40%
Stop Target: None
Action: Support is at $11.75. Resistance is at $12-$12.25.
You can read my thoughts on FLEX in Tuesday’s Pre-Market Update.
Marvell Technology (MRVL, $16.21, up $0.21)
MRVL May 18 calls (MRVL150515C00018000, $0.30, up $0.05)
Entry Price: $0.50 (2/18/2015)
Exit Target: $1.00
Return: -40%
Stop Target: None
Action: Resistance is at $16.25-$16.50. Near-term support is at $16, followed by $15.75-$15.50 and the 50-day moving average.
Brocade Communications Systems (BRCD, $12.41, up $0.02)
BRCD March 13 calls (BRCD150320C00013000, $0.10, flat)
Entry Price: $0.24 (2/13/2015)
Exit Target: $0.50-$0.75
Return: -58%
Stop Target: None
Action: Support is at $12.25-$12, followed by the 50-day moving average. Resistance is at $12.50-$12.75.
JDS Uniphase (JDSU, $13.19, down $0.32)
JDSU March 14 calls (JDSU150320C00014000, $0.15, down $0.10)
Entry Price: $0.78 (1/8/2015)
Exit Target: $1.00
Return: -81%
Stop Target: None
Action: Support is at $13, and the break below the 50-day moving average was bearish, but the 100-day moving average held. Let’s see where shares are at by Friday’s close before possibly pulling the plug.
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) — Shares closed at $34 on Wednesday, and I doubt a run of $2+ will come over the next two weeks. Sell to close the trade this morning and let’s clean this one off of the books.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options