Dear Momentum Stocks Weekly Subscriber,
I have three Trade Updates for the Momentum Stocks Weekly Portfolio.
I wanted to update the two recent trades from earlier this week, along with a trade that could get called away today.
Current Trades
BlackBerry (BBRY, $10.75, down $0.14)
Sold BBRY March 11 weekly calls (BBRY150306C00011000, $0.02, down $0.03)
Original Entry Price: $10.03 (1/29/15)
Lowered Price from Selling Options: $9.79
Exit Target: $12+
Return: 10%
Stop Target: $10
Action: The BBRY March 11 weekly calls expire today. If shares are at or above $11 after today’s close, the stock will be called away. The total return will be 12%.
Shares traded to a high of $11.45 on Tuesday before closing below $11. This may have represented a short-term top. Additional support is at $10.50-$10.25 on a close below $10.75. Resistance is at $11.25-$11.50 if shares recover and hold $11.
If shares remain below $11, we can write another call option to lower the cost basis next week or we can close the trade for a profit.
Limelight Networks (LLNW, $3.60, down $0.09)
Original Entry Price: $3.45 (3/4/15)
Lowered Price from Selling Options: None
Exit Target: $6-$7
Return: 4%
Stop Target: $3.51 (Stop Limit)
Action: Shares made a nice late-day surge on Wednesday after reaching a 52-week peak of $3.72. The boost came after Akamai acquired Xerocole, a competitor to both companies.
Thursday’s run to $3.81 and a fresh 52-week high was a sure sign that shares are trying to clear $4.
I mentioned that Limelight received a takeover offer north of $6 last summer but declined the marriage. Content distribution solutions will continue to grow and so will interest in Limelight and it 100+ patents. I believe shares can trade to $6-$7 on renewed takeover chatter.
The fundamentals look good for a run to $4-$5, but I have set a Stop Limit at $3.51 in case momentum fades. If triggered, the trade would make 2%.
Dot Hill Systems (HILL, $4.67, down $0.02)
Original Entry Price: $4.25 (3/4/15)
Lowered Price from Selling Options: None
Exit Target: $5-$7
Return: 10%
Stop Target: $4.50 (Stop Limit)
Action: I wanted to get into this trade ahead of the earnings that were announced last week. In January, the company raised guidance and said earnings for the fourth quarter would come in at $0.11-$0.13, up from $0.07-$0.12 a share, on revenue of $62-$68 million.
Analysts were expecting earnings of $0.09 a share on revenue of $66 million and yawned at the prior upside earnings forecast.
Dot Hill Systems delivered on their promise, as the numbers came in at $0.13 a share on sales of $68 million.
Wall Street rewarded the “better-than-expected” results, and shares rallied 9% on the news on Thursday.
I was hoping to see HILL make a run past $5 on this “unforgotten reminder,” and my upper-end price target is at $7. Thursday’s high reached $4.75, and I would like to see some follow-through today.
This was meant as a quick and “safer” earnings trade, which is why I recommended the stock and not the options. I’m looking at longer-term options to play a continued run higher and could add one if shares crack $5.
In the meantime, I have set a Stop Limit at $4.50. If tripped, the return would be 6%. I will continue to ride shares higher if momentum sticks, but I set the stop to protect profits.
All prices given in this update are current as 11:20 a.m. EST.
Every new Momentum Stocks Weekly 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.
Trade on!
Rick Rouse
Editor
Momentum Stocks Weekly