Dear Momentum Options Subscriber,
One of the main clues I said to watch for this week was the action in the financial stocks. Although there has been a little bounce today, the sector is starting to break down like a rented mule following Tuesday’s pullback in the Financial Select SPDR (XLF, $23.97, up $0.15). The talking heads were more worried about the overall market pullback, but the break below the 50- and 100-day moving averages was bearish.
I expected some nervousness heading into the second round of banks stress tests today, but I wanted to see near-term support hold. While it hasn’t, it will be even more important for the bulls to hold $23.50 and the 200-day moving average. A move above $24 into the close would be a slightly bullish sign.
The other clues I said to watch for at the start of the week, the S&P 500 Volatility Index ($VIX, 16.57, down 0.12) and the transports, have also given bearish clues, and our goal is to be patient while everyone else is nervous. The broader market’s break below the 50-day moving averages suggests further weakness, but today’s rebound might cloud that judgment if the bulls can recover near-term resistance.
While today’s rebound is good to see, the action has been choppy. The Fed’s bank stress tests results will be released after the bell, so trading could stay tight into the close.
Heading into the second half of trading, the Dow is up 47 points to 17,710, while the S&P 500 is higher by 3 points to 2,047. The Nasdaq is adding 7 points to 4,866, and the Russell 2000 is gaining 3 points to 1,211.
I could have a New Trade ahead of the close, but I’m still doing research and chart work. Stay locked and loaded in case I take action, but, for now, let’s go check on the current trades.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 21-5-1 (78%). 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 12:10 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.
Krispy Kreme Doughnuts (KKD, $20.71, up $0.35)
KKD April 20 puts (KKD150417P00020000, $0.95, down $0.10)
Entry Price: $0.95 (3/10/2015)
Exit Target: $1.90
Return: 0%
Stop Target: None
Action: Earnings are due to be released after the close. I’m expecting a possible test to $18 or a rebound to $22.
You can read my earnings preview for KKD in last Friday’s Mid-Market Update.
Yahoo! (YHOO, $42.70, up $0.02)
YHOO April 47 calls (YHOO150417C00047000, $0.38, up $0.01)
Entry Price: $0.80 (2/26/2015)
Exit Target: $1.60
Return: -53%
Stop Target: None
Action: Support is at $43-$42 and the 200-day moving average. A close below the latter could get $40 into play. Resistance at $43.50-$45.
Western Union (WU, $19.27, down $0.11)
WU April 20 calls (WU150417C00020000, $0.30, down $0.05)
Entry Price: $0.36 (2/25/2015)
Exit Target: $0.75
Return: -17%
Stop Target: None
Action: Support is at $19.25-$19. Resistance is at $19.50-$19.75.
American Express (AXP, $79.25, up $0.14)
AXP April 87.50 calls (AXP150417C00087500, $0.20, up $0.05)
Entry Price: $0.56 (2/25/2015)
Exit Target: $1.15
Return: -64%
Stop Target: None
Action: Support is at $78. Resistance is at $80.
Flextronics (FLEX, $11.45, up $0.04)
FLEX April 12 calls (FLEX150417C00012000, $0.17, flat)
Entry Price: $0.67 (2/24/2015)
Exit Target: $1.35
Return: -75%
Stop Target: None
Action: Support is at $11.25. A break below this level could lead to $11 and a test of the 100- and 200-day moving averages. Resistance is at $11.75-$12.
Marvell Technology (MRVL, $16.23, down $0.09)
MRVL May 18 calls (MRVL150515C00018000, $0.40, flat)
Entry Price: $0.50 (2/18/2015)
Exit Target: $1.00
Return: -20%
Stop Target: None
Action: Near-term support is at $16.25-$16 on a continued backtest. A close below the latter could lead to $15.75 and the 50-day moving average. Resistance is at $16.75-$17.
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) — Keep the Limit Order to sell to close the position at $0.95 in place — Continue to hold.
BlackBerry (BBRY) June 13 calls (from March 2015) — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options