Dear Momentum Options Subscriber,
The bulls tried their best to recover resistance, but Wednesday’s slight rebound that lasted for much of the session faded into the close. The bears made their best attempt at cracking additional support levels, but a rebound in the financial stocks, along with the small-caps, held them back.
The Dow declined 27 points, or 0.2%, to settle at 17,635. The blue-chips traded to a high of 17,731 shortly after the open but fell shy at making a serious run to resistance at 17,800. The fade to 17,627 held the 100-day moving average by 3 points. A close below this level will likely get 17,350-17,250 into play.
The S&P 500 fell 4 points, or 0.2%, to close at 2,040. The index traded up to 2,050 on the open but didn’t have the energy to push past 2,060 and the 50-day moving average. The retreat to 2,039 and the close below the 100-day moving average by two points was slightly bearish. I mentioned that there could be further risk to 2,025-2,000 once this level failed, but a recovery above 2,045-2,050 today might delay this possibility.
The Nasdaq dropped 10 points, or 0.2%, to finish just under 4,850. Tech tested a high of 4,876 intraday but failed at holding resistance at 4,875-4,900. There is risk to 4,800-4,775 and the 50-day moving average on continued weakness.
The Russell 2000 added 7 points, or 0.6%, to end at 1,215. The small-caps kissed 1,206 at the start of trading before reaching a peak of 1,216. The bulls held the 50-day moving average by 3 points again for the second-straight session and may have formed a “double-bottom” in the process. There is still risk to 1,175 on a close below 1,205-1,200, but the rebound to resistance at 1,215-1,220 was slightly bullish. A close above 1,225 would have been better, and I’ve talked about a possible trading range forming if the bulls failed to recover this level.
The S&P 500 Volatility Index ($VIX, 16.87, up 0.18) tested a low of 16.29 but finished higher after peaking at 17.19. The bulls held 17.50, while the bears had trouble with 15. A move above or below these levels could set the next trend.
From desk to press, futures look like this: Dow (+38); S&P 500 (+4); Nasdaq 100 (+9).
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 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.
Krispy Kreme Doughnuts (KKD, $20.35, down $0.01)
KKD April 20 puts (KKD150417P00020000, $1.00, down $0.05)
Entry Price: $0.95 (3/10/2015)
Exit Target: $1.90 (Limit Order on Half)
Return: 5%
Stop Target: None
Action: Set a Limit Order to close the first half of the KKD April 20 puts at $1.90.
Shares were pushing $19 in after-hours trading on Wednesday following the company’s earnings release. Krispy Kreme reported a profit of $0.17 a share on revenue of $125 million. Wall Street was looking for $0.17 a share on sales of $127 million.
I will likely send out a Trade Alert shortly after the open to adjust the parameters of the trade if our Limit Order is filled. If $1.90 fails to trigger, I may adjust the exit target, as I would like to close the first half of the trade into weakness.
Yahoo! (YHOO, $42.50, down $0.17)
YHOO April 47 calls (YHOO150417C00047000, $0.35, down $0.02)
Entry Price: $0.80 (2/26/2015)
Exit Target: $1.60
Return: -56%
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 is at $43.50.
Western Union (WU, $19.28, down $0.10)
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, $79.45, up $0.34)
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: Shares were above near-term resistance at $80 in after-hours trading last night following the bank stress tests. Support is at $78.
Flextronics (FLEX, $11.48, up $0.07)
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 $11.50-$11.75.
Marvell Technology (MRVL, $16.19, down $0.13)
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 $16.50.
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. Shares reached a fresh 52-week low of $77.38 yesterday — 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