Dear Momentum Options Subscriber,
The bulls got another Monday win following a strong session to start to the week. The surge past resistance kept the top of the trading ranges intact, but the VIX stayed above 15.
The Dow jumped 228 points, or 1.3%, to end at 17,977. The blue-chips opened at 17,751 and easily cleared 17,800 shortly afterwards. The push to resistance at 18,000 reached 17,988 before falling short. If cleared, 18,100-18,300 would be back in play. Support is at 17,800 and the 50-day moving average.
The S&P 500 soared 27 points, or 1.4%, to settle at 2,081. The index opened below its 50-day moving average and made a strong run past 2,075 to end near its session high. A move past 2,085 should lead to a test to 2,100-2,120. Support is at 2,060-2,050 on a pullback.
The Nasdaq zoomed 57 points, or 1.2%, to close at 4,929. Tech opened 3 points below resistance at 4,900 and cleared 4,925 into the closing bell. This was a “sweet” move that opens up the door for a return to 4,950-5,000. Near-term support is at 4,900-4,875. A close back below 4,850 would be bearish.
The Russell 2000 advanced 7 points, or 0.6%, to finish just below 1,240. The small-caps kissed 1,241 intraday and came within 2 points of tapping fresh all-time highs. A pop above 1,244 likely gets 1,250-1,260 in the mix. Support is at 1,225-1,220.
The S&P 500 Volatility Index ($VIX, 15.61, down 0.39) traded in a half-point range and made an intraday high of 15.89 followed by a low of 15.36. A move below 15 would be super bullish, but there is still risk to 17.50.
From desk to press, futures look like this: Dow (-57); S&P 500 (-7); Nasdaq 100 (-8).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 22-6-1 (76%). 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 8:00 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.
NVIDIA (NVDA, $22.97, up $0.27)
NVDA April 23 calls (NVDA150417C00023000, $0.69, up $0.13)
Entry Price: $0.65 (3/16/2015)
Exit Target: $1.30
Return: 6%
Stop Target: None
NVDA May 24 calls (NVDA150515C00024000, $0.64, up $0.04)
Entry Price: $0.65 (3/16/2015)
Exit Target: $1.30
Return: -2%
Stop Target: None
Action: Shares of NVIDIA have been pushing fresh 52-week peaks in recent weeks and look poised for further gains based on strong momentum. The stock had been in a four-month trading range before the recent run to blue-sky territory and has several catalysts that could propel it on a run past $25.
The company recently announced better-than-expected fourth-quarter earnings, as it reported a profit of $0.43 a share on revenue of $1.25 billion. Wall Street was looking for $0.29 a share on sales of $1.2 billion. This was the company’s fourth-straight earnings beat over the past year, and analysts are starting to take notice.
One brokerage firm upgraded the shares to “Buy” from “Neutral” last week. This followed an earlier upgrade in December to “Neutral” from “Underperform.” Another brokerage firm upgraded shares to “Sector Perform” from “Underperform” late last year.
The upgrades on the stock and sector make sense, as the semiconductor space has been hot lately. Consolidation within the sector is also increasing as the industry matures. NVIDIA’s synergies could make them a nice takeover target.
The company recently launched its new computer graphics mobile chip, the Tegra X1, which provides twice the performance of its previous chip, the Tegra K1. The new chip will be used in a number of future products, including NVIDIA’s own upcoming video game console named “Shield.” The unit is expected to cost $199 and will be released in May. The Shield will use Google (GOOG)’s Android software to allow content streaming from Android smartphones and tablets. NVIDIA’s Grid service will be used for the streaming of video games directly to the console.
It remains to be seen if the console will rival or compete with Microsoft (MSFT)’s Xbox or Sony (SNE)’s PlayStation as far as revenue numbers, but at least NVIDIA is giving it a shot.
There are litigation risks that come with owning NVIDIA, as the company has lawsuits pending with Qualcomm (QCOM) and Samsung. Others could follow, as the company is aggressive in protecting its patents. NVIDIA recently negotiated a $1.5 billion settlement deal with Intel (INTC), and there is water-cooler talk that a settlement with Apple (AAPL) could be next. Apple is and has launched a number of new products and might strike a deal to avoid a legal battle.
Of course, verdicts could go against NVIDIA without settlements, but I’m not too worried about that. Instead, I’m more focused on their recent product developments and the stock’s momentum.
Shares recently made a strong breakout out of the four-month trading range of $19-$21 I mentioned above. Near-term support is at $22. Resistance is at $23 and the 52-week high of $23.42. A close above the latter should lead to a run to $25-$26.
Yahoo! (YHOO, $43.51, up $0.64)
YHOO April 47 calls (YHOO150417C00047000, $0.48, up $0.12)
Entry Price: $0.80 (2/26/2015)
Exit Target: $1.60
Return: -40%
Stop Target: None
Action: Shares cleared resistance at $43-$43.50. The next hurdle lies at $44. Support is at $42.25-$42 and the 200-day moving average on a close back below $43.
Western Union (WU, $19.61, up $0.10)
WU April 20 calls (WU150417C00020000, $0.40, flat)
Entry Price: $0.36 (2/25/2015)
Exit Target: $0.75
Return: 11%
Stop Target: None
Action: Shares reached a peak of $19.63 on Monday. Resistance is at $19.75-$20. Support is at $19.50-$19.25.
American Express (AXP, $81.50, up $0.90)
AXP April 87.50 calls (AXP150417C00087500, $0.29, up $0.09)
Entry Price: $0.56 (2/25/2015)
Exit Target: $1.15
Return: -48%
Stop Target: None
Action: Resistance is at $83-$84 and the 50-day moving average. Support is at $80.
Flextronics (FLEX, $11.90, up $0.21)
FLEX April 12 calls (FLEX150417C00012000, $0.30, up $0.05)
Entry Price: $0.67 (2/24/2015)
Exit Target: $1.35
Return: -55%
Stop Target: None
Action: Resistance is at $12, and a close above this level would be bullish. Support is at $11.75-$11.50 and the 50-day moving average.
Marvell Technology (MRVL, $15.99, down $0.07)
MRVL May 18 calls (MRVL150515C00018000, $0.35, flat)
Entry Price: $0.50 (2/18/2015)
Exit Target: $1.00
Return: -30%
Stop Target: None
Action: Support is at $16-$15.75 and the 50-day moving average. Resistance is at $16.25.
BlackBerry (BBRY, $9.72, down $0.09)
BBRY June 13 calls (BBRY150617C00013000, $0.27, down $0.01)
Entry Price: $0.60 (3/2/2015)
Exit Target: $1.20+
Return: -55%
Stop Target: None
Action: Resistance is at $10 and the 200-day moving average. Support is at $9.75-$9.50. This is a speculation play that BBRY will get a takeover offer by mid-June.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options