Dear Momentum Options Subscriber,
The broader market continued its see-saw action on Tuesday, but tech and the small-caps showed some green on St. Patty’s Day. The slick-talking pros keep saying that volatility is “off the charts,” given the daily triple-digit moves on the Dow, but they can’t see the forest for the trees.
The Dow fell 128 points, or 0.7%, to settle at 17,849 on Tuesday. The blue-chips gave back half of Monday’s gains after trading to a low of 17,785 intraday. The bulls held support at 17,800 along with the 50-day moving average, while backup at 17,600 was not needed. Resistance is at 17,900-18,000.
The S&P 500 slipped 7 points, or 0.3%, to close at 2,074. The index traded in negative territory throughout the session after testing 2,065 during Wall Street’s lunch break. The second half of the action pushed the rebound past 2,075, but this level failed to hold into the close. Support is at 2,060-2,050 on continued weakness. Resistance is at 2,085-2,100.
The Nasdaq added 8 points, or 0.2%, to finish at 4,937. Tech traded down to 4,907 at the start of trading, with support holding at 4,900. The bounce off of this level looked special, as the bulls pushed a high of 4,944. The index fell shy of clearing resistance at 4,950, but, once it does, a run back towards 5,000 could come quick.
The Russell 2000 gained 2 points, or 0.2%, to end at 1,242. The small-caps took a little longer to break into positive territory following the bear attack to 1,234. The bulls held support at 1,230-1,225 before setting a fresh 52-week high north of 1,243. I mentioned that a move past 1,244 will likely get 1,250-1,260 in play, and we missed hitting that level by a point on Tuesday. I had a feeling that 1,244 would stick ahead of the Fed’s comments, but I’m hoping it clears today.
The S&P 500 Volatility Index ($VIX, 15.66, up 0.05) finished flat after trading to a high of 16.37. A close below 15 would be confirmation for higher highs, while a finish above 17.50 would spell trouble.
I’m expecting Janet Yellen and the Fed to say all the right things today. While Wall Street has been worried about the use of the word “patient,” it’s the one discipline they have lacked in trading the market. I have tried to focus more on the fundamental aspects of the market (and other indicators) during the current trading range, which I planned for coming into March.
The beauty of trading ranges is that the longer they are, the bigger the breakout or breakdown will be. I’m still hoping that we hit that sweet spot, but, in case we don’t, I have put a few Stop Limits in place to limit our exposure and minimize any potential damage.
Side note: It seems that I always sleep with one eye open during the week, as I often check the futures market during the night. They have shown some incredible fluctuations this week and have been funky ahead of the close of overseas markets.
At 1:30 a.m. ET they looked like this: Dow (-78); S&P 500 (+1); Nasdaq 100 (+18). This is telling me that big money is being placed on both sides of the ledger, which confirms the divergence pattern we are currently going through.
From desk to press, futures now look like this: Dow (-91); S&P 500 (-9); Nasdaq 100 (-17).
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.
Gogo (GOGO, $21.37, up $0.44)
GOGO April 23 calls (GOGO150417C00023000, $0.60, up $0.35)
Entry Price: $0.55 (3/17/2015)
Exit Target: $1.10
Return: 9%
Stop Target: None
Action: I have been wanting to get back into GOGO following the move back above $20. The call options have been good to us, as our two previous trades made us 78% and 88%, respectively.
I wanted to make sure that the backtest to $19 held following the dips to $18.91 and $18.88 last week. I also wanted to wait until shares cleared and held $20 again before getting back in. My near-term target for the stock has been $22-$24 by mid-May, and Tuesday’s high tripped $22. If shares can make a run past $24, these options will easily double.
NVIDIA (NVDA, $23.25, up $0.28)
NVDA April 23 calls (NVDA150417C00023000, $0.85, up $0.15)
Entry Price: $0.65 (3/16/2015)
Exit Target: $1.30
Return: 31%
Stop Target: $0.66 (Stop Limit)
NVDA May 24 calls (NVDA150515C00024000, $0.80, up $0.15)
Entry Price: $0.65 (3/16/2015)
Exit Target: $1.30
Return: 23%
Stop Target: $0.66 (Stop Limit)
Action: Set Stop Limits at $0.66 on both the NVDA April 23 calls and the NVDA May 24 calls.
Resistance is at $23.50 and the 52-week high of $23.42. A move above these levels should lead to a run at $25-$26. Near-term support is at $22.50-$22.
Yahoo! (YHOO, $43.79, up $0.28)
YHOO April 47 calls (YHOO150417C00047000, $0.45, up $0.04)
Entry Price: $0.80 (2/26/2015)
Exit Target: $1.60
Return: -40%
Stop Target: None
Action: Resistance is at $44. A close above this level would be super bullish. Near-term support is at $43.
Western Union (WU, $19.30, down $0.31)
WU April 20 calls (WU150417C00020000, $0.30, down $0.10)
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, $81.06, down $0.44)
AXP April 87.50 calls (AXP150417C00087500, $0.25, down $0.04)
Entry Price: $0.56 (2/25/2015)
Exit Target: $1.15
Return: -55%
Stop Target: None
Action: Resistance is at $83-$84 and the 50-day moving average. Support is at $80.
Flextronics (FLEX, $11.95, up $0.05)
FLEX April 12 calls (FLEX150417C00012000, $0.35, up $0.05)
Entry Price: $0.67 (2/24/2015)
Exit Target: $1.35
Return: -48%
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, $15.73, down $0.26)
MRVL May 18 calls (MRVL150515C00018000, $0.30, down $0.05)
Entry Price: $0.50 (2/18/2015)
Exit Target: $1.00
Return: -40%
Stop Target: None
Action: The close below support at $15.75 and the 50-day moving average was bearish, as it opens up risk to $15.50-$15. This trade has plenty of time premium left to make a run to $18, but I could close the trade if $15.25 fails to hold. Resistance is at $16.
BlackBerry (BBRY, $9.72, flat)
BBRY June 13 calls (BBRY150617C00013000, $0.25, down $0.02)
Entry Price: $0.60 (3/2/2015)
Exit Target: $1.20+
Return: -58%
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