Dear Momentum Options Subscriber,
“I been to the edge, an’ there I stood an’ looked down
You know I lost a lot of friends there baby, I got no time to mess around
Mmmm, so if you want it got to bleed for it baby
Yeah, got to got to bleed baby”
This Van Halen classic came to my brain after seeing futures last night and early this morning. It may feel like the bulls are walking the plank again, but let’s put things in perspective.
For much of 2013, 2014 and 2015, I have been betting against Wall Street and riding with the bulls while the naysayers have been calling for the mother of all corrections to come for three years. While at times I have been trapped, I have not been tricked, as I learned years ago not to bet against a TREND.
The portfolio has closed 37 positions this year, and only two of those were put options, or bearish trades. I’m 1-1 for those trades, and we have another put option trade that is currently open as well.
During this time frame, we had a “baby” selloff in January with a tremendous rebound that started on the first day of February following a pullback at the open that morning. The first trading day of March marked a short-term market top, followed by a drop to the bottom of the trading ranges by mid-month. The last two weeks of March saw another trip to the top, and now the bottom of the trading ranges are in play again.
I mentioned last week during the four-day weakness that there could be a “bottoming process” for another two to three sessions. Here we are, and it’s April Fool’s Day.
The good news is that we can just watch the action because the next battle could seriously hurt the bulls or bears again.
With April options expiring in less than three weeks, and with Good Friday coming up, any April trades are now considered “in the danger zone.” I say this because time premiums start to rot away and, with a three-day weekend coming up, next Monday is when the decay will start to heat up.
I currently have four April positions that are open, and I wanted to get one or two of them off of the books this week. There are two which I have said I wanted to keep open — YHOO on earnings and GOGO because the premium is at $0.05-$0.10 and it doesn’t make sense to just give that little bit of premium away on a heavily-shorted stock. I still might have to, but we can still get a nickel for them in two weeks.
If I chalk all four April trades to a loss, it would put me at 11 losers out of nearly 50 trades. Given the wackiness of March, I will take that track record seven days a week and all day on Sunday. However, I also know that the market can be humbling, and I could have easily been 25-25. I have closed half-positions and used Stop Limits and Limit Orders to navigate the choppy waters, and they were much needed strategies. They also help to take the emotion out of trading.
While today is looking bloody on Wall Street, just remember that we don’t have to rush to go short. There will be a wheelbarrow of money to be made when ALL of my technical indicators turn bearish, and we will have plenty of time to put fresh chips into play.
Instead, think of today as another bottoming process, if support holds of course. Instead of betting, let’s just “call” and see what the fools do.
Heading into the second half of trading, the Dow is down 111 points to 17,664, while the S&P 500 is lower by 11 points to 2,056. The Nasdaq is off 34 points to 4,866, and the Russell 2000 is falling 3 points to 1,250.
Now let’s go check on our trades.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 29-7-1 (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 12:25 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.
Flextronics (FLEX, $12.51, down $0.17)
FLEX May 13 calls (FLEX150515C00013000, $0.32, down $0.08)
Entry Price: $0.32 (3/30/2015)
Exit Target: $0.65
Return: 3%
Stop Target: $0.33 (Stop Limit)
Action: The Stop Limit of $0.33 has triggered. I will keep FLEX on my Watch List for another trade down the road.
Cypress Semiconductor (CY, $13.90, down $0.21)
CY April 16 calls (CY150417C00016000, $0.10, down $0.05)
Entry Price: $0.40 (3/18/2015)
Exit Target: $0.80
Return: -75%
Stop Target: None
CY June 16 calls (CY150619C00016000, $0.35, down $0.05)
Entry Price: $0.75 (3/18/2015)
Exit Target: $1.50
Return: -53%
Stop Target: None
Action: Close the CY April 16 calls at current levels. I am leaving the CY June 16 calls open.
Support is at $14-$13.50 and the 100-day moving average. Resistance is at $14.25-$14.50.
Veeva Systems (VEEV, $24.89, down $0.64)
VEEV April 29 calls (VEEV150417C00029000, $0.10, down $0.05)
Entry Price: $0.60 (3/18/2015)
Exit Target: $1.20
Return: -83%
Stop Target: None
Action: Close the VEEV April 29 calls at current levels.
Rigel Pharmaceuticals (RIGL, $3.84, up $0.27)
RIGL June 5 calls (RIGL150619C00005000, $0.40, up $0.05)
Entry Price: $0.25 (3/31/2015)
Exit Target: $0.75-$1.00
Return: 60%
Stop Target: None
Action: Resistance is at $3.80, followed by $4. The 52-week high is at $4.20. Support is at $3.40.
You can read more on this trade in this morning’s Pre-Market Update.
US Steel (X, $23.81, down $0.59)
X May 21 puts (X150515P00021000, $0.85, up $0.17)
Entry Price: $0.60 (3/26/2015)
Exit Target: $1.20
Return: 42%
Stop Target: None
Action: Shares have traded to a low of $23.71 today. Support is at $23.50 and the 50-day moving average. I’m looking for a test to $20 by mid-May. Resistance is now at $24.
You can read my full thoughts on the trade in the March 27 Pre-Market Update.
Yahoo! (YHOO, $44.22, down $0.22)
YHOO April 47 calls (YHOO150417C00047000, $0.20, down $0.10)
Entry Price: $0.80 (2/26/2015)
Exit Target: $1.60
Return: -75%
Stop Target: None
Action: There is additional risk to $44-$43 and the 200-day moving average this week.
Trades on Hold — other 2015 Portfolio Open positions (3): 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.
Marvell Technology (MRVL) May 18 calls (from February 2015) — Continue to hold.
BlackBerry (BBRY) June 13 calls (from March 2015) — Continue to hold.
Gogo (GOGO) April 23 calls (from March 2015) — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options