Dear Momentum Options Subscriber,
The first day of April was foolishly spent worrying about a major correction, as the talking heads were in overdrive throughout the session. The bears were growling, but the bulls’ planned traps held them back. While there is always the chance of lower lows, the game plan we had coming into this week is rounding out perfectly. Today’s action could provide the clues we are looking for regarding how the next week or two and the rest of April may play out.
The Dow declined 78 points, or 0.4%, to end at 17,698. The blue-chips spent their second consecutive session underwater after trading to a low of 17,585. I warned of risk to 17,600 followed by 17,350 and the 200-day moving average, but hopefully the lows are in. The close below the 100-day moving average was a little concerning, but the bottom of the trading range held like a tack. Resistance is at 17,800-17,900.
The S&P 500 fell 8 points, or 0.4%, to settle at 2,059. The index traded down to 2,048 but held 2,050 and its 100-day moving average into the close. There is still 1% risk to 2,040 (bottom trading range), with resistance at 2,060 followed by 2,070-2,075.
The Nasdaq gave back 20 points, or 0.4%, to close at 4,880. Tech tested a low of 4,844 and briefly fell below its 50-day moving average at 4,866 while holding this level into the closing bell. The bears “stretched” the 4,850 level by a six-pack, which is a level that needs to hold into the three-day weekend. There is additional help at 4,800 that represents the bottom of the trading range. Resistance is at 4,900-4,925.
The Russell 2000 slipped a point, or 0.1%, to finish at 1,251. The small-caps tested backup support at 1,240 following the opening dip to 1,239. This level easily held on the rebound shortly afterwards, with the bulls clearing 1,250 by the horn. I mentioned that another move back above 1,260 could be the “all clear” signal. In other words, the next 10-point move could be the clue we are looking for. The bottom uptrend line coming into the week was at 1,220, and the bottom of the trading range is at 1,200.
The S&P 500 Volatility Index ($VIX, 15.11, down 0.18) traded up to 16.66 during the early morning madness but nearly fell below 15 in the final minutes of trading. This was a slightly bullish sign, as the low checked-in at 15.08. Remember, no worries until 17.50 trips, and no flinching until 20 triggers. A close below 15 today would be a nice Easter gift.
From desk to press, futures look like this: Dow (-29); S&P 500 (-5); Nasdaq 100 (-12).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 30-9-1 (75%). 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.
Rigel Pharmaceuticals (RIGL, $3.75, up $0.18)
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: Shares kissed $3.84 yesterday. 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 the April 1 Pre-Market Update.
US Steel (X, $23.85, down $0.55)
X May 21 puts (X150515P00021000, $0.80, up $0.17)
Entry Price: $0.60 (3/26/2015)
Exit Target: $1.20
Return: 33%
Stop Target: $0.68 (Stop Limit)
Action: Set a Stop Limit at $0.68 to protect profits.
Shares traded to a low of $23.71 on Wednesday. Support is at $23.50 and the 50-day moving average. I’m looking for a test to $20 by mid-May. Resistance is at $24.
You can read my full thoughts on the trade in the March 27 Pre-Market Update.
Cypress Semiconductor (CY, $13.92, down $0.19)
CY June 16 calls (CY150619C00016000, $0.37, down $0.05)
Entry Price: $0.75 (3/18/2015)
Exit Target: $1.50
Return: -51%
Stop Target: None
Action: I decided to drop the CY April 16 calls on the close below $14. I still like the CY June 16 calls, and I want to stay in the semiconductor sector, as I mentioned that M&A activity would drive further gains in this space for the rest of 2015.
Support is at $13.75 and the 100-day moving average. A close below $13.50 would be bearish. Resistance is at $14-$14.25.
Yahoo! (YHOO, $44.13, down $0.31)
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. I’m placing the trade on hold until $45-$46 is recovered, and it will appear in the “Trades on Hold” section of subsequent issues.
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