Dear Momentum Options Subscriber,
The bulls failed at getting their third-straight win following Tuesday’s late-day slide in the market. The action in the small-caps was a bummer, as the index failed to hold fresh support. The talking heads took notice of the pullback into the close, but no major damage was done.
The Dow dropped 5 points, or 0.03%, to finish at 17,875. The blue-chips opened higher but were choppy during the first hour of trading. The bulls pushed a high of 17,983 in the second half of the action but fell short of resistance at 18,000-18,100. The final-hour fade to 17,871 easily held support at 17,800, but there is risk to 17,600 on a close below this level.
The S&P 500 slipped 4 points, or 0.2%, to end at 2,076. The index traded up to 2,089 and nearly cracked resistance at 2,090-2,100 before finishing at its session low. Support at 2,075-2,070 held, and there is backup help at 2,060.
The Nasdaq gave back 7 points, or 0.1%, to settle at 4,910. Tech made a run to resistance at 4,950 after reaching 4,948 a few hours after the open but struggled at clearing it. The final-hour fade to 4,907 held near-term support at 4,900. There is additional risk to 4,885-4,850 on dips below this level.
The Russell 2000 declined 7 points, or 0.6%, to close at 1,253. The small-caps opened lower, which was perhaps a sign that choppiness would come on Tuesday. The index tested 1,263 intraday but stumbled to its session low ahead of the closing bell. Support at 1,250 held, with backup at 1,240 not needed. Resistance is at 1,260 again.
The S&P 500 Volatility Index ($VIX, 14.78, up 0.04) tested the 14 level throughout the session, with the bulls kissing 14.01. “Support” (resistance for the bulls) at 13.50 held. The late-day panic to 14.73 still kept the VIX in negative territory, with “resistance” for the bears at 15 holding into the closing bell.
From desk to press, futures look like this: Dow (+23); S&P 500 (+3); Nasdaq 100 (+6.5).
I have more details on our RMBS trades as well as a chart this morning, so let’s go check out the action.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 31-9-1 (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.
Rambus (RMBS, $12.90, up $0.33)
RMBS May 13 calls (RMBS150515C00013000, $0.62, up $0.25)
Entry Price: $0.58 (4/7/2015)
Exit Target: $1.20
Return: 7%
Stop Target: None
RMBS August 15 calls (RMBS150821C00015000, $0.49, up $0.19)
Entry Price: $0.47 (4/7/2015)
Exit Target: $1.00-$1.25
Return: 4%
Stop Target: None
Action: The options pits were very active in RMBS, as the August 15 calls traded nearly 6,000 contracts. The May 14 calls traded 1,400 contracts.
Continued closes above $13 could lead to a quick run to $13.75-$14. Support is at $12.75-$12.50.
Earnings are scheduled to be released on Monday, April 20, after the close. Although this isn’t an earnings trade, the announcement will likely affect these options. Wall Street is expecting Rambus to earn $0.06 a share on revenue of just under $73 million.
The company has announced a number of new deals and licensing agreements in recent weeks and months and is moving more of its focus to encrypted technology. The partnerships could provide a revenue surprise along with an earnings beat.
The past four quarters have been mixed, as Rambus has missed by a penny twice, matched once and beat by four cents. Litigation concerns have been a major headwind, but they have simmered down in recent years. Samsung was a major thorn in Rambus’ side, as the company went to court to protect its intellectual property and continue to defend it.
Yesterday’s comments and the chart:
“Shares of Rambus have been holding their 50-day moving average since early February. This follows a ‘double bottom’ at $10.01 in January that occurred three days apart.
A ‘mini’ golden cross formed in February, with the 50-day moving average crossing above the 100-day moving average. Another golden cross recently developed last week, with the 50-day moving average crossing above the 200-day moving average.
A 50-cent trading range of $12.75-$12.25 has been in place since the beginning of March, with a high of $12.88. The 52-week high is $14.82.”
Sony (SNE, $28.97, down $0.38)
SNE May 31 calls (SNE150515C00031000, $0.60, down $0.10)
Entry Price: $0.70 (4/6/2015)
Exit Target: $1.40
Return: -14%
Stop Target: None
Action: Support is at $28.50-$28. My near-term target is $32, with a shot at $35 on continued momentum.
Comcast (CMCSA, $58.31, up $0.11)
CMCSA May 60 calls (CMCSA150515C00060000, $1.00, flat)
Entry Price: $1.05 (4/6/2015)
Exit Target: $2.10
Return: -5%
Stop Target: None
Action: Tuesday’s high reached $58.68. A run past $59 should get the 52-week high of $60.70 in play. Support is at $57.75 and the 50-day moving average.
PowerShares QQQ Trust (QQQ, $105.80, down $0.18)
QQQ May 109 calls (QQQ150515C00109000, $0.70, down $0.03)
Entry Price: $0.75 (4/6/2015)
Exit Target: $1.50
Return: -7%
Stop Target: None
Action: The QQQs reached a peak of $106.70 yesterday before finishing at their session low. Continued closes above $106 could lead to a run at $108-$110. Support is at $105-$104.
Rigel Pharmaceuticals (RIGL, $3.81, up $0.13)
RIGL June 5 calls (RIGL150619C00005000, $0.45, up $0.05)
Entry Price: $0.25 (3/31/2015)
Exit Target: $0.75-$1.00
Return: 80%
Stop Target: None
Action: Resistance is at $4, followed by the 52-week high at $4.20. Tuesday’s high reached $4.06. Support is at $3.60, followed by $3.40 on a drop back below $3.80-$3.75.
You can read more on this trade in the April 1 Pre-Market Update.
Cypress Semiconductor (CY, $13.89, down $0.08)
CY June 16 calls (CY150619C00016000, $0.40, flat)
Entry Price: $0.75 (3/18/2015)
Exit Target: $1.50
Return: -47%
Stop Target: None
Action: 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.
Trades on Hold — other 2015 Portfolio Open positions (4): 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.
Yahoo! (YHOO) April 47 calls (from February 2015) — Continue to hold.
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