Dear Momentum Options Subscriber,
The market was choppy on Tuesday as the broader indexes showed strength, while tech and the small-caps pulled back.
The Dow gained nearly 60 points, or 0.3%, to end at 18,036. The blue-chips tested support at 17,900 and the 50-day moving average on the morning dip to 17,905. The rebound to 18,075 fell short of clearing resistance at 18,100. The top of the trading range is at 18,200.
The S&P 500 added 3 points, or 0.2%, to settle at 2,095. The bears pushed a lower low of 2,083 for the week but were unable to crack support at 2,075, which is a level that has held for seven-straight sessions. Resistance remains at 2,100-2,110.
The Nasdaq declined 11 points, or 0.2%, to close at 4,977. Tech made another run at 5,000 on the open, but the 8-point pop to 4,996 quickly faded. The index traded down to 4,952 and tested support at 4,950 shortly afterwards. The rest of the session was spent battling over the 4,975 level, with the bulls holding down the fort. The next 25-point swing will likely set the tone, or trend, for the rest of the week. The continued two-month plus trading range continues to be frustrating, but, the longer it continues, the bigger the breakout or breakdown will be, which is what we are trying to capitalize on. I have been using the QQQs to trade the Nasdaq, so there could be another opportunity today or this week to get back in once I see another good entry point.
The Russell 2000 slipped a quarter of a point, or 0.02%, to finish at 1,265. The small-caps traded to a high of 1,268 during the opening minutes but fell shy at clearing Monday’s 52-week high of 1,271 and resistance at 1,275. The accelerated pullback to 1,258 came within the first 30 minutes of trading, but support held at 1,260. The bulls were pushing positive territory again by Wall Street’s lunch break, but the bears controlled much of the second-half action.
The S&P 500 Volatility Index ($VIX, 13.67, down 0.27) spiked to a high of 14.74, with 15 holding for the sixth-straight session. The VIX closed near its session low of 13.64, with the bears holding 13.50. A close below 12.50 would confirm another run at all-times highs.
The portfolio is once again “light,” as we have closed five more winning trades this week. Three trades were double-digit winners, and two were singles. I’m still hoping to hit a triple or a home run with our current trades to complete the cycle. I also have a bevy of new trades on my Watch List, so stay locked and loaded, as I could take action after the open.
We still need to be careful of a continued trading range and the possibility of another backtest to the bottoms of the ranges. This is still a great trading environment for us, as I have been able to stay a step ahead of the action, but the bears are still lingering. This has forced me to use tighter stops and to take profits more quickly, but trading should get easier once a clear trend is in place.
From desk to press, futures look like this: Dow (+41); S&P 500 (+4); Nasdaq 100 (+8.5).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 39-11-1 (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.
Jabil Circuit (JBL, $23.90, up $0.24)
JBL May 24 calls (JBL150515C00024000, $0.67, up $0.12)
Entry Price: $0.60 (4/10/2015)
Exit Target: $1.20
Return: 12%
Stop Target: None
Action: Tuesday’s high reached $23.98. Continued closes above $24 would be bullish for a run to $26-$28. Near-term support is at $23.50, followed by $23.
Sony (SNE, $31.13, up $0.76)
SNE May 31 calls (SNE150515C00031000, $1.30, up $0.35)
Entry Price: $0.70 (4/6/2015)
Exit Target: $1.40
Return: 86%
Stop Target: $0.80, raise to $0.95 (Stop Limit)
Action: Raise the Stop Limit from $0.80 to $0.95.
My near-term target is $32, with a shot at $35. Yesterday’s peak reached $31.35. Support is at $30, followed by $29. Earnings are due out on April 30. You can read my full update on what to expect in the April 7 Mid-Market Update.
Rigel Pharmaceuticals (RIGL, $4.06, down $0.05)
RIGL June 5 calls (RIGL150619C00005000, $0.40, flat)
Entry Price: $0.25 (3/31/2015)
Exit Target: $0.75-$1.00
Return: 60%
Stop Target: None
Action: Resistance is at $4.20, which represents yesterday’s high and the 52-week high. A close above this level would be bullish for a possible run to $4.50-$5. Support is at $3.80-$3.60.
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) — This sector could see heated M&A activity in the coming months, and MRVL tends to move on takeover chatter — Continue to hold.
BlackBerry (BBRY) June 13 calls (from March 2015) — This is a speculation trade that BBRY will receive a takeover offer of $14 or better by mid-June — Continue to hold.
Cypress Semiconductor (CY) June 16 calls (from March 2015) — Earnings are due out on Thursday — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options