Dear Momentum Options Subscriber,
The Fed heads failed to inspire a rebound off of the lows on Wednesday, as the market closed at its near-term support levels. The dictionary word of the day is “transitory,” which is a word used by the zombies to describe economic growth. The Federal Open Market Committee (FOMC)’s meeting minutes also revealed that its “calendar-based” guidance was officially retired, as they remain cautious on inflation risks as well.
The FOMC certainly seemed less confident than it has been in recent meetings, as their optimism for a booming economy this year is fading. This made the prospects of an interest rate hike in June unlikely, with the focus now shifting to September and beyond.
The Dow fell 74 points, or 0.4%, to close at 18,035. The blue-chips traded in negative territory throughout the session and bottomed at 17,953 mid-day. The bulls held support at 18,000-17,900 and the 50-day moving average, and there is backup at 17,800 and the 100-day moving average. Resistance is at 18,100-18,200.
The S&P 500 stumbled nearly 8 points, or 0.4%, to finish at 2,106. The index opened at 2,112 and tested an intraday low of 2,097. Support at 2,100-2,090 and the 50-day moving average held. This was a slightly bullish sign. The close above 2,100 keeps resistance at 2,115-2,125 in play.
The Nasdaq declined roughly 32 points, or 0.6%, to end at 5,023. Tech opened 27 points lower at 5,028 before trying to regain positive territory shortly afterwards. The rebound to 5,053 looked promising before a breakdown to 4,999 by Wall Street’s lunch break. The close below 5,025 keeps risk to 5,000 open, with backup support at 4,975-4,050 and 50-day moving average. Resistance is at 5,050-5,075.
The Russell 2000 gave back a dozen points, or 1%, to settle just under 1,247. The small-caps stayed in the red from start to finish, as the bears pushed a low of 1,245. The 50-day moving average was stretched by two points, but it held into the close. A close below 1,240-1,235 could lead to heavy selling pressure and a test to 1,225-1,215 and the 100-day moving average. A recovery of 1,250-1,260 ahead of the weekend would be bullish.
The S&P 500 Volatility Index ($VIX, 13.39, up 0.98) popped 8% and reached a peak of 14.34. The backtest to 15 was the highest high in eight sessions. That level has held all month, excluding the first trading day. The close below 13.50 was slightly positive, but the bulls need to recover the 12.50 level again ahead of Friday’s close.
We will have a couple of trades in play today, so please pay close attention to the trade updates below.
From desk to press, futures look like this: Dow (-49); S&P 500 (-6); Nasdaq 100 (-26).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 44-13-1 (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 8:30 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.
Limelight Networks (LLNW, $3.70, down $0.02)
LLNW September 4 calls (LLNW150918C00004000, $0.45, up $0.05)
Entry Price: $0.35 (4/29/2015)
Exit Target: $0.70
Return: 29%
Stop Target: None
Action: Earnings are due out this afternoon. Wall Street is expecting a loss of $0.04 a share on revenue of $39 million. I’m hoping the company can break even or turn a profit on higher-than-expected revenue.
The company received a takeover offer north of $6 last June, and management needs to show shareholders why they deserve to run the ship.
Krispy Kreme Doughnuts (KKD, $18.11, down $1.11)
KKD June 17 puts (KKD150619P00017000, $0.60, up $0.20)
Entry Price: $0.35 (4/28/2015)
Exit Target: $1.05 (closed first half at $0.70 on 4/29/2015)
Return: 86%
Stop Target: $0.45 (Stop Limit)
Action: Set a Stop Limit at $0.45 on the second half of the trade.
I have set the Exit Target at $1.05 for the second half of the position. Our first Exit Target at $0.70 triggered on yesterday’s plunge below $18 to $17.79. I wanted to lock in triple-digit profits in the first half on the move, especially as it took only 24 hours or less.
The next wave of support is at $17.50, followed by $17 if $18-$17.75 fails to hold the rest of the week. Resistance is at $18.50-$18.75 and the 200-day moving average.
iShares Russell 2000 (IWM, $123.80, down $1.36)
IWM May 127 calls (IWM150515C00127000, $0.35, down $0.35)
Entry Price: $0.70 (4/28/2015)
Exit Target: $1.40
Return: -50%
Stop Target: None
Action: Near-term support is at $123.50, and a close below this level would be bearish. Resistance is at $125.
The previous QQQ trade was down over 50% before returning 100%, so I’m hoping for the same turnaround here. I plan to hold this trade into next Friday. These are May options, which is another reason that I want to be out of this trade next week — win or lose.
Opko Health (OPK, $14.37, down $0.16)
OPK June 16 calls (OPK150619C00016000, $0.50, down $0.05)
Entry Price: $0.50 (4/27/2015)
Exit Target: $1.00
Return: 0%
Stop Target: None
Action: Support is at $14.50-$14.25 and the 50-day moving average. The 52-week high is at $15.23, and a close above $15-$15.25 should lead to a run at $16-$17 over the near term. Earnings are due out the second week of May.
Freeport-McMoRan (FCX, $22.89, up $0.21)
FCX June 23 calls (FCX150619C00023000, $1.25, up $0.15)
Entry Price: $0.55 (4/27/2015)
Exit Target: $1.60 (closed first half at $1.10 on 4/28/2015)
Return: 114%
Stop Target: $0.90, raise to $1.10 (Stop Limit)
Action: Raise the Stop Limit from $0.90 to $1.10.
Shares cleared near-term resistance at $23 after reaching a peak of $23.10 yesterday. The next hurdle is at $24. Support has moved up to $22.50.
TiVo (TIVO, $11.25, down $0.06)
TIVO June 12 calls (TIVO150619C00012000, $0.40, flat)
Entry Price: $0.30 (4/24/2015)
Exit Target: $0.90
Return: 33%
Stop Target: None
Action: The next layers of resistance are at $11.50-$12, followed by the 200-day moving average. Support is at $11-$11.25 and the 50-day moving average.
You can read my full update on TiVo in the April 27 Pre-Market Update. Earnings are due out in late May.
SunPower (SPWR, $33.27, down $0.53)
SPWR June 38 calls (SPWR150619C00038000, $0.62, down $0.08)
Entry Price: $0.95 (4/22/2015)
Exit Target: $1.90
Return: -35%
Stop Target: None
Action: Earnings are due out this afternoon, which could decide the fate of this trade early if shares test $30. I would like to see a run past $35-$36 on better-than-expected results and raised guidance.
Dot Hill Systems (HILL, $6.40, down $0.21)
HILL September 7.50 calls (HILL150918C00007500, $0.50, down $0.10)
Entry Price: $0.45 (4/20/2015)
Exit Target: $1.35-$1.80
Return: 11%
Stop Target: None
Action: Near-term support is at $6.25 following the close below $6.50. Resistance is at $6.50-$6.75, and a close above the latter would be bullish for a run at $7. Earnings are due out on May 7, and I will cover the company’s numbers next week.
Jabil Circuit (JBL, $23.15, down $0.18)
JBL May 24 calls (JBL150515C00024000, $0.20, down $0.05)
Entry Price: $0.60 (4/10/2015)
Exit Target: $1.20
Return: -67%
Stop Target: None
Action: Near-term support is at $23 and the 50-day moving average. Resistance is at $23.50, followed by $24 and the 52-week high at $24.11.
Trades on Hold — other 2015 Portfolio Open positions (1): 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.
BlackBerry (BBRY) June 13 calls (from March 2015) — This is a speculation trade from early March on BBRY receiving a takeover offer of $14 or better by mid-June — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options