Dear Momentum Options Subscriber,
The bears continue to take advantage of the nervousness on Wall Street and the pending unemployment report to push lower levels of support. This has been the worst two-day stretch since late January, and yesterday’s action may have been fueled by Janet Yellen’s comments about an inflated stock market.
The Dow fell 86 points, or 0.5%, to finish at 17,841. The blue-chips made an opening run past resistance at 18,000 after reaching a peak of 18,016. This was followed by an immediate backtest to support at 17,800 an hour into the session. The bears pushed a low of 17,733, but the bulls held 17,800. There is additional risk to 17,600 and the bottom of the trading range on a close below this level. Resistance is at 17,900-18,000.
The S&P 500 declined 9 points, or 0.5%, to end at 2,080. The index pushed resistance at 2,100 after kissing 2,098 at the start of trading. The rally lasted about 15 minutes before a reversal and backtest to support at 2,075-2,070. The bears pushed a low of 2,067, but the bulls held these levels into the close. There is additional risk to 2,050 on a close below 2,070. A finish back above 2,090-2,100 ahead of the weekend would be bullish.
The Nasdaq crumbled 19 points, or 0.4%, to settle at 4,919. Tech cleared near-term resistance at 4,950 after making a run to 4,965 on the open. The failure to clear the additional hurdles at 4,975-5,000 was a good clue that lower lows might trigger. The index traded down to 4,888, and I have talked about the need to hold back-up support at 4,850. The close above 4,900 was a slight relief and keeps resistance within a 1% range.
The Russell 2000 gained 4 points, or 0.3%, to close at 1,219. The small-caps raced to a peak of 1,222 on Wednesday’s open and maintained a bullish bias until late in the second half of trading. I have been warning that a break below the March low of 1,206, or the 1,200 level, would be bearish. Yesterday’s bottom touched 1,211, but the positive close keeps resistance at 1,220-1,225 in play.
The S&P 500 Volatility Index ($VIX, 15.15, up 0.84) zoomed past 15 to a high of 16.36 during yesterday’s pullback. The bulls held 17.50, but the close back above 15 was slightly bearish and the first in over a month. A recovery of 14-13.50 would stem the heightened volatility.
From desk to press, futures look like this: Dow (-48); S&P 500 (-5); Nasdaq 100 (-10).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 46-14-1 (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 8:30 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.
Wells Fargo (WFC, $54.92, down $0.43)
WFC June 57.50 calls (WFC150619C00057500, $0.30, down $0.05)
Entry Price: $0.31 (5/4/2015)
Exit Target: $0.65
Return: -3%
Stop Target: None
Action: Support is at $54.50-$54. Wednesday’s low touched $54.45. Resistance is at $55-$55.50. The 52-week high is at $56.26.
Limelight Networks (LLNW, $3.98, up $0.03)
LLNW September 4 calls (LLNW150918C00004000, $0.45, down $0.05)
Entry Price: $0.35 (4/29/2015)
Exit Target: $0.80 (Limit Order on half)
Return: 29%
Stop Target: $0.40 (Stop Limit)
Action: Support is at $3.80-$3.75 on continued weakness. Yesterday’s low reached $3.88, with the options trading down to $0.44. Resistance is at $4.00-$4.20.
You can read my full update on LLNW in the May 1 Pre-Market Update.
Krispy Kreme Doughnuts (KKD, $17.27, down $0.27)
KKD June 17 puts (KKD150619P00017000, $0.90, up $0.10)
Entry Price: $0.35 (4/28/2015)
Exit Target: $1.05 (closed first half at $0.70 on 4/29/2015)
Return: 129%
Stop Target: $0.60, raise to $0.70 (Stop Limit)
Action: Raise the Stop Limit from $0.60 to $0.70. This ensures that the trade will make a 100% return, but I’m still looking to squeeze a little more juice out of this melon.
Wednesday’s low reached $17.20. I would love to see a close below $17 ahead of the weekend. Resistance is at $17.75-$18.
Earnings are due out the first week of June. I have a target of $15 for KKD going into, or after the announcement, as long as $18.50 holds.
You can read my full update on KKD in the April 29 Pre-Market Update.
Opko Health (OPK, $14.00, up $0.12)
OPK June 16 calls (OPK150619C00016000, $0.30, flat)
Entry Price: $0.50 (4/27/2015)
Exit Target: $1.00
Return: -40%
Stop Target: None
Action: Support is at $13.75-$13.50 on a continued pullback. Resistance is at $14-$14.25.
Earnings are scheduled to be released this week or early next. I have an unconfirmed date of this Friday. Analysts are looking for a loss of $0.08 a share on revenue of $23 million. I believe OPK will top these numbers.
Dot Hill Systems (HILL, $6.82, up $0.21)
HILL September 7.50 calls (HILL150918C00007500, $0.65, up $0.10)
Entry Price: $0.45 (4/20/2015)
Exit Target: $1.35-$1.80
Return: 44%
Stop Target: None
Action: Shares traded to a fresh 52-week high of $6.95 yesterday.
Earnings are due out this morning. I could have a Trade Alert shortly after the open, depending on whether or not we need to take action. Near-term support is at $6.50-$6 on disappointing results or lowered guidance.
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.
SunPower (SPWR) June 38 calls (from April 2015) — I will likely close this trade if support at $30 fails. Resistance is at $32.50 — Continue to hold.
iShares Russell 2000 (IWM) May 127 calls (from April 2015) — I would like to be out of this trade by this Friday, win, lose or draw — Continue to hold.
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