Dear Momentum Options Subscriber,
The bears got a Monday win yesterday, which may have given us our first clue that this week could be a little rocky. The bulls held near-term support, but the action in the small-caps (and biotech) was concerning.
The Dow dipped 42 points, or 0.2%, to settle at 18,037. The blue-chips traded to a high of 18,175 on the opening pop but failed at clearing resistance at 18,200. Shaky support is at 18,000, followed by 17,900-17,800 and the 50- and 100-day moving averages.
The S&P 500 slipped 8 points, or 0.4%, to close at 2,108. The index made a run to near-term resistance at 2,125 and set another fresh all-time intraday high for the third-straight session. The breakout failed to hold, as the bears pushed a low of 2,107. Support at 2,100-2,090 and the 50-day moving average held, but a close below the latter would be a bearish development.
The Nasdaq fell nearly 32 points, or 0.6%, to finish at 5,060. Tech challenged its all-time intraday high of 5,132 after reaching a peak of 5,119. The late-day low of 5,053 held near-term support at 5,050. A close below 5,000 might suggest that a short-term top is in. Closes above 5,100 keep 5,200-5,250 in play.
The Russell 2000 declined nearly 15 points, or 1.2%, to end at 1,252. The small-caps tested resistance at 1,275-1,280 after trading into the bottom of this range on the open. The early morning weakness started before the other major indexes, and the close below 1,260 was slightly bearish. Support at 1,250-1,245 and the 50-day moving average was solid, with the bears testing 1,250 late in the session. A close below 1,240 might also signal that a short-term top is in.
The S&P 500 Volatility Index ($VIX, 13.12, up 0.83) jumped nearly 7% after trading to a high of 13.40. The VIX stayed elevated throughout the session, but the bulls held 13.50. There is risk to 15 on pops above this level. A close above 11.50 this week would indicate that higher highs could come into May.
The Stop Limit on our remaining position in Sony (SNE) was triggered late in the day, as the position was closed on the backtest to $31. I feel good about the remaining trades, but I may add some put options if there is a continued pullback.
If the small-caps can hold near-term support, I could use call options on the iShares Russell 2000 (IWM, $124.47, down $1.39) to play a rebound to $125-$127. If the Russell 2000 falls below the 1,245-1,240 levels, I could use put options to play a test to 1,225-1,215 and the 100-day moving average.
We could take action ahead of the Mid-Market Update, so be ready shortly after the open in case I send out a New Trade alert.
From desk to press, futures look like this: Dow (-69); S&P 500 (-8); Nasdaq 100 (-6).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 43-13-1 (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.
Sony (SNE, $31.19, down $0.15)
SNE May 32 calls (SNE150515C00032000, $0.90, down $0.05)
Entry Price: $0.50 (4/20/2015)
Exit Target: $1.50-$2.00 (closed 1/3 at $1.40 on 4/22/15, closed 1/3 at $0.90 on 4/27/15, closed 1/3 at $0.80 on 4/27/15)
Return: 106%
Stop Target: $0.80 (Stop Limit)
Action: The Stop Limit of $0.80 triggered on the last third of the position into yesterday’s close, so we are now out of the trade completely.
I will likely sit out trading earnings on Thursday, but I will be watching the action for a possible re-entry point if shares pull back to $30. Shares tend to make volatile price swings, regardless of earnings, and the Stop Limits helped keep our emotions in check while we locked in a triple-digit profit.
Opko Health (OPK, $14.39, down $0.44)
OPK June 16 calls (OPK150619C00016000, $0.40, down $0.05)
Entry Price: $0.50 (4/27/2015)
Exit Target: $1.00
Return: -20%
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 this level should lead to a run a $16-$17 over the near term.
Shares have been in a tight range since early February, which is when we last traded options on this stock. The nearly three-month range between $14-$15 could produce a substantial breakout or breakdown once key resistance or support levels are cleared. Earnings are due out the second week of May.
Freeport-McMoRan (FCX, $21.82, up $1.00)
FCX June 23 calls (FCX150619C00023000, $0.80, up $0.35)
Entry Price: $0.55 (4/27/2015)
Exit Target: $1.10 (Limit Order on half)
Return: 45%
Stop Target: $0.63 (Stop Limit)
Action: Set a Limit Order to sell to close half of the FCX June 23 calls at $1.10. Also, set a Stop Limit at $0.63 to protect profits.
Near-term resistance is at $22. If that level is cleared on a close, a run to $24 could be in the mix. Monday’s high reached $22.12. Support is at $20-$19.75 and the 50-day moving average on a pullback.
TiVo (TIVO, $11.29, down $0.02)
TIVO June 12 calls (TIVO150619C00012000, $0.40, up $0.05)
Entry Price: $0.30 (4/24/2015)
Exit Target: $0.90
Return: 33%
Stop Target: None
Action: Support is at $11-$11.25 and the 50-day moving average. The next layers of resistance are at $11.50-$12, followed by the 200-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, $33.66, down $0.31)
SPWR June 38 calls (SPWR150619C00038000, $0.75, down $0.10)
Entry Price: $0.95 (4/22/2015)
Exit Target: $1.90
Return: -21%
Stop Target: None
Action: Near-term resistance is at $36. Support is at $34-$33.75.
Earnings are due out on Thursday, April 30, and I covered what to expect in the April 27 Pre-Market Update. This trade will likely make a major move, and I plan to ride the storm out through June. The company’s partnership with Apple (AAPL) is something worth keeping an eye on.
Dot Hill Systems (HILL, $6.51, down $0.05)
HILL September 7.50 calls (HILL150918C00007500, $0.50, down $0.05)
Entry Price: $0.45 (4/20/2015)
Exit Target: $1.35-$1.80
Return: 11%
Stop Target: None
Action: Resistance is at $6.50-$6.75, and a close above the latter would be bullish for a run at $7. Near-term support is at $6.25 on dips below $6.50. Earnings are due out on May 7, and I will cover the company’s numbers next week.
These are the September options that do not expire for five months. The goal is to keep the trade open through two earnings cycles and into September on a possible run to $8-$9 in the stock.
Jabil Circuit (JBL, $23.65, down $0.04)
JBL May 24 calls (JBL150515C00024000, $0.40, flat)
Entry Price: $0.60 (4/10/2015)
Exit Target: $1.20
Return: -33%
Stop Target: None
Action: Near-term support is at $23.50, followed by $23 and the 50-day moving average. Resistance is at $24 and the 52-week high at $24.11. A close above these levels should lead to a run at $25-$26.
Rigel Pharmaceuticals (RIGL, $4.69, down $0.19)
RIGL June 5 calls (RIGL150619C00005000, $0.50, down $0.12)
Entry Price: $0.25 (3/31/2015)
Exit Target: $0.75-$1.00 (closed 1/4 at $0.60 on 4/22/15, closed 1/4 at $0.50 on 4/27/15)
Return: 110%
Stop Target: $0.30 (Stop Limit on remaining 1/2 position)
Action: Shares went on a wild ride on Monday after trading to a high of $5.20 and then dropping to $4.35. Resistance is at $5. Support is at $4.50-$4.25. A close below the latter will likely trigger the Stop Limit.
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