Dear Momentum Options Subscriber,
The market traded in a tighter-than-normal range on Wednesday, with the bears getting the overall victory. The major averages finished mixed, and the small-caps disappointing once again. The transportation sector was weak, which is a possible bearish development that I’m watching carefully, but, overall, the bulls showed some strength.
The Dow fell 7 points, or 0.04%, to end at 18,060. The blue-chips made an opening run past resistance at 18,100 after trading to a high 18,132, but the rest of the session was choppy. The bears pushed a low of 18,039 late in the day but were unable to crack support at 18,000.
The S&P 500 declined less than a point, or 0.03%, to settle at 2,098. The index traded up to 2,110 on the open but struggled once again with resistance at 2,120-2,125. The pullback to 2,096 held near-term support at 2,090 and the 50-day moving average.
The Nasdaq gained 5 points, or 0.1%, to close at 4,981. Tech showed some strength as it held positive territory throughout the session after reaching a peak of 5,012. The index failed at holding the 5,000 level, but the close above 4,975 was slightly bullish. Support is at 4,950-4,900.
The Russell 2000 slipped a point, or 0.1%, to finish at 1,232. The small-caps made another run to resistance at 1,240 after reaching a peak of nearly 1,238 shortly after the open. The 4-point rally quickly faded as the bears pushed 1,228 ahead of Wall Street’s lunch break. The bulls held support at 1,225-1,220, and there is additional help at 1,215-1,210.
The S&P 500 Volatility Index ($VIX, 13.76, down 0.10) opened lower at 13.63 and traded down to 13.06 at the start of trading. The bears tapped a high of 14.04 ahead of the closing bell. I have said that a close above 15 or below 12.50 will likely set the next trend for the rest of May and possibly into June.
Despite the hair-pulling action and frustrating trading ranges, I have found some gems that are working for us. I have updated our current trades with raised Stop Limits, so let’s go check on the action.
From desk to press, futures look like this: Dow (+88); S&P 500 (+11); Nasdaq 100 (+24).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 47-15-1 (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.
I hereby disclose that I will be participating in the following trade(s). 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.
Rigel Pharmaceuticals (RIGL, $4.10, up $0.14)
RIGL September 5 calls (RIGL150918C00005000, $0.60, up $0.10)
Entry Price: $0.50 (5/13/2015)
Exit Target: $1.00
Return: 20%
Stop Target: None
Action: Shares recovered their 50-day moving average and held $4 into Wednesday’s close. Resistance is at $4.25, followed by $4.50. Support is at $3.85-$3.75 and the 50-day moving average if $4 fails to hold into the weekend.
Diamond Foods (DMND, $29.19, up $0.89)
DMND June 31 calls (DMND150619C00031000, $0.90, up $0.35)
Entry Price: $0.45 (5/12/2015)
Exit Target: $1.35 (closed one third at $0.80 on 5/13/15)
Return: 93%
Stop Target: $0.50 (Stop Limit)
Action: Set a Stop Limit at $0.50 on the remaining two thirds of the trade. I have removed one of the initial Exit Targets of $0.90 after we closed a third of the trade yesterday.
Shares cleared near-term resistance at $28.50-$29 after trading to a high of $29.31 on Wednesday. The next hurdle is at $30. If cleared, a run to $31-$32 could come. Fresh support is at $28.
Sony (SNE, $32.00, up $0.49)
SNE June 32 calls (SNE150619C00032000, $1.20, up $0.15)
Entry Price: $0.70 (5/8/2015)
Exit Target: $1.40, raise to $1.75 (closed first half at $1.25 on 5/13/15)
Return: 75%
Stop Target: $0.75, raise to $0.95 (Stop Limit)
Action: Raise the Stop Limit from $0.75 to $0.95 on the second half of the trade. Also, raise the Exit Target to $1.75.
Shares traded to a high of $32.44 yesterday, with the options reaching a peak of $1.50. I feel like a knucklehead for not recommending a Limit Order to close the first half the trade at $1.40, as it represented a 100% return. However, shares gapped up at the open and quickly faded back towards $32. I wanted to take partial profits on the pullback because shares are extremely volatile.
The close above $32 yesterday was bullish. The recent 52-week high is at $32.60. A close above this level should get $33-$34 in play. Support is at $31-$30.50.
Wells Fargo (WFC, $55.60, up $0.13)
WFC June 57.50 calls (WFC150619C00057500, $0.31, up $0.03)
Entry Price: $0.31 (5/4/2015)
Exit Target: $0.65
Return: 0%
Stop Target: None
Action: Shares traded to a high of $55.83 on Wednesday. Resistance is at $56. Near-term support is at $55.50-$55.
Limelight Networks (LLNW, $4.11, up $0.06)
LLNW September 4 calls (LLNW150918C00004000, $0.60, flat)
Entry Price: $0.35 (4/29/2015)
Exit Target: $0.80 (Limit Order on half)
Return: 71%
Stop Target: $0.40 (Stop Limit)
Action: Shares traded to a fresh 52-week high of $4.24 yesterday. Resistance is at $4.20-$4.25. Support is at $3.80 on another close below $4.
You can read my full update on LLNW in the May 1 Pre-Market Update.
Opko Health (OPK, $15.67, up $0.86)
OPK June 16 calls (OPK150619C00016000, $0.55, up $0.20)
Entry Price: $0.50 (4/27/2015)
Exit Target: $1.00 (closed first half at $0.60 on 5/13/15)
Return: 15%
Stop Target: $0.45 (Stop Limit)
Action: Set a Stop Limit at $0.45 on the second half of the trade.
Shares traded to $15.81 and a new 52-week high yesterday. This sets up a run to $16-$17. Support has moved up to $15.
Dot Hill Systems (HILL, $6.86, down $0.01)
HILL September 7.50 calls (HILL150918C00007500, $0.60, flat)
Entry Price: $0.45 (4/20/2015)
Exit Target: $1.35-$1.80
Return: 33%
Stop Target: None
Action: Resistance is at $7. Support is at $6.75-$6.50.
Trades on Hold — other 2015 Portfolio Open positions (2): 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) — Resistance is at $32.75 and the 50-day moving average. Support is at $30 — 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