Dear Momentum Options Subscriber,
“Mama’s got a squeeze box
She wears on her chest
And when Daddy comes home
He never gets no rest
‘Cause she’s playing all night
And the music’s all right
Mama’s got a squeeze box
Daddy never sleeps at night
She goes in and out and in and out and in and out and in and out…”
I normally wait until Friday afternoons to spin an office classic to wind down the week. However, these lyrics are a great description of the current market environment, and I was singing them mid-week following the statement from the Federal Reserve. Talk about a sweet spot — I was betting on yesterday’s rebound, but it caught Wall Street totally off-guard.
The Dow zoomed 227 points, or 1.3%, to close at 18,076. The blue-chips traded to a low of 17,697 ahead of the Fed announcement while holding support at 17,800-17,600. The rebound reached a peak of 18,097 and easily cleared resistance at 17,900-18,000. The move above these levels gets 18,100-18,300 back in play.
The S&P 500 soared 25 points, or 1.2%, to finish a half of a point below 2,100. The index tested a low of 2,061 intraday, with support at 2,060-2,050 sticking. The turnaround touched a high north of 2,106 after prior resistance at 2,085-2,100 was cleared. The next layers of resistance are at 2,120-2,150. I would like to see 2,085-2,075 hold on a pullback.
The Nasdaq jumped 45 points, or 0.9%, to end at 4,982. Tech tested support at 4,900 intraday after the bears pushed 4,907 ahead of the Fed news. This was a solid signal that higher highs would come. They did, and the bulls pushed the index past the 5,000 level by a point. Although this level failed to hold, the move was bullish as long as 4,975-4,950 holds on a backtest.
The Russell 2000 advanced nearly 10 points, or 0.8%, to settle at 1,252. The small-caps were down a touchdown at halftime after trading to a low of 1,235. Support at 1,230-1,225 was strong before a second-half run to 1,255. I mentioned that a move to 1,250-1,260 could come quickly, and the bulls split the middle of this range. A move above the latter could lead to a short-term push to 1,275.
The S&P 500 Volatility Index ($VIX, 13.97, down 1.69) was absolutely on point and gave us the best single clue there could be for a breakout on Wednesday. The VIX’s low of 13.69 shortly after the open was breached on the run past resistance, as the bulls pushed another low of 13.38. I have talked about a return to 13.50-12.50 once the VIX got back below 15, but this level needs to hold for the rest of the week and into next.
From desk to press, futures look like this: Dow (-14); S&P 500 (-2); Nasdaq 100 (+1.25).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 24-6-1 (77%). 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.
Cypress Semiconductor (CY, $15.26, down $0.28)
CY April 16 calls (CY150417C00016000, $0.45, down $0.10)
Entry Price: $0.40 (3/18/2015)
Exit Target: $0.80
Return: 13%
Stop Target: None
CY June 16 calls (CY150619C00016000, $0.80, down $0.10)
Entry Price: $0.75 (3/18/2015)
Exit Target: $1.50
Return: 7%
Stop Target: None
Action: Shares have been in a tight range following the mid-December run to $15. Support is at this level and the 50-day moving average, which has been holding during the trading range. Continued closes above $16 would be bullish for a run to $18-$20.
Veeva Systems (VEEV, $27.48, down $0.25)
VEEV April 29 calls (VEEV150417C00029000, $0.65, down $0.06)
Entry Price: $0.60 (3/18/2015)
Exit Target: $1.20
Return: 8%
Stop Target: None
Action: Shares tested a low of $27, with support at the 200-day moving average holding into the close. There is additional risk to $26-$25 on a close below this level. A move above $28.50 and the 50- and 100-day moving averages could lead to additional short covering and a run past $30.
Gogo (GOGO, $21.14, down $0.23)
GOGO April 23 calls (GOGO150417C00023000, $0.60, down $0.05)
Entry Price: $0.55 (3/17/2015)
Exit Target: $1.10
Return: 9%
Stop Target: None
Action: Resistance is at $22. Support is at $21-$20.
Yahoo! (YHOO, $44.67, up $0.88)
YHOO April 47 calls (YHOO150417C00047000, $0.55, up $0.10)
Entry Price: $0.80 (2/26/2015)
Exit Target: $1.60
Return: -31%
Stop Target: None
Action: The close above $44 was beautiful, but further resistance is at $45 and the 50-day moving average. A close above this level should lead to a run at $47-$48. Near-term support is at $44-$43.
Western Union (WU, $19.35, up $0.05)
WU April 20 calls (WU150417C00020000, $0.25, down $0.05)
Entry Price: $0.36 (2/25/2015)
Exit Target: $0.75
Return: -31%
Stop Target: None
Action: It appears as though the short-sellers are targeting shares of WU, as the put options were heavily traded on Wednesday. Specifically, the WU May 18 puts traded over 10,000 contracts and closed at $0.35 yesterday.
Support at $19.25-$19 was stretched following a test to $18.72, but the recovery of these levels was slightly bullish. Resistance is at $19.50-$19.75.
American Express (AXP, $81.86, up $0.80)
AXP April 87.50 calls (AXP150417C00087500, $0.30, up $0.05)
Entry Price: $0.56 (2/25/2015)
Exit Target: $1.15
Return: -46%
Stop Target: None
Action: Resistance is at $83-$84 and the 50-day moving average. Support is at $80.
Flextronics (FLEX, $12.08, up $0.13)
FLEX April 12 calls (FLEX150417C00012000, $0.40, up $0.05)
Entry Price: $0.67 (2/24/2015)
Exit Target: $1.35
Return: -40%
Stop Target: None
Action: Shares closed above resistance at $12 after reaching a peak of $12.24. Short-term resistance is at $12.25-$12.50. The 52-week high is at $12.48. Support is at $11.75-$11.50 and the 50-day moving average if $12 fails to hold.
Marvell Technology (MRVL, $15.83, up $0.10)
MRVL May 18 calls (MRVL150515C00018000, $0.30, flat)
Entry Price: $0.50 (2/18/2015)
Exit Target: $1.00
Return: -40%
Stop Target: None
Action: Resistance is at $15.75-$16. Support is at $15.50-$15.
BlackBerry (BBRY, $9.77, up $0.05)
BBRY June 13 calls (BBRY150617C00013000, $0.25, flat)
Entry Price: $0.60 (3/2/2015)
Exit Target: $1.20+
Return: -58%
Stop Target: None
Action: Resistance is at $10 and the 200-day moving average. Support is at $9.75-$9.50. This is a speculation play that BBRY will get a takeover offer by mid-June.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options