Dear Momentum Options Subscriber,
The bulls returned to their winning ways on Wednesday, as the market closed higher for the third time in the past four sessions. The final hour of trading was a little choppy, but the closes above resistance were bullish.
The Dow advanced 27 points, or 0.2%, to end at 17,902. The blue-chips traded to a high of 17,976 shortly after the open and nearly cleared resistance at 18,000 before another late-day fade. The dip to 17,822 held support at 17,800, and the close above 17,900 was slightly bullish. The next triple-digit move should provide a great clue on how the near-term action might play out.
The S&P 500 climbed 5 points, or 0.3%, to settle just below 2,082. The index raced to a high of 2,086 at the start of trading before a backtest to 2,073 following the release of the Fed minutes. Support at 2,075-2,070 held along with the 50-day moving average. Resistance remains at 2,090-2,100.
The Nasdaq jumped 40 points, or 0.8%, to close at 4,950. Tech held positive territory throughout the session and reached a peak of 4,956 intraday. The move and close on resistance at 4,950 was a very bullish signal that could lead to a retest of 5,000-5,050. Support is at 4,925-4,900 on a pullback.
The Russell 2000 added 9 points, or 0.8%, to finish at 1,262. The small-caps also held green throughout the day after testing a high of 1,264. The close back above resistance at 1,260 was bullish along with the fourth-straight higher high. The next hurdles are at 1,275-1,280 on a move above 1,265. Support is at 1,250-1,240 on closes back below 1,260.
The S&P 500 Volatility Index ($VIX, 13.90, down 0.88) traded in negative territory from start to finish on Wednesday, with the bulls pushing a low of 13.75. A close below 13.50 would signal continued strength in the market and possibly another run at all-time highs. The 14.50-15 level still needs to be watched on pullbacks, with a close above the latter being bearish.
I have set a few Stop Limit orders to protect profits on several of our trades. I have also placed a Stop Target on another trade, which I could raise on continued momentum to protect profits.
From desk to press, futures look like this: Dow (+13); S&P 500 (+0.25); Nasdaq 100 (+1).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 31-9-1 (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 8:00 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.
Rambus (RMBS, $13.55, up $0.65)
RMBS May 13 calls (RMBS150515C00013000, $1.00, up $0.28)
Entry Price: $0.58 (4/7/2015)
Exit Target: $1.20 (closed half at $1.00 on 4/8/2015)
Return: 72%
Stop Target: $0.70 (Stop Limit)
RMBS August 15 calls (RMBS150821C00015000, $0.62, up $0.13)
Entry Price: $0.47 (4/7/2015)
Exit Target: $1.00-$1.25
Return: 32%
Stop Target: $0.50 (Stop Limit)
Action: Set a Stop Limit at $0.70 on the RMBS May 13 calls. Set a Stop Limit at $0.50 on the RMBS August 15 calls.
I decided to close half of the RMBS May 13 calls into strength yesterday to lock in gains of over 70% in less than 24 hours. I still believe they can give us a 100% return or greater, along with the RMBS August 15 calls, but the profits were too good to pass up.
Going forward, I have set Stop Limits to protect additional profits in case shares stall. Resistance is at $13.75-$14. Yesterday’s peak reached $13.64. Support is at $13.
Sony (SNE, $29.52, up $0.55)
SNE May 31 calls (SNE150515C00031000, $0.70, up $0.10)
Entry Price: $0.70 (4/6/2015)
Exit Target: $1.40
Return: 0%
Stop Target: None
Action: Resistance is at $30. Support is at $28.50-$28. My near-term target is $32, with a shot at $35 on continued momentum.
Comcast (CMCSA, $59.18, up $0.87)
CMCSA May 60 calls (CMCSA150515C00060000, $1.20, up $0.20)
Entry Price: $1.05 (4/6/2015)
Exit Target: $2.10
Return: 14%
Stop Target: $1.00
Action: Set a Stop Target at $1.00, but it is not a Stop Limit order. It could become one, however, as I would like to raise it to $1.10 or better on additional strength.
Shares closed a penny off of their high on Wednesday and cleared $59 in the process. The 52-week high is at $60.70 and will likely be challenged on continued strength. Support is at $58-$57.75 and the 50-day moving average.
PowerShares QQQ Trust (QQQ, $106.64, up $0.84)
QQQ May 109 calls (QQQ150515C00109000, $0.85, up $0.15)
Entry Price: $0.75 (4/6/2015)
Exit Target: $1.50
Return: 13%
Stop Target: $0.76 (Stop Limit)
Action: Set a Stop Limit at $0.76.
If there is a pullback today, we can wait until next week to reestablish positions. I would like to see the QQQs clear $107-$107.25 this morning, but I have no problem stepping back if the action remains choppy.
Continued closes above $106 could lead to a run at $108-$110. Yesterday’s high reached $106.79. Support is at $105-$104.
Rigel Pharmaceuticals (RIGL, $3.91, up $0.07)
RIGL June 5 calls (RIGL150619C00005000, $0.40, down $0.05)
Entry Price: $0.25 (3/31/2015)
Exit Target: $0.75-$1.00
Return: 60%
Stop Target: None
Action: Resistance is at $4, followed by the 52-week high at $4.20. Wednesday’s top touched $3.93. Support is at $3.60, followed by $3.40 on a drop back below $3.80-$3.75.
Cypress Semiconductor (CY, $13.81, down $0.09)
CY June 16 calls (CY150619C00016000, $0.35, down $0.05)
Entry Price: $0.75 (3/18/2015)
Exit Target: $1.50
Return: -53%
Stop Target: None
Action: Support is at $13.75 and the 100-day moving average. A close below $13.50 would be bearish. Resistance is at $14-$14.25.
Trades on Hold — other 2015 Portfolio Open positions (4): 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.
Yahoo! (YHOO) April 47 calls (from February 2015) — Shares cleared $45 on Wednesday — Continue to hold.
Marvell Technology (MRVL) May 18 calls (from February 2015) — Continue to hold.
BlackBerry (BBRY) June 13 calls (from March 2015) — Continue to hold.
Gogo (GOGO) April 23 calls (from March 2015) — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options