Dear Momentum Options Subscriber,
Wall Street blinked on Monday’s open and tried to get back on the bulls’ bandwagon as the market trended higher throughout the day. It was a great start to the week, as the bulls won their second-straight session and their fourth Monday session in the past five.
The Dow and S&P recovered their 50- and 100-day moving averages on the massive move. More bullish news could be in store today, as the Russell 2000 has traded higher 75% of the time on the last trading day in March over the past two decades.
The Dow jumped 263 points, or 1.5%, to close at 17,976. The blue-chips stampeded past resistance at 17,800-17,900 after touching an intraday high of 18,008. Although 18,000 failed to hold, I mentioned that the month of April is historically bullish for the Dow. One of the savvy talking heads echoed those comments during market hours and may have twisted Wall Street’s arm to buy stocks.
The S&P 500 soared 25 points, or 1.2%, to finish at 2,086. The index jolted past 2,070-2,075 shortly after the starting bell and raced to 2,088 late in the session. I talked about a move to 2,090-2,100 on momentum, and the close above 2,075 (now support) was bullish. Backup support is at 2,050-2,040.
The Nasdaq zoomed 56 points, or 1.2%, to end at 4,947. Tech easily cleared 4,900 at the start of trading and nearly hurdled 4,925. I mentioned that a run past these levels could lead to 4,975-5,000+. Yesterday’s high reached 4,948 and, while I was pushing for 4,950 to trip, it was close enough for a victory dance. Near-term support has moved up from 4,850 to 4,900-4,875.
The Russell 2000 gained 17 points, or 1.4%, to settle at 1,257. The small-caps opened at 1,246 and easily cleared the first layer of resistance at 1,250 within the first hour of trading. The bulls kissed 1,258 but fell short at the second layer of resistance at 1,260. Fresh support will try to hold at 1,250, with 1,240 serving as backup.
The S&P 500 Volatility Index ($VIX, 14.51, down 0.56) opened below 15 at 14.76 and traded to a low of 14.08. The drop back below 15 was bullish, but further assurance of a rally would come on a close below 13.50.
I have put a number of Stop Limits in place to protect profits and prevent losses. Given the see-saw action in March, we still need to stay light on our feet and quick on our toes.
From desk to press, futures look like this: Dow (-70); S&P 500 (-9.5); Nasdaq 100 (-18).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 26-7-1 (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.
Flextronics (FLEX, $12.65, up $0.27)
FLEX May 13 calls (FLEX150515C00013000, $0.42, up $0.20)
Entry Price: $0.32 (3/30/2015)
Exit Target: $0.65
Return: 31%
Stop Target: $0.33 (Stop Limit)
FLEX April 12 calls (FLEX150417C00012000, $0.71, up $0.21)
Entry Price: $0.67 (2/24/2015)
Exit Target: $1.00 (Limit Order)
Return: 6%
Stop Target: $0.70 (Stop Limit)
Action: Set a Stop Limit at $0.33 on the FLEX May 13 calls. Set a Stop Limit at $0.70 on the FLEX April 12 calls.
Shares traded to a 52-week high of $12.74 and came within a penny of $12.75. If cleared, a run to $13-$14 could come. Support has moved up from $12.25 to $12.50.
I wanted to set a Stop Limit on the FLEX April 12 calls to ensure that the trade doesn’t turn into a loss. The five-week waiting period has been rough and, after being down over 50%, we can limit our exposure if the $0.70 Stop Limit trips.
I will ride with the May calls as along as $12 holds, but it was a bummer to see an analyst downgrade on FLEX yesterday.
Standpoint Research downgraded shares from “Buy” to “Hold.” I will give them credit for initiating a Buy rating on the stock when shares were near $9 last October, but why the downgrade on momentum?
I did the extra chart work over the weekend, which showed multi-year resistance up to the mid-teens, so let’s see how it plays out.
PowerShares QQQ Trust (QQQ, $106.73, up $1.21)
QQQ April 108 calls (QQQ150417C00108000, $0.71, up $0.26)
Entry Price: $0.65 (3/30/2015)
Exit Target: $1.30 (Limit Order on half)
Return: 9%
Stop Target: $0.67 (Stop Limit)
QQQ May 110 calls (QQQ150515C00110000, $0.75, up $0.18)
Entry Price: $0.65 (3/30/2015)
Exit Target: $1.30 (Limit Order on half)
Return: 15%
Stop Target: $0.67 (Stop Limit)
Action: Set Stop Limits at $0.67 on both positions.
The QQQs held $106 into the close and traded to a high of $106.82. The next wave of resistance is at $108. A close, or dips, below $106-$105.75 could trigger the Stop Limits. Given the volatility of the market, I’m protecting profits here as well.
I want to be out of the April call by Thursday’s close, regardless, and ahead of the three-day weekend. The market is closed on Friday, April 3 for Good Friday.
US Steel (X, $25.44, up $0.66)
X May 21 puts (X150515P00021000, $0.50, down $0.13)
Entry Price: $0.60 (3/26/2015)
Exit Target: $1.20
Return: -17%
Stop Target: None
Action: Resistance is at $25-$26. A close above $27 and the 100-day moving average would be bullish. Support is at $24, followed by $23.50 and the 50-day moving average. I’m looking for a test to $20 by mid-May.
You can read my full thoughts on the trade in the March 27 Pre-Market Update.
Cypress Semiconductor (CY, $14.11, down $0.25)
CY April 16 calls (CY150417C00016000, $0.20, down $0.05)
Entry Price: $0.40 (3/18/2015)
Exit Target: $0.80
Return: -50%
Stop Target: None
CY June 16 calls (CY150619C00016000, $0.45, down $0.05)
Entry Price: $0.75 (3/18/2015)
Exit Target: $1.50
Return: -40%
Stop Target: None
Action: CY has been testing our patience, as shares got no love on an overall up-day. Resistance is at $14.50-$15. Support is at $14-$13.50 and the 100-day moving average.
Veeva Systems (VEEV, $25.44, down $0.02)
VEEV April 29 calls (VEEV150417C00029000, $0.15, flat)
Entry Price: $0.60 (3/18/2015)
Exit Target: $1.20
Return: -75%
Stop Target: None
Action: Support is at $25. Resistance is at $26-$27 and the 200-day moving average. If shares close below $24, I will exit the trade. If shares can’t clear $27 by Thursday, I may also exit the trade then.
Yahoo! (YHOO, $44.95, down $0.15)
YHOO April 47 calls (YHOO150417C00047000, $0.40, down $0.05)
Entry Price: $0.80 (2/26/2015)
Exit Target: $1.60
Return: -50%
Stop Target: None
Action: Monday’s low reached $44.81, and the close below $45 was disappointing while tech was strong.
Near-term support is at $44.50, followed by $44-$43 and the 200-day moving average. Shares look poised to test $47 and the 100-day moving average, with momentum possibly pushing $50.
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.
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