Dear Momentum Options Subscriber,
The second part of the bank stress tests were released after Wednesday’s close, and they didn’t go as smoothly as the first round. The 31 banks that are in focus passed last week’s tests with flying colors, but some weren’t as fortunate this time around.
29 banks passed the Federal Reserve’s annual tests, while three of them will need to alter their plans but still got a check mark. Deutsche Bank Trust and Santander Holdings failed outright.
The tests were done to ensure that the banks could survive another economic downturn. Although the group has lagged in the overall bull-market run over the last few years, it may be a safe sector to start putting money to work if you haven’t done so already.
The good news has helped revive the bulls, as they are now pushing resistance.
Heading into the second half of trading, the Dow is higher by 195 points to 17,830, while the S&P 500 is up 20 points to 2,060. The Nasdaq is jumping 31 points to 4,891, and the Russell 2000 is climbing 12 points to 1,228.
There is still another half of trading to go, and the close today will take on added meaning, as the bulls need to hold current levels. I could have additional Trade Alerts into today’s close, but I wanted to provide this quick update, as the second half of our KKD trade has now been closed.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 22-5-1 (79%). 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 11:45 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.
Krispy Kreme Doughnuts (KKD, $19.08, down $1.27)
KKD April 20 puts (KKD150417P00020000, $1.30, up $0.30)
Entry Price: $0.95 (3/10/2015)
Exit Target: $1.90 (closed first half at $1.60 on 3/12/2015)
Return: 47%
Stop Target: $1.20 (Stop Limit)
Action: The Stop Limit of $1.20 has triggered on the KKD April 20 puts after we closed the first half of the trade on this morning’s open. The low on the options at the time of the Profit Alert was $1.32. Shares rebounded off of a low of $18.51 to reach $19.95 shortly afterwards.
I was worried that today’s overall market bounce might help KKD shares despite the earnings miss. I spent a ton of time researching this trade last week, and I wanted to make sure I locked in profits on the opening weakness. Although I’m disappointed that shares rebounded off of the low, I also mentioned Wall Street’s love affair for the stock.
I will keep shares on my Watch List for another opportunity to possibly go short, as I do see KKD trading to the mid-teens at some point.
Yahoo! (YHOO, $43.30, up $0.80)
YHOO April 47 calls (YHOO150417C00047000, $0.45, up $0.10)
Entry Price: $0.80 (2/26/2015)
Exit Target: $1.60
Return: -44%
Stop Target: None
Action: Support is at $43-$42 and the 200-day moving average. A close below the latter could get $40 into play. Resistance is at $43.50.
Western Union (WU, $19.52, up $0.24)
WU April 20 calls (WU150417C00020000, $0.35, up $0.05)
Entry Price: $0.36 (2/25/2015)
Exit Target: $0.75
Return: -3%
Stop Target: None
Action: Support is at $19.25-$19. Resistance is at $19.50-$19.75.
American Express (AXP, $81.07, up $1.62)
AXP April 87.50 calls (AXP150417C00087500, $0.30, up $0.10)
Entry Price: $0.56 (2/25/2015)
Exit Target: $1.15
Return: -46%
Stop Target: None
Action: Shares have traded to a high of $81.69 today. Resistance is at $82 as long as $80 holds. Support is at $78 on a close below $80.
Flextronics (FLEX, $11.49, up $0.01)
FLEX April 12 calls (FLEX150417C00012000, $0.17, flat)
Entry Price: $0.67 (2/24/2015)
Exit Target: $1.35
Return: -75%
Stop Target: None
Action: Support is at $11.25. A break below this level could lead to $11 and a test of the 100- and 200-day moving averages. Resistance is at $11.50-$11.75.
Marvell Technology (MRVL, $16.15, down $0.04)
MRVL May 18 calls (MRVL150515C00018000, $0.40, flat)
Entry Price: $0.50 (2/18/2015)
Exit Target: $1.00
Return: -20%
Stop Target: None
Action: Near-term support is at $16.25-$16 on a continued backtest. A close below the latter could lead to $15.75 and the 50-day moving average. Resistance is at $16.50.
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.
Philip Morris (PM) March 75 puts (From January 2015) — Keep the Limit Order to sell to close the position at $0.95 in place — Continue to hold.
BlackBerry (BBRY) June 13 calls (from March 2015) — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options