Dear Momentum Options Subscriber,
The bulls took a breather on Tuesday as the market stayed weak throughout the session. Near-term support held despite the heightened geopolitical concerns, and there are several other big events that will come into play during the rest of the week.
Despite the Debbie Downers, there were bullish signs that limited the damage. However, we still have to be cautious of the talking heads crying “wolf” and the intensified gibber-jabber.
The Dow dropped 85 points, or 0.5%, to finish at 18,203. The blue-chips traded in the red throughout the day after bottoming at 18,136. Support at 18,100-18,000 held again, and the close above 18,200 was a slightly bullish sign. Resistance is at 18,300, with fluff up to 18,500-18,600 if cleared.
The S&P 500 slipped 9 points, or 0.5%, to end at 2,107. The index opened at 2,115 and fell below support at 2,100 mid-day. The low of 2,098 was a stretch by the bears as they eyed backup support at 2,075. The close above 2,100 was the eighth in a row, and that level is serving as a nice floor while the bulls continue their run to 2,125-2,150.
The Nasdaq fell 28 points, or 0.6%, to settle just under 4,980. Tech was also weak throughout the session and tested a low of 4,956. The good news is that near-term support at 4,950 held for the eighth-straight session, and the close above 4,975 was bullish. Continued closes back above 5,000 keep 5,100-5,150 and the all-time high of 5,132 in play.
The Russell 2000 gave back 8 points, or 0.6%, to close at 1,234. The small-caps tested a low of 1,230 by halftime but held support at 1,230-1,225 for the 11th-straight trading session. Resistance is at 1,240, with additional upside to 1,250-1,260 once cleared.
The S&P 500 Volatility Index ($VIX, 13.86, up 0.82) woke up and added 6% after reaching a peak of 14.69. The bears came close to cracking 15, but the bulls held this level during the heat of Tuesday’s battle. A close below 13.50-12.50 would confirm higher highs are still in the mix for the indexes.
I’ve got some good news on our TiVo trade, as shares were pushing $12 in after-hours trading last night.
From desk to press, futures look like this: Dow (-49); S&P 500 (-7); Nasdaq 100 (-12).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 18-2-1 (86%). 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.
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.
Gogo (GOGO, $19.47, up $1.04)
GOGO May 20 calls (GOGO150515C00020000, $1.40, up $0.50)
Entry Price: $0.85 (3/2/2015)
Exit Target: $1.70, raise to $2.25 (Limit Order on Half)
Return: 65%
Stop Target: None
Action: Raise the Exit Target from $1.70 to $2.25 and make it a Limit Order on the first half of the trade.
Shares finished a penny below their high of $19.48 yesterday. Short-term resistance is at $20. If cleared, a run to $22 could come quickly, which is why I raised the Exit Target. Near-term support is moving up and will try to hold at $19.25-$19 on a pullback.
BlackBerry (BBRY, $10.97, down $0.09)
BBRY June 13 calls (BBRY150619C00013000, $0.60, flat)
Entry Price: $0.60 (3/2/2015)
Exit Target: $1.20
Return: 0%
Stop Target: None
Action: Shares traded to a high of $11.45 before closing below $11. Additional support is at $10.75 on continued weakness. Resistance is at $11.25-$11.50 over the near term.
TiVo (TIVO, $11.25, down $0.13)
TIVO May 12 calls (TIVO150515C00012000, $0.60, down $0.02)
Entry Price: $0.42 (2/27/2015)
Exit Target: $0.85, raise to $1.40 (Limit Order on second half) (closed half at $0.60 on 3/3/2015)
Return: 43%
Stop Target: None
Action: Raise the Exit Target from $0.85 to $1.40 (Limit Order) on the second half of the trade. This will ensure a triple-digit profit.
If this Limit Order is not reached on the open, I will likely send out a Trade Alert shortly afterwards with updated instructions.
I will cover TiVo’s earnings in more detail during today’s Mid-Market Update. The $1.40 Limit Order on the second half of the trade might be aggressive, but these are May options, so we have plenty of time to play continued momentum if the target is not reached. Fresh support will need to hold, of course, and I will update the Stop Target and possibly make it a Stop Limit after the open.
This was meant to be a short-term earnings trade, but the fundamentals for TiVo continue to improve. I believe the company is a takeover target that could fetch a premium north of $20. The chart also supports an upside breakout to the high teens.
Yahoo! (YHOO, $42.61, down $1.49)
YHOO April 47 calls (YHOO150417C00047000, $0.40, down $0.20)
Entry Price: $0.80 (2/26/2015)
Exit Target: $1.60
Return: -50%
Stop Target: None
Action: Yahoo’s weakness can be attributed to Alibaba’s (BABA) pullback, as shares of last year’s biggest IPO fell to fresh lows. BABA tested $80.03 and closed at $81.58. YHOO traded down to $42.42.
Shares held the $43-$42 level, but my timing to get into this trade was obviously a tad early. I did expect some weakness, which is why I didn’t use the March calls, but I didn’t expect the BABA curveball.
The April calls still have over a month of time premium, so there is no need to bail on the trade. I want to see how the rest of the week shakes out before cutting the cord or possibly placing the trade on hold.
Western Union (WU, $19.72, down $0.32)
WU April 20 calls (WU150417C00020000, $0.35, down $0.15)
Entry Price: $0.36 (2/25/2015)
Exit Target: $0.75
Return: -3%
Stop Target: $0.40, change to None
Action: I am removing the Stop Target on the WU April 20 calls. Support at $19.75-$19.50 was tested on Tuesday’s pullback to $19.57. I still like this trade as long as $19.25-$19 holds, as shares are still making higher highs and higher lows.
Resistance is at $19.75-$20, and I could piggy-back the trade on another move above $20. The WU March 19 calls were closed for an 81% profit, so this trade has plenty of wiggle room, and we can be patient.
American Express (AXP, $81.91, down $0.12)
AXP April 87.50 calls (AXP150417C00087500, $0.40, down $0.05)
Entry Price: $0.56 (2/25/2015)
Exit Target: $1.15
Return: -29%
Stop Target: None
Action: I mentioned that this trade would be volatile, but I like how shares of AXP recovered on Tuesday. Support at $82-$81.50 was stretched following the drop to $80.90. Backup support is at $80, and a close below this level would be bearish. Resistance is at $82.59-$83.
Flextronics (FLEX, $11.92, down $0.31)
FLEX April 12 calls (FLEX150417C00012000, $0.40, down $0.20)
Entry Price: $0.67 (2/24/2015)
Exit Target: $1.35
Return: -40%
Stop Target: None
Action: Shares close below short-term support at $12. There is additional help at $11.75. Resistance is at $12.25-$12.50.
You can read my thoughts on FLEX in Tuesday’s Pre-Market Update.
Marvell Technology (MRVL, $16.00, down $0.41)
MRVL May 18 calls (MRVL150515C00018000, $0.25, down $0.10)
Entry Price: $0.50 (2/18/2015)
Exit Target: $1.00
Return: -50%
Stop Target: None
Action: Near-term support at $16 was breached following Tuesday’s trip to $15.96. A close below this level could lead to a backtest to $15.75-$15.50 and the 50-day moving average. Resistance is at $16.25-$16.50.
Brocade Communications Systems (BRCD, $12.39, down $0.21)
BRCD March 13 calls (BRCD150320C00013000, $0.10, down $0.06)
Entry Price: $0.24 (2/13/2015)
Exit Target: $0.50-$0.75
Return: -58%
Stop Target: None
Action: Support is at $12.25-$12, followed by the 50-day moving average on the close below $12.50. Resistance is at $12.75-$13.
JDS Uniphase (JDSU, $13.51, down $0.30)
JDSU March 14 calls (JDSU150320C00014000, $0.25, down $0.10)
Entry Price: $0.78 (1/8/2015)
Exit Target: $1.00
Return: -68%
Stop Target: None
Action: Support is at $13.40 and the 50-day moving average on a pullback. The breakeven point for the trade is at $14.78. This is one of our longest running trades, and I would like to see a close above $14 this week.
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) — Continue to hold.
AT&T (T) March 36 calls (From February 2015) — Support is at $34 and the 200-day moving average. Resistance is at $34.75-$35 — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options