Dear Momentum Options Subscriber,
Gold broke through $1,220 on Monday but slipped $6.00 on Tuesday and $5.50 on Wednesday to close at $1,202.70. While a rally back to $1,220-$1,240 could still come, a close below $1,200 today would be a bearish development and might confirm that a temporary top is in.
Additionally, a “death cross” has formed on the chart, which could indicate that lower prices are ahead. A death cross forms when the 50-day moving average falls below the 200-day moving average. When the 50-day moving average falls below the 100-day moving average, it can be considered a mini death cross. The SPDR Gold Shares ETF (GLD)’s 50-day and 100-day moving averages were a penny apart following Tuesday’s close. Yesterday’s drop clearly shows that the death cross is now officially in play as the spread widened to $2.00.
Here were my thoughts from the March 23 Pre-Market Update:
“Gold ($GOLD, $1,181.70, up $11.20) rebounded on the Fed news, as the dollar weakened and the threat of higher rates was removed over the short term. The yellow metal traded past the $1,300 level (per ounce) in mid-January before falling off a cliff and below all of its major moving averages within a month. Gold may have formed a temporary “double-bottom” after holding $1,140 and the early November 2014 lows. A run to $1,200 looks certain, and a close above the 100-day moving average would be bullish for the gold bugs.
The best way to trade gold is by following the SPDR Gold Shares ETF (GLD, $113.57, up $1.28). Options are available to trade, and the GLD April 116 calls (GLD150417C00116000) closed at $0.90 on Friday. They could be used to play further strength in GLD, with a stop at $0.45 for super-aggressive traders. This is not an official trade recommendation, but one that is on my Watch List. ”
I followed up on Gold three days later in my Mid-Market Update from March 26 and said the following on the pop past $1,200:
“The GLD April 116 calls (GLD150417C00116000, $1.45, up $0.40) were trading for $0.90 coming into the week. At current levels, these options are up 61%. If you took the trade, ride it out for another day or into next week, but I would suggest locking in half-profits, as they are too juicy to pass up. ”
The GLD April 116 calls (GLD150417C00116000) were pushing $2.00 on Monday and fell $0.40 on Tuesday to close at $1.10. They fell another $0.45 on Wednesday and they are currently at $0.35, down $0.30.
I always try to close half of a trade when the options reach a 100% return. I would have protected profits following Monday’s peak, as I always set Stop Limits after taking chips off of the table. “Plan the trade, trade the plan,” as I like to say.
At current levels, the trade would be a scratch, as the average closing price would be $0.90 if the other half were still left open.
The bearish technical development for Gold came quickly, so I wanted to follow up on where the yellow metal could be headed. Gold is currently at $1,193, and a backtest to $1,180-$1,175 is likely in the works.
We have received good feedback on these types of trades even though they don’t become official recommendations. I profile different trades on names that I’m watching to give you a better feel for trade setups. Subscribers may take positions from time to time and ask for updates, so I felt it was important to get this out. Keep your comments and questions coming and write us if you have new ones.
As far as the market, the Dow is up 12 points to 17,915, while the S&P 500 is higher by 3 points to 2,084. The Nasdaq is gaining 6 points to 4,957, and the Russell 2000 is declining 9 points to 1,253.
I have a number of Alerts today, so let’s go check the action. I could have additional updates into the close, so stay locked and loaded as well.
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 12:35 p.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, $13.26, down $0.28)
RMBS May 13 calls (RMBS150515C00013000, $0.80, down $0.20)
Entry Price: $0.58 (4/7/2015)
Exit Target: $1.20 (closed half at $1.00 on 4/8/2015)
Return: 47%
Stop Target: $0.70 (Stop Limit)
RMBS August 15 calls (RMBS150821C00015000, $0.55, down $0.07)
Entry Price: $0.47 (4/7/2015)
Exit Target: $1.00-$1.25
Return: 6%
Stop Target: $0.50 (Stop Limit)
Action: The Stop Limits have triggered on both options, and we are now out of both trades.
The RMBS May 13 calls traded down to $0.51 after opening at $0.90. The RMBS August 15 calls kissed a low of $0.38 after opening at $0.62.
Shares opened at $13.40 and made a nasty backtest to $12.74 and prior resistance. Unfortunately, the Stop Limits were triggered in the process. I will keep RMBS on my Watch List for a possible re-entry point, but, for now, I’m out.
Sony (SNE, $29.74, up $0.22)
SNE May 31 calls (SNE150515C00031000, $0.75, up $0.05)
Entry Price: $0.70 (4/6/2015)
Exit Target: $1.40
Return: 7%
Stop Target: None
Action: Resistance at $30 was tested on this morning’s run to $29.95. Support is at $28.50-$28. My near-term target is $32, with a shot at $35 on continued momentum.
Comcast (CMCSA, $59.36, up $0.18)
CMCSA May 60 calls (CMCSA150515C00060000, $1.30, up $0.10)
Entry Price: $1.05 (4/6/2015)
Exit Target: $2.10
Return: 24%
Stop Target: $1.00, raise to $1.10 (Stop Limit)
Action: Raise the Stop Target to $1.10 and make it a Stop Limit.
Shares have traded to a high of $59.68 today. The 52-week high is at $60.70, which will likely be challenged on continued strength. Support is at $58-$57.75 and the 50-day moving average.
PowerShares QQQ Trust (QQQ, $106.60, down $0.04)
QQQ May 109 calls (QQQ150515C00109000, $0.78, down $0.07)
Entry Price: $0.75 (4/6/2015)
Exit Target: $1.50
Return: 1%
Stop Target: $0.76 (Stop Limit)
Action: The Stop Limit of $0.76 has triggered, and we are now out of the trade.
The QQQs cleared $107 and reached $107.13 on the open before slipping to $106.24 ahead of Wall Street’s lunch break. While I’m disappointed about the pullback, I will keep the QQQs on my radar for another possible trade.
Rigel Pharmaceuticals (RIGL, $3.80, down $0.11)
RIGL June 5 calls (RIGL150619C00005000, $0.40, flat)
Entry Price: $0.25 (3/31/2015)
Exit Target: $0.75-$1.00
Return: 60%
Stop Target: None
Action: Today’s high has reached $3.95. Resistance is at $4, followed by the 52-week high at $4.20. Support is at $3.60, followed by $3.40 on a drop back below $3.80-$3.75.
Cypress Semiconductor (CY, $13.98, up $0.17)
CY June 16 calls (CY150619C00016000, $0.40, up $0.05)
Entry Price: $0.75 (3/18/2015)
Exit Target: $1.50
Return: -47%
Stop Target: None
Action: Resistance is at $14-$14.25. Support is at $13.75 and the 100-day moving average. A close below $13.50 would be bearish.
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) — 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) — Close the trade at current levels. I was hoping to see shares above $20 this week and, while that is still possible, I don’t think shares will trade above $23 by next Friday. We can save the nickel in premium to use for another trade.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options