Dear Momentum Options Subscriber,
The Nasdaq closed above 5,000 for the third time in its history on Monday. It was the first time Tech has closed above 5,000 in 15 years and is certainly this morning’s headline news. While many on Wall Street say they aren’t surprised by the close, hardly any of them predicted that it would happen. Needless to say, the most hated rally in the history of Wall Street continues.
The comparisons of “then and now” are muted talking points to me, as I have been calling for this level to be reached since February of 2014. Instead of worrying about the then and now, I’m more excited about Nasdaq 5,800-6,000 this year.
The Dow jumped 156 points, or 0.9%, to close at 18,288. The blue-chips dipped 10-points on the open to 18,122 but easily held support at 18,100-18,000. The steady climb afterwards reached another all-time intraday peak of 18,288, and the index came within a 12-pack of trading into my near-term target zone of 18,300-18,500.
The S&P 500 soared nearly 13 points, or 0.6%, to finish at 2,117. The index held positive territory throughout the session, with support at 2,100 holding as well. The bulls went out at session highs but fell shy of clearing last week’s all-time peak of 2,119. Resistance at 2,120-2,125 is close to clearing and that could lead to a run to 2,150 over the near term.
The Nasdaq zoomed 44 points, or 0.9%, to end at 5,008. Tech opened at 4,972 and the move above 4,975 was a clear signal that 5,000 would be tapped. The close above 5,000 gets 5,100 and the all-time high of 5,132 back on the map. Support is at 4,975-4,950 on a pullback.
The Russell 2000 rallied 9 points, or 0.8%, to settle at 1,242. The small-caps slipped by half of a point to 1,232 at the start of trading, but support at 1,230-1,225 was solid once again. The close above 1,240 and run to 1,243 keeps my near-term fluff targets of 1,250-1,260 in play. The Russell’s fresh highs have largely gone unnoticed, except by us.
The S&P 500 Volatility Index ($VIX, 13.04, down 0.30) fell 2% and traded to a low of 12.87. The bulls came close to sniffing my near-term target of 12.50, and a drop below this level would be super bullish for the rest of March. The bears will be gunning for a return above 13.50, but the bulls have no worries until the VIX tests 14.50-15 again.
I have a lot of open trades, and the portfolio is maxed, but the plan is to close four to five trades this week and another few next week. Predicting a market top is incredibly hard, but I want to limit our exposure by mid-March and into early April as my February fluff targets for the major indexes come into play. I’m closing one trade that has been on hold — our CBOE call options — at this morning’s open.
From desk to press, futures look like this: Dow (-22); S&P 500 (-3.5); Nasdaq 100 (-5.5).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 17-1-1 (94%). 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, $18.43, up $0.45)
GOGO May 20 calls (GOGO150515C00020000, $0.90, up $0.15)
Entry Price: $0.85 (3/2/2015)
Exit Target: $1.70
Return: 6%
Stop Target: None
Action: I wanted to confirm the late-day strength and return above $18-$18.25 before starting a new position in GOGO. If you didn’t get into this trade yesterday, wait for the dust to settle on this morning’s open to see where shares are at.
Shares traded to a high of $18.65 on Monday and appear on track to easily clear $20 by mid-May. Short-term resistance is at $19. Last week’s high reached $18.92 after better-than-expected earnings were announced, and momentum could be coming back into the stock. Near-term support is at $18-$17.50.
I’m not sure what effect the news of a $300-million convertible note offering will have on shares, as this news was announced after yesterday’s close. My timing could be impeccable or a little early, as shares will likely be active on the open.
Companies do this to raise capital, and it gives shareholders certain rights. I believe it’s a bullish sign, and I’ve talked about the company’s tremendous backlog and recent partnerships. There is no stop on the trade, and these are May options, so any negative dip should be short-lived.
BlackBerry (BBRY, $11.05, up $0.24)
BBRY June 13 calls (BBRY150619C00013000, $0.60, up $0.10)
Entry Price: $0.60 (3/2/2015)
Exit Target: $1.20
Return: 0%
Stop Target: None
Action: The close above the 50- and 100-day moving averages last week was bullish, with shares trading to a high of $10.95. The move above $11 to $11.18 on Monday could lead to a run to $11.25-$11.50 over the near term. A close above the latter could lead to a test of $12 and the 52-week high of $12.63. Support is at $10.75 on a drop back below $11.
There was a lot of late-day chatter on Monday about BBRY transitioning from a hardware company to a software company. This has clearly been the real value in the company’s business model, which is why I have been mentioning BBRY as a takeover target. These options will double if shares are above $14 by mid-June.
TiVo (TIVO, $11.38, up $0.20)
TIVO May 12 calls (TIVO150515C00012000, $0.62, up $0.15)
Entry Price: $0.42 (2/27/2015)
Exit Target: $0.85 (Limit Order on Half)
Return: 48%
Stop Target: None
Action: Shares traded to a high of $11.51 on Monday. The next waves of resistance are at $11.75-$12 and the 100-day moving average. Near-term support is at $11-$10.75.
I would like to be out of the first half of the trade on Wednesday’s open and possibly the entire trade by the end of the week depending on the momentum.
Read my preview of today’s earnings announcement and why I like the risk/reward this trade offers in Monday’s Pre-Market Update.
Yahoo! (YHOO, $44.11, down $0.17)
YHOO April 47 calls (YHOO150417C00047000, $0.60, down $0.10)
Entry Price: $0.80 (2/26/2015)
Exit Target: $1.60
Return: -25%
Stop Target: None
Action: YHOO dipped to $43.70 before making a mid-day pop to $44.43. Shares are forming a solid base at $43-$44. A move above $45 could lead to a run to $46-$47. The 50- and 100-day moving averages are just below $47, which is where a major battle could occur. I’m expecting a test to this level by mid-April as long as the 50-day moving average does not fall below the 100-day moving average. If $47 clears, shares could easily test $50. If shares fall below $43-$42, I will likely close the trade.
Western Union (WU, $20.04, up $0.52)
WU April 20 calls (WU150417C00020000, $0.50, up $0.10)
Entry Price: $0.36 (2/25/2015)
Exit Target: $0.75
Return: 39%
Stop Target: $0.40
WU March 19 calls (WU150320C00019000, $1.10, up $0.35)
Entry Price: $0.40 (2/13/2015)
Exit Target: $0.80, raise to $1.20 (closed first half at $0.60 on 2/19/2015) (Limit Order at $1.30)
Return: 113%
Stop Target: $0.58, raise to $0.85 (Stop Limit)
Action: Set a Stop Target of $0.40 on the WU April 20 calls, but it is not a Stop Limit.
Raise the Exit Target from $0.80 to $1.20 on the second half of the WU March 19 calls, and set a Limit Order to close it at $1.30 if $1.20 is cleared. Also, raise the Stop Limit from $0.58 to $0.85.
Shares cleared $20 and reached a fresh 52-wek high of $20.10 on Monday. There is additional fluff from the six-year chart up to $22 on closes above $20. Support is at $19.75-$19.50 on a pullback.
American Express (AXP, $82.03, up $0.44)
AXP April 87.50 calls (AXP150417C00087500, $0.40, down $0.05)
Entry Price: $0.56 (2/25/2015)
Exit Target: $1.15
Return: -11%
Stop Target: $0.25
Action: Shares touched an intraday high of $82.21 on Monday. The next layers of resistance for AXP are at $82.50, followed by $83.50-$84. Support is at $82-$81.50, followed by $80.
Flextronics (FLEX, $12.23, up $0.05)
FLEX April 12 calls (FLEX150417C00012000, $0.60, up $0.05)
Entry Price: $0.67 (2/24/2015)
Exit Target: $1.35
Return: -10%
Stop Target: None
Action: Short-term support is at $12.25-$12. Resistance is at $12.50-$12.75.
I have talked about the company’s relationship with Apple (AAPL), as Flextronics manufactures the Mac Pro. Last year, I went on record and said that FLEX could be the front-runner to produce or work on the Apple Watch.
FLEX shares traded to a 52-week peak of $12.48 last week, and I have said that a run to the mid-teens could come this year.
Apple is holding a special event on March 9, and I have a feeling that it is going to blow away the tech-hungry minds. As usual, Wall Street isn’t expecting much as far as sales for the watch, but they have already underestimated Apple Pay and its gorilla ecosystem for years.
I’m hoping that Flextronics catches a piece of this action, which is why I like the bullish call options. The company has its fingers in a lot of pies, but the easiest way to dummy down their business is to think of them as a flexible technology business.
FLEX has a manufacturing operation here in the States. It would be great to see Apple bring back some production work here at home and provide more jobs.
The company was mum on its development of Apple’s Mac Pros, as no leaks were released prior to the announcement. The watch has been one of Apple’s top secret projects for a few years, and Flextronics is known to keep their work on the down low as well.
Flextronics has its prints and technology in wearable devices such as Fitbit, Jawbone and Nike Fuelband.
A “new” partnership with Apple, or a takeover, is pure speculation on my part, of course, but it makes more sense than McDonald’s (MCD) buying ShakeShack (SHAK), which is what one analyst on TV recently suggested.
Flextronics has a market-cap north of $7 billion, so a takeover could cost Apple or another tech company $12-$14 billion. This would fetch a premium of $20-$24 for the stock, which would represent a return of almost 100% from current levels.
I’m using the options to play the technical aspect of FLEX, but I also love the fundamentals of the company. Recent third-quarter (2015) earnings of $0.30 a share on revenue of $7 billion topped Wall Street’s expectations for $0.26 a share on sales north of $6.6 billion.
This represented the fourth-straight earnings beat for the company, as they have topped the suit-and-ties’ expectations by $0.02, $0.03, and $0.04 in the previous three quarters.
Marvell Technology (MRVL, $16.41, up $0.29)
MRVL May 18 calls (MRVL150515C00018000, $0.35, flat)
Entry Price: $0.50 (2/18/2015)
Exit Target: $1.00
Return: -30%
Stop Target: None
Action: Near-term support is at $16. 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, $12.60, up $0.21)
BRCD March 13 calls (BRCD150320C00013000, $0.16, up $0.04)
Entry Price: $0.24 (2/13/2015)
Exit Target: $0.50-$0.75
Return: -33%
Stop Target: None
Action: Resistance is at $12.75-$13. Support is at $12.25-$12 and the 50-day moving average on another close below $12.50.
JDS Uniphase (JDSU, $13.81, up $0.04)
JDSU March 14 calls (JDSU150320C00014000, $0.35, flat)
Entry Price: $0.78 (1/8/2015)
Exit Target: $1.00
Return: -55%
Stop Target: None
Action: The close above $13.75 was bullish and should lead to a run to $14+. 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 (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.
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.
CBOE Holdings (CBOE) March 67.50 calls (From February 2015) — Shares continued their descent and finished below $60 on Monday. Sell to close the second half of the trade for a nickel today, and let’s move on. We closed the first half at $1.10 on 2/5/15, and the overall loss was 28%.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options