Dear Momentum Options Subscriber,
The bulls bucked the odds of a lower session following President’s Day and scored a rare win to start the week. Of course, last week’s momentum has given Wall Street new life, as traders were eager to get back to work. With many of them already behind the eight-ball, the pressure is on to perform.
The Dow added 28 points, or 0.2%, to settle at 18,047. The blue-chips kissed a low of 17,951 shortly after the opening bell before rebounding to hold 18,000 for most of the session. The index traded to a high of 18,052 during the second half of the action and fell shy at clearing resistance at 18,100. A close above this level gets 18,300-18,500 in play. Support is at 17,900-17,800.
The S&P 500 gained 3 points, or 0.2%, to close at 2,100. The index traded down to 2,089 and easily held support at 2,075 on the open before making a run past resistance. The bulls pushed another all-time high of 2,101 while holding 2,100. I mentioned that continued closes above this level could lead to 2,125-2,150 over the near term.
The Nasdaq climbed 5 points, or 0.1%, to finish at 4,899. Tech tested support near 4,875-4,850 on the bears’ growl to 4,880 at the start of trading. The bulls recovered to reach another 15-year high of 4,901, with overhead resistance at 4,950-5,000 still on deck.
The Russell 2000 advanced nearly 2 points, or 0.2%, to end at 1,225. The small-caps fell 2 points on the open to test 1,221 while holding short-term support at 1,215-1,210. The index traded to an all-time intraday peak of 1,227, and the close above 1,225 gets 1,235-1,250 in the mix.
The S&P 500 Volatility Index ($VIX, 15.80, up 1.11) was itchy, as it stayed elevated throughout Tuesday’s session. The VIX touched a high of 16.33 on the wakeup call, and the close back above 15 was a bummer. The bulls held 17.50 but need to get back below this level to keep higher highs in play.
I have a number of important updates this morning, so please pay close attention to some of the trade instructions listed below. I could have a Profit Alert (or two) after the open, so stay close to your email inboxes and cell phones.
From desk to press, futures look like this: Dow (-5); S&P 500 (-2); Nasdaq 100 (+0.25).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 9-0 (100%). 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.
Western Union (WU, $19.30, up $0.28)
WU March 19 calls (WU150320C00019000, $0.65, up $0.15)
Entry Price: $0.40 (2/13/2015)
Exit Target: $0.80
Return: 63%
Stop Target: None
Action: Shares closed at their session high yesterday. Resistance is at $19.75-$20. Near-term support is at $19-$18.75 on a pullback.
Brocade Communications Systems (BRCD, $12.43, down $0.13)
BRCD March 13 calls (BRCD150320C00013000, $0.27, down $0.06)
Entry Price: $0.24 (2/13/2015)
Exit Target: $0.50-$0.75
Return: 13%
Stop Target: None
BRCD April 12 calls (BRCD150417C00012000, $0.85, down $0.10)
Entry Price: $0.80 (12/31/2014)
Exit Target: $1.60
Return: 6%
Stop Target: None
Action: Shares traded to a high of $12.60 before finishing below $12.50. Near-term support is at $12.25-$12, with additional help at $11.75 and the 50-day moving average. Resistance is at $12.75-$13.
Sony (SNE, $26.60, down $0.70)
SNE March 28 calls (SNE150320C00028000, $0.55, down $0.20)
Entry Price: $0.60 (2/12/2015)
Exit Target: $1.80
Return: -8%
Stop Target: None
Action: Support is at $27-$26. A close below $25 would suggest momentum is fading. I have a near-term target of $30 for the stock.
Boston Scientific (BSX, $14.84, down $0.14)
BSX March 15 calls (BSX150320C00015000, $0.45, down $0.10)
Entry Price: $0.45 (2/10/2015)
Exit Target: $0.90, raise to $1.25 (Limit Order on Half)
Return: 0%
Stop Target: None
Action: Raise the Limit Order to close half of the trade from $0.90 to $1.25.
Shares were pushing $16 in after-hours trading last night after the company agreed to pay Johnson & Johnson (JNJ) $600 million in their long-running litigation battle concerning Guidant.
Although this will hit Boston’s books, the pending lawsuit is now a thing of the past. As part of the settlement, JNJ agreed to permanently dismiss its claims against Boston Scientific without acknowledgment of liability by Guidant.
I will likely send a Profit Alert today if our Limit Order is reached into strength this morning. If the $1.25 Limit Order doesn’t trigger, continue to hold until you hear from me.
AT&T (T, $34.71, up $0.05)
T March 36 calls (T150320C00036000, $0.12, down $0.03)
Entry Price: $0.26 (2/6/2015)
Exit Target: $0.75
Return: -54%
Stop Target: None
Action: Shares traded down to $34.45 on Tuesday before rebounding to reach $34.73. Resistance is at $35. My near-term target is calling for a run to $37 by mid-March. The 52-week high is at $37.48. Support is at $34.25-$34 and the 200-day moving average.
CBOE Holdings (CBOE, $62.61, down $0.40)
CBOE March 67.50 calls (CBOE150320C00067500, $0.15, down $0.10)
Entry Price: $0.80 (2/4/2015)
Exit Target: $0.60 on the second half (Limit Order), (closed half at $1.10 on 2/5/15)
Return: -22%
Stop Target: None
Action: A close above $64 and the 50-day moving average would be bullish. Support is at $61 and the 100-day moving average. A close below these levels could force me to exit the trade for a slight loss.
Hilton Worldwide Holdings (HLT, $28.65, up $0.08)
HLT April 29 calls (HLT150417C00029000, $1.10, up $0.10)
Entry Price: $0.40 (1/8/2015)
Exit Target: $1.20, raise to $2.00 (closed half at $0.80 on 2/11/15)
Return: 138%
Stop Target: $0.85 (Stop Limit)
Action: I have raised the Exit Target from $1.20 to $2.00 on the possibility of shares making a strong move past $30-$31, but it is not a Limit Order.
Earnings are due to be released this morning. I will likely close the trade if there is a miss or lowered guidance and shares fall back. If shares do clear $31 and the Exit Target comes into play, continue to hold. I could issue a Profit Alert either way ahead of the Mid-Market Update.
Veeva Systems (VEEV, $29.90, down $0.22)
VEEV February 31 calls (VEEV150220C00031000, $0.15, down $0.10)
Entry Price: $0.75 (1/8/2015)
Exit Target: $1.50
Return: -80%
Stop Target: None
Action: The break-even point for the trade is at $31.75. Support is at $28 on a close below $29.50. Resistance is at $31-$32. The options expire this Friday and will be worthless if shares stay below $31.
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.
JDS Uniphase (JDSU) March 14 calls (From January 2015) — Continue to hold.
Philip Morris (PM) March 75 puts (From January 2015) — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options