Dear Momentum Options Subscriber,
Shares of MagnaChip Semiconductor (MX $7.51, down $7.51) are dropping like a rock following the company’s earnings release.
After Thursday’s close, the company “re-stated” earnings for 2011-2013 and the past three quarters for calendar year 2014. All were much worse than previously reported and why shares are getting taken to the woodshed.
Shares were pushing a prior 52-week high of $16.48 but are now at fresh 52-week lows following the reshuffling.
Astute investors may have picked up on the company’s announcement there would be changes to the books in late January as traders took sides ahead of the pending news.
Shares were at $12 on the pending news on Jan. 28 and closed the following day at $14. The steady climb into February past $15 was a signal bullish bets were being made the bears showed up today as shares are back in the single-digits.
MagnaChip said it was an “important step forward” and plans to run a tighter ship but it will be hard to keep shareholders trust.
The MX March 12.50 puts (MX150320P00012500, $4.90, up $4.30) would have been a nice earnings/ lottery trade to play heading into yesterday’s close. The put options are up an astounding 717% after closing Thursday’s session at 60 cents.
As far as the market, it has been another bullish February week with the indexes at and pushing all-time highs.
Heading into the second half of trading, the Dow is up 40 points to 18,012 while the S&P 500 is higher by 4 points to 2,093. The Nasdaq is advancing 20 points to 4,878 and the Russell 2000 is climbing 4 points to 1,220. The S&P 500 Volatility Index ($VIX, 14.87, down 0.47) has traded below 15 to a low of 14.79.
I will be watching the action into the close and I have a New Trade ahead of the long three-day weekend on a stock that’s showing strength.
Wall Street will be closed on Monday, Feb. 16, for Presidents’ Day. I will be back Tuesday morning with the charts and updates for the indexes and the current trades. I could have a late-day Profit Alert ahead of the close, but, if you don’t hear from me, have a great weekend and stay ready for a continuing, exciting February.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 8-0 (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 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.
New Trade
Brocade Communications Systems (BRCD, $12.42, up $0.36)
Action: Buy to open BRCD March 13 calls (BRCD150320C00013000, $0.24, up $0.05) at current levels.
This is a piggy-back play to our current BRCD trade. Shares are showing strength and could make a move past $13 next week.
Current Trades
Sony (SNE, $27.45, up $0.34)
SNE March 28 calls (SNE150320C00028000, $0.80, up $0.10)
Entry Price: $0.60 (2/12/2015)
Exit Target: $1.80
Return: 33%
Stop Target: None
Action: Shares have traded to another 52-week peak of $27.46 today. I have a near-term target of $30 for the stock. Support is at $27-$26.
Boston Scientific (BSX, $14.93, up $0.19)
BSX March 15 calls (BSX150320C00015000, $0.50, up $0.07)
Entry Price: $0.45 (2/10/2015)
Exit Target: $0.90
Return: 11%
Stop Target: None
Action: Shares have reached $14.95 today. A close above $15 gets the 52-week peak at $15.28 in play. Support is at $14.75-$14.50.
AT&T (T, $34.55, down $0.07)
T March 36 calls (T150320C00036000, $0.15, flat)
Entry Price: $0.26 (2/4/2015)
Exit Target: $0.75
Return: -42%
Stop Target: None
Action: I would like to see a close above $34.75 ahead of the weekend. Resistance is at $35 and my near-term target is calling for a run to $37 by mid-March. Support is at $34.50-$34.25. A close below $34 and the 200-day moving average would be bearish.
CBOE Holdings (CBOE, $62.72, up $0.55)
CBOE March 67.50 calls (CBOE150320C00067500, $0.flat)
Entry Price: $0.80 (2/4/2015)
Exit Target: 60 cents on the other half (Limit Order); (closed half at $1.10 on 2/5/15)
Return: -16%
Stop Target: None
Action: A close above $64 and the 50-day moving average would be bullish. Support is at $61 followed by $60.50 and the 100-day moving average.
Marvell Technology (MRVL, $16.51, flat)
MRVL March 17 calls (MRVL150320C00017000, $0.70, flat)
Entry Price: $0.50 (2/3/2015)
Exit Target: $1.00
Return: 40%
Stop Target: None
Action: Shares have touched a 52-week high of $16.75 today. A close above this level should get $17-$17.25 in play. A “golden cross” has formed in the chart and a run to $20 could be coming if the aforementioned resistance levels are cleared. Support is at $16.25-$16.
Hilton Worldwide Holdings (HLT, $28.72, up $0.27)
HLT April 29 calls (HLT150417C00029000, $1.10, up $0.10)
Entry Price: $0.40 (1/8/2015)
Exit Target: $1.20 (closed half at $0.80 on 2/11/15)
Return: 138%
Stop Target: 70 cents (Stop Limit)
Action: Shares have traded to another all-time high of $28.94 today. My near-term target is $29-$30. A close below $28.25-$28 and fresh support will likely trigger the 70 cent Stop Limit.
Veeva Systems (VEEV, $30.00, up $0.05)
VEEV February 31 calls (VEEV150220C00031000, $0.25, flat)
Entry Price: $0.75 (1/8/2015)
Exit Target: $1.50
Return: -67%
Stop Target: None
Action: I would like to see $31 cleared by today’s close. The break-even point is at $31.75 and is only 5% away. An upgrade or downgrade could be coming as shares have stayed in a tight range for six weeks. Support is at $28 on a close below $29.50. Resistance is at $31-$32.
Brocade Communications Systems (BRCD, $12.42, up $0.36)
BRCD April 12 calls (BRCD150417C00012000, $0.80, up $0.15)
Entry Price: $0.80 (12/31/2014)
Exit Target: $1.60
Return: 0%
Stop Target: None
Action: The 52-week high is at $12.43. Support will try to hold at $12-$11.75 on a pullback. Earnings are due out on Feb. 19.
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