Dear Momentum Options Subscriber,
Although there were some pockets of strength, the market looked sluggish on Monday, with the bears getting the overall win. There were signs of weakness as well, as the financial stocks pulled back and the VIX stayed elevated.
The Dow fell 86 points, or 0.5%, to close at 18,105. The blue-chips made a brief trip into positive territory on the open and reached 18,199 before spending the majority of the session in the red. The bulls once again failed at clearing resistance at 18,200, with the bears pushing a low of 18,089 afterwards. Support at 18,100 held into the closing bell, and there is backup help at 18,000-17,950 and the 50-day moving average.
The S&P 500 slipped nearly 11 points, or 0.5%, to finish at 2,105. The index tangled with resistance at 2,120-2,125 at the start of trading after reaching a high of 2,117, but it was all downhill following the opening pop. The bears pushed a low of 2,104 but also had trouble at cracking support at 2,100. There is wiggle room to 2,090 and the 50-day moving average, but a close below these levels would be bearish.
The Nasdaq gave back 10 points, or 0.2%, to end at 4,993. Tech stayed steady throughout the much of the session, as the bulls made a run to 5,017. However, the fade to 4,992 keeps risk open to 4,975-4,950. The 50-day moving average is at 4,963.
The Russell 2000 added a point, or 0.1%, to settle at 1,235. The small-caps opened roughly half of a point lower but traded into the resistance zone at 1,240-1,250 after making a push to 1,243. It was a higher high than Friday trip to 1,239, but the bulls still failed at recovering the 50-day moving average at 1,246. Support at 1,225-1,220 easily held, and I’m watching the 1,210 level as a possible shorting opportunity.
The S&P 500 Volatility Index ($VIX, 13.78, up 0.92) stayed elevated throughout Monday’s session and went out at its session high. The bulls missed holding 13.50, and another close above 15 needs to be watched carefully. However, I’m still rooting for a close below 12.50 this week to confirm higher highs for the market.
It has been a slow month for new trades, but our current trades are holding up well. I have learned over the years to be very careful with trading ranges, as they can last for incredibly long periods of time. It is also smarter to use longer-term options, as they provide more time premium for a trade to play out. It is still important to keep some skin in the game, but it’s also important to not commit too much fresh money trying to push the action.
I have given clear upside breakout targets as well as downside triggers to watch for as far as playing the next trend. Trading ranges are great for writing covered calls, but directional trading gets a little tricky if there is no momentum.
This is why it’s important to stay focused and build your watch list with possible candidates while being patient. My playbook will be exploding with index option trades for the S&P, Nasdaq and Russell once we get the green light to go long or short.
I have a bevy of call options trades ready on stocks that are on the verge of making runs into blue-sky territory. I also have a number of put option trades for stocks that could fold like cheap lawn chairs in the coming weeks. We just need to be patient.
From desk to press, futures look like this: Dow (-157); S&P 500 (-17); Nasdaq 100 (-41).
Momentum Options Play List
Closed Momentum Options Trades for 2015: 47-15-1 (75%). 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.
Sony (SNE, $30.84, up $0.20)
SNE June 32 calls (SNE150619C00032000, $0.80, flat)
Entry Price: $0.70 (5/8/2015)
Exit Target: $1.40
Return: 14%
Stop Target: None
Action: Shares traded to a high of $31.20 on Monday. Resistance is at $31-$31.50. The recent 52-week high is at $32.60. Support is at $30, followed by $29 and the 50-day moving average.
Wells Fargo (WFC, $55.51, down $0.54)
WFC June 57.50 calls (WFC150619C00057500, $0.29, down $0.09)
Entry Price: $0.31 (5/4/2015)
Exit Target: $0.65
Return: -6%
Stop Target: None
Action: Shares tested near-term support at $55.50 following yesterday’s dip to $55.48. There is additional help at $54.50 and the 50-day moving average. Resistance is at $56.
Limelight Networks (LLNW, $4.07, up $0.10)
LLNW September 4 calls (LLNW150918C00004000, $0.60, up $0.05)
Entry Price: $0.35 (4/29/2015)
Exit Target: $0.80 (Limit Order on half)
Return: 71%
Stop Target: $0.40 (Stop Limit)
Action: Shares reached a peak of $4.10 on Monday. Resistance is at $4.20-$4.25. Support is at $3.80, followed by $3.65 and the 50-day moving average.
You can read my full update on LLNW in the May 1 Pre-Market Update.
Opko Health (OPK, $14.30, up $0.17)
OPK June 16 calls (OPK150619C00016000, $0.30, flat)
Entry Price: $0.50 (4/27/2015)
Exit Target: $1.00
Return: -40%
Stop Target: None
Action: The company reported a loss of $0.30 a share on revenue of $30.1 million following Monday’s close. Analysts were looking for a loss of $0.08 a share on revenue of $23.1 million.
Opko said its top-line results from both of its Phase 3 trials for Rayaldee were successful and that there could be additional news on this front later this month.
Resistance is at $14.25 and the 50-day moving average. Support is at $13.75-$13.50 on another drop below $14.
Shares were pushing $14 in after-hours trading last night, but I’m hoping the revenue beat and other noteworthy news get shares pushing $15.
Dot Hill Systems (HILL, $6.99, up $0.09)
HILL September 7.50 calls (HILL150918C00007500, $0.60, flat)
Entry Price: $0.45 (4/20/2015)
Exit Target: $1.35-$1.80
Return: 33%
Stop Target: None
Action: Continued closes above $7 would be bullish for a run to $7.25. Yesterday’s peak reached $7 for the third-straight session. Support is at $6.75-$6.50.
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.
SunPower (SPWR) June 38 calls (from April 2015) — Resistance is at $32.75 and the 50-day moving average. Support is at $30 — Continue to hold.
BlackBerry (BBRY) June 13 calls (from March 2015) — Renewed takeover talk made the rumor rounds on Wall Street yesterday, as shares jumped 6%. This is a speculation trade from early March on BBRY receiving a takeover offer of $14 or better by mid-June — Continue to hold.
Trade on!
Rick Rouse
Editor and Chief Options Strategist
Momentum Options