Seeking Alpha

Momentum Option...'s  Instablog

Momentum Options Trading
Send Message
We are a poweful option trading newsletter that focuses on momentum stocks. Momentum can be used to the upside or downside to play call and put options on stocks that are in a clear trend. We target triple-digit returns for all option trades while trying to keep losses at 50%. We have 6-year... More
My company:
Momentum Options Trading LLC
View Momentum Options Trading's Instablogs on:
  • Futures Up, Bulls Looking to Rebound
    9:00am (EST)

    The Dow fell 166 points on Friday, or 1.4%, and closed at 11,823.  Although the index reached our near-term target of 12,000 last week, we had trouble closing above this level.  We also listed key support levels to watch for on a pullback on Thursday and again on Friday.  For the Dow it was 11,800-11,750. The index traded to a low of 11,803.  The blue-chips could test 11,550-11,500 and then it gets interesting but we don’t feel the Dow is done flirting with 12,000.

    The S&P 500 dropped 23 points, or 1.8%, to end the week at 1,276.  The index also managed to take out our target of 1,300 on Thursday and Friday but couldn’t close above it, either. We said to watch for the 1,275-1,270 level to hold and the index traded to a low of 1,275. There is additional support at 1,260-1,250 and a break below 1,250 could get scary but we still expect a battle at 1,300 again.

    The Nasdaq got hammered for 68 points, or 2.5%, and settled at 2,686 but ended the week down only 3 points. On Friday, we were looking for 2,650-2,700 to hold in our 1pm update and it did. There is further risk down to 2,550-2,500 but we are still looking for a run up to 2,850-3,000.

    Today is the last day of January so here is what we are looking at.

    From our 12/26/10 Weekly Wrap:

    "January is also a pivotal month as far as determining market direction for 2011 according to the January Barometer (JB).  This “theory” states that however the S&P 500 trades for the month, so goes the rest of the year.  The JB was created in 1972 and carries a .783 win rate, on average, and has registered only 6 “errors” since 1950 for a 90% win rate.

    This year, at the end of January 2010, the S&P ended at 1,073 after starting the year at 1,115, for a loss of 3.7%.  So, unless the market crumbles, the JB was not a good indicator this year.  History can and does repeat itself in some situations concerning the market and stocks but what we found interesting was this was the first time that the JB could be wrong for two straight years.  In 2009, the S&P 500 dropped 8.6% in January (from 903 to 825) but ended the year higher by 23.5%.

    Is it possible the JB could be wrong for the third straight time this January?  It would be hard to believe but something that bears watching." (NYSE:END)

    From our 1/2/2011 Weekly Wrap:

    "Last week we mentioned the January Barometer so this week we thought we would throw some more factoids at you.

    Although the jury is still out on President Obama, the third year of a new President has historically been bullish.  The bulls were already on a run before the November midterm elections, but here is the best part about this data.  Since 1948, there have been 15 full presidential cycles, and all of them showed strong stock market gains in the third year.  The average pop has been nearly 18%.

    Here is another thing to watch for this week.  The “first 5 days of January” are usually a early warning “system” that Wall Street likes to use to see where the market may end for the year.  If we go back 60 years, the last 37 UP “first 5 days of January” have been followed by full-year gains 32 times.  The 23 DOWN “first 5 days of January” have been followed by 12 up years and 11 down.

    These tidbits are nice but the market will get a fresh look at 4Q and yearend results, which will be the real catalyst going forward, starting in 2 weeks." (END)

    The S&P 500 started 2011 off at 1,257 and closed at 1,271 for the first five days of January. Check one. If the bulls can hold 1,257 today then the January Barometer will give us check two. Another factoid about the January Barometer is that when the month is positive, February averages gains of 0.5%. If negative, then the average loss for February is nearly 1%. Yikes! 

    As you can see, the January Barometer has been a good indicator in the past, and today will be an important day (in theory) for Wall Street. The S&P is up 2% so far this year, with one more trading day to go.  
    As we head to press, Dow futures are up 42 points to 11,817 while the S&P futures are higher by 6 points to 1,277. The Nasdaq 100 futures are showing a 7 point pop to 2,275.
    Tags: SPY
    Jan 31 9:08 AM | Link | Comment!
  • S&P Breaks 1,300
    1:00pm (EST)

    The market is up as we head into the second half of trading but has stayed in a narrow range since the open. Earnings have been good and bad while economic news has also been mixed as pending home sales came in better-than-expected, while initial jobless claims disappointed.

    Initial claims jumped to 454,000 after a print of 403,000 in the prior week. The initial claims count is the highest total since October and missed expectations of 410,000. Continuing claims were 3.99 million, up from 3.90 million.

    Despite the tug-of-war headlines, the market is holding up well and we are still looking for one more big push through resistance.

    The Dow is currently up 16 points to 12,001 and has traded to a high of 12,019. The S&P 500 is up 2 points at 1,298 and has touched a high of 1,300.72 while the Nasdaq is up 17 points to 2,756.

    We have a number of trades in our portfolio that have gotten some nice pops today. One of our current positions has hit a 100% return while another is up over 50% in 5 days. We also have some other trades that have gotten off to great starts so let’s go check the updates in our Members Area.

    We will be back in the morning with a full update but stay locked and loaded. We may have another trade on the way.
    Tags: SPY
    Jan 27 1:19 PM | Link | Comment!
  • Bulls Tackle Dow 12,000, New Trade Recommendation
    12:50pm (EST)

    Write it and they will come...

    In our "Field of Dreams", we had a vision of Dow 12,000; S&P 1,300; and Nasdaq 3,000 back in October 2010.  We have written and talked about these targets for the last 3 months and today was opening day. We felt it when we woke up this morning. For those of you who believed in us, welcome to the party.

    Seriously, how many "pros" have called for a pullback or correction over the past few weeks or months?  How many said the “Santa Claus” rally was over before it started? How many got nervous when the high-beta names started falling?

    Too many for us to count, obviously.  Perhaps they got scared last week when the Nasdaq was tanking or the S&P was threatening to fall below support.  Little did they know, this was the "testing" period and a lot of the professional money managers failed to make the grades and got it wrong.

    In fact, we said the market would "pullback" last week before the it would set new highs again. We went out a limb and stuck to our guns last week when the “pros” told you the market was going to correct or pullback.  Heck, we even said last week was going to be a down week because of options expiration and we took profits on a number of trades and left the stronger ones open.  However, we also OPENED three new bullish trades last Friday as we knew the bulls had more gas left in the tank.  The knuckleheads who told you to get out are the same ones buying this morning.

    From our Weekly Wrap October 31, 2010:

    The S&P 500 fell less than a point and settled at 1,183.  The index hit a high of 1,196 but was unable to crack our 1,200 target as it gained less than a point and went nowhere for the week.  However, for October, the S&P popped 42 points, or 3.7%, and a run to 1,300 is in the cards if the bulls can break resistance while support remains in the 1,170-1,175 area with additional backup at 1,150.  YTD, the index is up 6.1%.

    The Nasdaq was the one index we did confirmation on for another leg up although Friday’s session was flat.  Tech closed above our 2,500 target and the index is at 2,507 after clearing this hurdle last Wednesday.  For the week, the Nasdaq added 28 points, or 1.1%, and for the month it gained nearly 140 points, or 5.9%.  We have our sights set on 2,600-2,700 over the near-term and support is at 2,450, but, the monthly close above 2,500 for the first time since May 2008 was big for the bulls.  The Naz is up 10.5% for 2010. (NYSE:END)

    Folks, we aren’t there, just yet, because we are still waiting for the S&P 500 to trip 1,300 target and the Nasdaq may or may not run up to 3,000. Our point is that you use targets to set up your trading strategies for weeks and months.  The market isn’t always going to be an easy read but sometimes it is.

    Sometimes you will have trading ranges or flat markets (like the 5 month range we had in 2010) and sometimes you will have straight up and straight down markets, or trends. After flat markets, there is usually a breakout or breakdown and we told you to watch for it. In trending markets, options are easier to trade. In choppy and flat markets, your goal is to stay even. Of course, the market has been trending higher since the breakout so we have been aggressive with our trades.

    We still need to be careful because the market and news is always changing but back in December, we said the bulls could run until April.

    As we head to press, the Dow is up 11 points to 11,988 and has traded to a high of 12,020. The S&P 500 is higher by 6 points to 1,297 and has kissed 1,299.22. We would love to see a close over 1,300 by the final bell. The Nasdaq is showing an advance of 19 points and is at 2,738.

    We have a NEW TRADE today so let’s get to it. Subscribers, check the Members Area for the details and for the other trade updates.
    Jan 26 1:08 PM | Link | Comment!
Full index of posts »
Latest Followers


More »
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.