The knee-jerk reaction to the Fed minutes on Wednesday was expected, but the bulls had to wait for Janet Yellen’s comments before they were allowed to roam. Once the Fed’s notes were out, the bulls took off.
The Dow traded to an all-time intraday high of 17,221 and bested the previous closing high of 17,138. The next layers of fluff are at 17,350-17,500, with support holding at 16,900-16,800.
On the S&P 500, the bulls easily recovered and came within half of a point of triggering a fresh all-time high after pushing 2,010.74. The bulls are looking to trigger 2,025-2,050, while the bears are trying to get to 1,975.
The Nasdaq added 9 points to settle at 4,562. Tech held positive territory throughout the first half of trading before slipping to 4,539 late in the session. The rebound to 4,582 was nice, but it’s hard to get excited until 4,600 clears and holds. Support is at 4,525-4,500.
The Russell popped 3 points to close just under 1,154. The small-caps showed the most strength throughout the session, and there is 2% upside from here to 1,170-1,175, but the bulls need to clear and hold 1,180 to get the flood gates opened.
The S&P 500 Volatility Index (VIX) finished flat following a bear run to 14.53 ahead of the Fed minutes. The bulls roared back after a “considerable time” on the sidelines and pushed a low of 11.73. They missed getting the close below 12.50 and came close to triggering 11.50. Finishes below these levels would suggest higher highs are in store.
In the meantime, while the bulls are charging ahead, there’s a short-term call options trade I want to bring to you: Flextronics (FLEX). Flextronics is a Singapore-based company that helps primarily electronics, automotive, clean tech and lighting manufacturers with its systems and processes. It claims the No. 2 spot in its industry, boasting hundreds of clients that rely on its design, logistics and manufacturing services.
Flextronic’s management team is meeting with analysts Friday, Sept. 19, so an upgrade could be coming, and there’s an inexpensive option to play the possibility. Buy to open the FLEX January 11 calls (FLEX150117C00011000) at current levels. They last traded at 55 cents, which is a price I like for new entries.
With the potential upgrade catalyst, my initial target for the FLEX call options is $1.50-plus but, as a general rule, I don’t use hard stops on options that are this cheap, as the volatility in lower-priced options is typically higher. Plus, one contract will cost you just $55, and that’s the most per-contract that you stand to lose.
Looking at FLEX’s technicals, support is at $10.75. Near-term resistance is at $11.25. If cleared, shares could make another run at $11.75 and fresh 52-week peaks again. I believe shares are going to make a strong move past $12 in the coming weeks and $14 by year-end. If that level is reached by mid-January, for a longer-term hold, the FLEX January 11 calls could be worth $3 at that time for nearly a 450% return from current levels.
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