MomentumOptionsTrading.com Midday Update for 5/12/14
Dow Triggers All-time Highs/ VIX Below 12.50
The bulls are going for their 5th-straight Monday win and I mentioned this morning the day after Mother’s Day is usually pretty bullish. The charts from the weekend also showed a potential breakout for the broader market and a possible recovery in Tech and the small-caps.
If you haven’t taken the time to login to the Members Area, please do so, especially new subscribers, as it will help give you a better understanding of what is happening with the market right now. The chart work I do takes up half my Sunday nights but they will give you a snapshot of where the indexes could be headed over the near-term in a few minutes.
It will also keep your emotions in check as you will know what to expect. Of course, it is too early to tell if the entire market will rally for the rest of the week but things are looking promising as traders are buying the recent pullback.
Shares of Pinnacle Foods (PF, $34.83, up $4.38) are up 14% after the company agreed to a merger with Hillshire Brands (HSH, $34.66, down $2.29). The deal is worth $6.6 billion, or $36 a share for Pinnacle shareholders. It is a cash and stock offer where the common stock of PF will be exchanged for $18 in cash and a half share of HSH common stock.
There have been other M&A deals in recent weeks I have discussed and the water-cooler talk is this could be a busy summer for acquisitions. I would love to see it as it would support my possible much higher yearend price targets for the market.
The Dow is higher by 103 points to 16,687 while the S&P 500 is up 15 points to 1,893. The Nasdaq is gaining 61 points to 4,133 and the Russell 2000 is surging 23 points to 1,130. The VIX is down 0.68, or 5%, to 12.24 and below 12.50.
There is a possible New Trade I am still researching on a company reporting earnings after the close. I have been tracking Rackspace Hosting (RAX, $27.11, up $0.83) over the past few months and shares are hovering near 52-week lows despite a decent business. There is also takeover talk surrounding the company and the two forces could lead to a huge move in the stock. The option premiums are a little rich to do a strangle trade and may keep me on the sidelines but I’m still doing the math to see if I can make something work.
I have a lot to cover with our current trades so lets go hit the Members Area for now. If I take action before the close, I will have the trade ready by 3pm. If you do not receive a New Trade alert before the close, it means I passed on Rackspace.