9:00am (EST)
We don’t need no education
We don’t need no thought control
No dark sarcasm in the classroom
Wall Street leave them bulls alone
There is no intro needed for this Friday’s office jam as we get ready for the opening bell…
The bulls continued their march higher on Thursday as they pushed past resistance while holding support on Tech. The bears tried to catch a little of the action but economic news helped offset some of the weakness as jobless claims came in much better-than-expected. The bulls gave a little bit back as the S&P finished flat but we are betting they have one more stampeded in them before the bears take over.
The Dow added 46 points, or 0.3%, to close at 13,825. The blue-chips were up triple-digits at one point, trading to a high of 13,879, and held resistance at 13,800 into the close. It would be hard to imagine the bulls not triggering 14,000 or new highs for the Dow as they have come so far so fast. However, we often remind readers that stocks (or the market) often take the stairs higher and the elevator down at some point.
The S&P 500 showed a heartbeat and ended the day up 1/100 of a point to close at 1,494.82. The index cleared 1,500 in the morning hours and kissed 1,502 before ending flat. The bulls will try to clear and hold this level ahead of the weekend. Support is way back at 1,275.
The Nasdaq held up well despite Apple’s (AAPL, $450.50, down $63.51) regression, falling 23 points, to settle at 3,130. The bulls were able to hold 3,125 after Tech touched a low of 3,124.45 but 3,100 is now in play on a further pullback. A close back above 3,150 today would be a bullish sign for next week.
The Russell 2000 gained 3.5 points, or 0.4%, to end right on 900. The small-caps reached a peak of 904 and could run another 3% before the bears wake up. We have been calling for a test to 900-925 on an overshoot which could be reached within the next week or two if the bulls keep their current momentum.
The S&P Volatility Index ($VIX, 12.69, up 0.23) hit 13.50 after the open but stayed well below 15 which is our warning sign.
Starbucks (SBUX, $54.57, up $0.11) should get a nice pop at the open after reporting a sweet quarter. We were thisclose to recommending the February 57.50 calls (SBUX130216C0005750, $0.77, up $0.27) yesterday but we didn’t like the price action shares were showing as we wanted to see a push past $55 ahead of the news. Shares traded to a high of $54.90 yesterday and will likely clear this level at the open.
Although we didn’t swing the bat this week on an earnings play, we will next week as we have room for a few more trades. We are off to a 9-0 start (including the Weekly Wrap) for 2013 but we want to be careful as we approach a possible top in the market.
Futures are showing a decent start to today’s session and look like so: Dow (+31); S&P 500 (+4); Nasdaq (+10).
Subscribers, check the Members Area for the updates.
Special Note: For those of you unfamiliar with our Watch List, it is a section in the newsletter on possible option trades we are looking at. Some of them become “official” trades we take, some don’t.
One stock that has been hot over the past 2 weeks is Aetna (AET, $49.72, up $1.11) and we profiled the February 48 calls (AET130216C00048000, $2.30, up $0.80)last Monday at 50 cents. If you happen to be in this trade, it would be wise to start booking at least half profits as the trade is up a whopping 360%. We have added 2 new candidates this morning and although we likely won’t initiate new positions today, we might if the price is right.
Again, we DON’T take credit (or blame) for a trade unless we send out a New Trade Alert but we get tons of emails from time to time when an option we profile on our Watch List breaks out to these kinds of gains so we thought we would address all of the happy emails we are getting.
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Bulls Fight Back, Apple Stock-Split and Mini Options?
Wednesday, February 27th, 2013
9:00am (EST)
We said we expected volatility to pick up this week and if the next 3 days are like the first 2, Wall Street will need a drink. After zooming 34% on Monday, the S&P 500 Volatility Index ($VIX, 16.87, down 2.12) dropped over 10% on Tuesday as the bulls rebounded to recover half of the prior session’s losses.
The volatility is great for option trading but in this type of environment it is important to use limit orders when getting into new trades and once they are profitable to set Hard Stops. You can also close half of the trades when they are up and let the rest of your options ride by setting stops on the other half to protect profits. There will be some slippage but all we are looking for are “quick hits” on cheap options that give us high double-digit returns with an occasional triple-digit winner in this type of environment.
The whippy action that started from last week stopped us out of 3 profitable trades yesterday for gains of 42%, 10%, and 17%. The 2 trades that we closed for 10% and 17% were up over 60% and 80% so this is what we mean by slippage. We still made some decent 5-day profits but we were a little disappointed we couldn’t get you triple-digit profits. Don’t worry, we have more coming. Our 2013 Track Record is now up to 23-7 for 2013 which equals a 77% success rate.
The levels we said to watch for into Tuesday’s close were: Dow 13,900; S&P 1,495; Nasdaq 3,125; and for the Russell (2000) – 900. Once again, we nearly nailed every single close so let’s go see what it means. (continued…)
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