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Tuesday, October 18th, 2011
1:45pm (EST)
The market appeared to be in trouble after Wall Street heard IBM’s revenue miss last night but the bulls held the first wave of support and have actually turned things around as we head into the second half of trading. IBM did say some good things as well as some other companies as earnings appear to be outweighing pessimism about the Europe’s debt crisis today.
International Business Machines (IBM, $176.55, down $10.04) reported a profit of $3.84 billion, or $3.19 a share, versus $3.59 billion, or $2.82 a share, in the year-ago period. Excluding certain write-offs, the company actually earned $3.28 a share. The suit-and-ties were expecting $3.22 a share.
Revenue came in at $26.16 billion, slightly less than the $26.26 billion that analysts had penciled-in. Despite the sales miss, the company still raised guidance for the full-year which means they are expecting a better quarter when they report again in January 2012.
Even better, IBM said it would earn at least $13.35 a share for the year, topping the previous forecast for at least $13.25 a share. It was the company’s 10th straight quarter in which it has raised its full-year profit forecast. IBM announced an incredible quarter and we would be buyers at $175. In a year or two, it is possible IBM could be a $300 stock as the company expects to earn $20 a share by 2015.
Shares hit a 52-week high of $190 last Friday and despite another robust quarter, investors are clearly selling the news. The 5% dip has accounted for 75 points against the Dow but the blue-chips have rebounded from a triple-digit loss to nearly a triple-digit gain. And if it weren’t for IBM, the Dow would be right back at the top of its trading range.
The index is currently up 70 points to 11,467 while the S&P 500 is higher by 11 points to 1,212. The Nasdaq is showing a 13 point pop and is at 2,628.
The bulls also got a bonus package when the Producer Price Index (PPI) report showed an increase of 0.8% for September versus expectations for a gain of 0.2%. Yipee!
Apple (AAPL, $419.68, down $0.31), Intel (INTC, $23.30, up $0.02), Juniper Networks (JNPR, $21.05, up $0.65) and Yahoo (YHOO, $15.48, down $0.23) will announce earnings after the bell. If these 4 horsemen can come in with better-than-expected numbers then Tech could rebound and break out of its trading range.
We took advantage of the dip to add 2 new trades this morning so let’s go check them out! Subscribers, log into the Members Area for the updates. We could have a short-covering rally into the close so buckle-up.
Tags: bear market, bears, blue-chip stocks, bulls, chicken option trade. Dow futures, chicken trade, Dow, Dow quotes, gold quotes, Google call options, Google+earnings, momentum, momentum options, Nasdaq, option mentoring, option trading course, S&P 500, straddle option trade, VIX
Posted in Apple, Market Analysis, Market Commentary | Comments Off
Thursday, August 25th, 2011
1:30pm (EST)
We mentioned on Tuesday we could be nearing a bottom for Financial stocks and it seems Warren Buffet got the message. Buffett’s Berkshire Hathaway will invest $5 billion in Bank of America (BAC, $7.63, up $0.64) to shore up the company’s balance sheet and provides a much needed vote of confidence for the sector.
Shares of Bank of America surged on the news and are up 9% but have come down from a high of $8.80 which was hit shortly after the open.
The deal between the two sides involves 50,000 shares (at $100,000 each) of preferred stock that will pay a 6% annual dividend and includes warrants to buy 770 million BofA shares at an exercise price of $7-and change over the next 10 years.
The company can buy back the preferred shares at any time providing it pays Mr. Buffett a 5% premium.
It was a big bet by Uncle Warren, who did a similar deal with Goldman Sachs (GS, $109.13, down $1.18) back in 2008, on a company still dealing with billions of dollars in problem mortgage loans. There have been worries BofA might need to raise outside capital of up to $50 billion to deal with losses and meet new industry capital rules and the company said it didn’t need cash but took the money anyway so some questions are being raised.
We have been mentioning over the past few weeks that BofA has a tangible book value of over $12 a share and we were hoping to buy the stock (or options) once it traded in the $5’s. On Monday, shares hit a low of $6.01 and we thought we would get a chance this week to get in, but as you can see, we really may have put a bottom in some of these names. For those of you who participated in our BofA strangle trade that was on our Watch List, congratulations, you have made money on both sides.
Despite the surprise announcement, the market took a turn for the worse after posting solid gains at the open and testing the next layers of resistance. The selloff comes in response to water-cooler talk that Germany may lose its AAA credit rating which pounded their stock market (DAX: 5,584, down 97 points) into the close. The reaction spread to other foreign exchanges and has affected our major indexes which headed lower on the news.
Although both S&P and Fitch recently reaffirmed their Triple A ratings on Germany, it appears short-sellers and the machines are looking for new opportunities.
We have mentioned resistance levels all week and they have been holding just like we thought they would heading into Friday’s Bernanke update.
After reaching a high of 11,405, the Dow is down 125 points to 11,195 while the S&P is off 16 points to 1,161 after kissing 1,190. We don’t know if there would have been, or still is, enough mustard to get over 1,200 but the bulls will be trying to hold at least 1,150 into the close.
The Nasdaq made a trip higher despite the Apple (AAPL, $371.94, down $4.24) news and reached a peak of 2,482 at the open. We have been targeting the 2,500 level as a make-or-break rally point and Tech is currently at 2,427 – down 40 points, or 1.6%.
We like our positions heading into the Bernanke Watch on Friday so let’s see how it plays out. Subscribers, check the Members Area for the current trade updates.
Tags: AAPL, bac, option alerts, option trading, option trading services, options momentum trading, options on stock, options trading, options trading service, Steve Jobs retiring, stock option trade, trade in options, weekly options trading
Posted in Apple, Market Analysis, Market Commentary | Comments Off
Wednesday, July 20th, 2011
1:05pm (EST)
The bulls got off to a good start this morning after stellar earnings from Apple (AAPL, $387.51, up $10.66) had Wall Street in a buying mood. The company reported another ridiculous 3 months as they blew by estimates for the 13th straight quarter on strong iPad and iPhone sales. And strong computer sales. And strong download sales of its applications. Well, you get the picture.
There is no need to go over their numbers because it seems like monopoly money but we have counted 7 analyst upgrades this morning with many of the knuckleheads raising their price targets above $500.
Our question is where were you yesterday?
If these so called “analysts” believed in Apple and are hiking their price targets by 25%-50%, why didn’t they say so before their earnings announcements?
Anyway, we don’t trade Apple because it’s a high triple-digit stock which usually carries high premiums. We could have looked at the Weekly options yesterday with the stock at $376 but we didn’t like thesetups. With many analysts actually negative on the stock going into the quarter, there was a chance for a 10% move either way which we figured would have put the stock at $410 or $340.
If you were bullish on Apple before the close on Tuesday, you could have bought the Apple WEEKLY July 400 calls (AAPL110722C00400000, $0.95, down $1.15) for under $2 yesterday and sold them into strength this morning when they hit a high of $2.65.
If you were bearish on Apple going into the quarter you could have purchased the Apple WEEKLY July 350 puts (AAPL110722P00350000, $0.05, down $1.45) at $1.50 but you would be down 96% today. Ouch.
As a strangle option trade, you could have bought the July 400 calls and the July 350 puts but you would still be feeling pain.
As you can see, even the WEEKLY options on Apple are super-priced and inflated which makes trading Apple a tough task unless you are SELLING options. We don’t ever recommend selling an option because it leaves you “naked” but we wanted to show you why we usually don’t trade options on stocks over $100.
Apple ended the quarter with $75 billion in cash and now sports a market cap of $360 billion. By comparison, Exxon Mobil (XOM, $83.64, up $0.01), the world’s largest company by MC, has a market cap of $412 billion but Apple is closing the gap.
Despite the bullish news, investors have been selling Apple near $400 as shares have reached a high of $398. However, if we owned the stock, which is a lot different than owning options, then we would just hold on to it.
As we head into the second half of trading, the market is trading slightly lower as it retests prior resistance levels which are now trying to form support. The Dow is down 15 points to 12,573 while the S&P 500 is lower by a point to 1,326. The Nasdaq is off by 13 points to 2,813.
As usual, we have a ton of information to cover with our ongoing trades so let’s get to it. Subscribers, check the Members Area for the updates.
Tags: AAPL, binary options, call options, futures options, high beta stocks, Hot stocks, momentum options, Momentum stocks, option market, option tips, options, options mentoring, options trading, options trading course, stock market options, weekly options, what are options
Posted in Apple, Earnings, Market Analysis, Market Commentary | Comments Off
Thursday, April 21st, 2011
9:00am (EST)
It has been a wild and volatile shortened week for the market with today’s action leaving us on the brink of watching a good movie end. Things started off scary on Monday after the major averages got slammed by the bears on an S&P downgrade of U.S. debt. On Tuesday, the bulls battled back and recouped a portion of the losses ahead of the bombshell of scheduled earnings after the close and before Wednesday’s open.
The bulls had a tremendous session yesterday as the major indexes soared 1.5% on the heels of a number of positive earnings surprises which pushed the Dow to new 52-week highs. Although the S&P and Tech are still lagging from hitting their highs, they are close. There is a chance for a continued run higher as the earnings parade continued last night and into this morning. More on this in a minute…
The Dow soared 186 points, or 1.5%, to finish at 12,453. The index touched a high of 12,475 and came within spitting distance of reaching our near-term target of 12,500-12,600. The blue-chips touched a low of 12,093 on Monday which fell in between our downside targets of 12,200 and then 12,000. This represents a nearly 400-point swing from lows to highs this week.
The S&P 500 jumped over 17 points, or 1.4%, to end at 1,330 after reaching a high of 1,332.66. We said to watch for 1,325 (check) and 1,334 yesterday but the index once again ran into trouble at the 1,334 level. This level represents a 100% move from the March 6, 2009 low of 666.79. The S&P reached a low of 1,294 on Monday which really threw us for a loop because we felt the momentum was there for a push down to 1,275-1,250.
The Nasdaq zoomed 57 points, or 2.1%, and settled at 2,802. Repeat…2,802. After failing to close above the 2,800 level for weeks (and months), Tech reclaimed this important psychological level for the first time since mid-February after falling to 2,706 on Monday. This was just above our near-term support of 2,700-2,650 and we also felt Tech would fall through support. We have mentioned there is chance for a run up to 2,850 if support did hold Monday morning and the triple-digit gain off the lows has the index right there.
In fact, here were our thoughts on Monday morning:
“The Dow is up 20 points for April while the S&P 500 is down 6 points. Tech is down about 17 points. So far, April has not delivered the results the bulls have been hoping for as the crosswinds have slammed us back into a trading range. If we pencil in the historic 2% April average gains for the indexes then we get Dow 12,500; S&P 1,355; and Nasdaq 2,820 by month end.
Yes, we do a lot of homework and chart work but it’s pretty crazy how that last paragraph just comes together and makes a compelling argument for one last bull charge as we head into May which happen to be our upside targets. However, a 2% move the other way puts the S&P below 1,300.” (END)
Folks, the last two sentences in the last two paragraphs say it all. We got whipsawed this week.
As far as how things are looking this morning, Apple (AAPL, $342.41, up $4.55) was up $10 in after-hours last night after crushing Wall Street’s estimates. The company reported a profit of nearly $6 billion, or $6.40 a share, versus $3.1 billion, or $3.33 a share, in the year-ago quarter. Revenue came in at $24.7 billion.
Analysts were looking for earnings of $5.39 on sales of $23.4 billion.
It was another solid quarter for Apple which pretty much doubled year-ago results. That’s what happens when you sell over 18 million iPhones, 9 million iPods, 4.7 million iPads, and 3.8 million Macs in a quarter. However, two key things to points out. iPad missed expectations as Wall Street was looking for over 6 million units to be sold but in fairness to Apple, their supply chain wasn’t running at 100%. Also, iPod sales were expected to come in at nearly 10 million so they missed there as well. The company did beat on iPhone and Mac sales.
As usual, Apple sandbagged their numbers going forward and lowered guidance but all of the positives clearly outweigh any negatives. One thing we are disappointed in was the fact there was no stock-split. A 5-to-1 split would get shares under $100. Come on Stevie, give us a split or pay the shareholders a dividend with the $65 billion in cash Apple has in its coffers.
Futures are up so if we get a breakout, we will go over some of our thoughts from February in our afternoon update or Weekly Wrap which comes out on Sunday’s. As we head to press, here is what we look like: Dow futures (+27), S&P (+x5), Nasdaq 100 (+18). Subscribers, check the Members Area for the latest updates.
Tags: AAPL, call options, high beta stocks, Hot stocks, momentum options, Momentum stocks, option tips, options trading course, stock market options, strangle option trades, weekly options
Posted in Apple, Earnings, Market Commentary | Comments Off
Thursday, April 7th, 2011
8:45am (EST)
The bulls had us a little nervous yesterday as we were writing up the afternoon update. The pattern this week has been a strong start at the open, followed by a mild bear attack, before a slow steady climb back towards resistance by the bulls.
The talking heads and pros have been calling for another pullback, and we will get one, but the trend has been higher as we head towards first quarter earnings season.
The Dow made a run up to 12,450 on Wednesday before finishing with a gain of 33 points, or 0.3%, to 12,426. Our near-term target is 12,500-12,600 with support coming in at 12,200 then 12,000.
The S&P 500 advanced 3 points, or 0.2%, and close at 1,335 after racing to a high of 1,339 intraday. The close above 1,334 was big as we continue to look for a pop up to 1,350. Support is strong at 1,325.
The only thing we can beach about is the Nasdaq’s failure to close above 2,800. The index added 9 points, or 0.3%, to finish at 2,799.82 after reaching a high of 2,815. Our target remains 2,850 over the short-term with support at 2,750-2,700.
Some of the blame for Tech failing to clear the 2,800 level can be attributed to Apple’s (AAPL, $338.04, down $0.85) recent weakness. Shares were down for the sixth-straight session and have been under pressure since the Nasdaq announced a rebalancing of the Nasdaq-100 Index next month.
We have mentioned before that Apple makes up 20% of the index which means how Apple goes, so does the Nasdaq 100. The new allocation will shrink Apple’s weighting in the index down to 12% which is forcing some money managers to reduce their holdings.
From the look of things, Apple’s stock (blue line) could test $320-$325 which is the first wave of support. Shares recently broke below their 20-day and 50-day (green & red lines) moving averages (MA) and are on the cusp of falling through their 100-day MA as well (purple line). Further support is at $300. Apple trades WEEKLY options which are a lot “cheaper” than regular options so there may be a trade here in the next week or two.
We have seen somewhat of a ripple effect as a few of the larger stocks on the Nasdaq have become more volatile. Cisco Systems (CSCO, $18.07, up $0.85), Dell (DELL, $14.78, up $0.35), Intel (INTC, $19.95, up $0.24), Microsoft (MSFT, $26.15, up $0.37) and Oracle (ORCL, $33.58, down $0.34) will become more weighted within the index. These stocks have shown some strength on the news as fund managers scramble to add their names by May 2 which is when the rebalancing takes place.
As we head to press, futures are showing a higher open to start: Dow (+25), S&P 500 +3), Nasdaq 100 (+5).
We have a lot to cover in our Members Area so let’s get to it. Subscribers, check for the updates.
Tags: Apple (AAPL) CSCO, call option trades, chicken trades, momentum options, Momentum stocks, MSFT, options trading course, ORCL, put options, stock market options, stocks that trade weekly options, strangle option trades, weekly options
Posted in Apple, Hot Stocks, Market Commentary | Comments Off
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IBM Weighs on Blue-Chips, Dow Still Up
Tuesday, October 18th, 2011
1:45pm (EST)
The market appeared to be in trouble after Wall Street heard IBM’s revenue miss last night but the bulls held the first wave of support and have actually turned things around as we head into the second half of trading. IBM did say some good things as well as some other companies as earnings appear to be outweighing pessimism about the Europe’s debt crisis today.
International Business Machines (IBM, $176.55, down $10.04) reported a profit of $3.84 billion, or $3.19 a share, versus $3.59 billion, or $2.82 a share, in the year-ago period. Excluding certain write-offs, the company actually earned $3.28 a share. The suit-and-ties were expecting $3.22 a share.
Revenue came in at $26.16 billion, slightly less than the $26.26 billion that analysts had penciled-in. Despite the sales miss, the company still raised guidance for the full-year which means they are expecting a better quarter when they report again in January 2012.
Even better, IBM said it would earn at least $13.35 a share for the year, topping the previous forecast for at least $13.25 a share. It was the company’s 10th straight quarter in which it has raised its full-year profit forecast. IBM announced an incredible quarter and we would be buyers at $175. In a year or two, it is possible IBM could be a $300 stock as the company expects to earn $20 a share by 2015.
Shares hit a 52-week high of $190 last Friday and despite another robust quarter, investors are clearly selling the news. The 5% dip has accounted for 75 points against the Dow but the blue-chips have rebounded from a triple-digit loss to nearly a triple-digit gain. And if it weren’t for IBM, the Dow would be right back at the top of its trading range.
The index is currently up 70 points to 11,467 while the S&P 500 is higher by 11 points to 1,212. The Nasdaq is showing a 13 point pop and is at 2,628.
The bulls also got a bonus package when the Producer Price Index (PPI) report showed an increase of 0.8% for September versus expectations for a gain of 0.2%. Yipee!
Apple (AAPL, $419.68, down $0.31), Intel (INTC, $23.30, up $0.02), Juniper Networks (JNPR, $21.05, up $0.65) and Yahoo (YHOO, $15.48, down $0.23) will announce earnings after the bell. If these 4 horsemen can come in with better-than-expected numbers then Tech could rebound and break out of its trading range.
We took advantage of the dip to add 2 new trades this morning so let’s go check them out! Subscribers, log into the Members Area for the updates. We could have a short-covering rally into the close so buckle-up.
Tags: bear market, bears, blue-chip stocks, bulls, chicken option trade. Dow futures, chicken trade, Dow, Dow quotes, gold quotes, Google call options, Google+earnings, momentum, momentum options, Nasdaq, option mentoring, option trading course, S&P 500, straddle option trade, VIX
Posted in Apple, Market Analysis, Market Commentary | Comments Off