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Friday, February 3rd, 2012
9:00am (EST)
The market finished flat on Thursday ahead of this morning’s unemployment numbers with Tech showing strength while the blue-chips slipped.
The Dow fell 11 points to 12,705 while the S&P added a point to end at 1,325. The Nasdaq added 11 points to finish at 2,859 after kissing a high of 2,868.
Before we get into this morning’s action, we wanted to give you an update on Abercrombie & Fitch (ANF, $40.40, down $6.43) which dropped 14% yesterday. We have been watching this stock for over a decade so we know how it trades and we could fell this big breakdown coming which may not be done. This is one of the beauties of trading options because sometimes you can just feel a trade is going to be good and we have targeted a drop below $40 for 2 weeks.
Shares were downgraded on Monday but shares drifted higher throughout the week and we knew we were getting the perfect setup. In fact, as we have been closing trades this week, we had Abercrombie put options at the TOP of our Watch List. The company was expected to announce earnings next week and we have been telling our subscribers that they could report a terrible quarter.
It wasn’t too hard to figure out when some of our research revealed the company has been slashing prices for months and has been losing market share. Plus, with the warm weather, this pick was a no brainer.
Here were our thoughts with stock and option quotes from the Wednesday’s close:
Abercrombie & Fitch (ANF, $46.83, up $0.89)
February 42 puts (ANF120218P00042000, $0.65, down $0.25)
May 37 puts (ANF120519P00037000, $1.10, down $0.30)
Thoughts: We could be getting close for a nice entry point. The company will announce earnings on February 13 and we think it will be a terrible quarter. In fact, they could pre-warn Wall Street and we may open a position by Friday on ANF with one of these options.
There is a chance for a pop to $50 but a move below $42.50 will be our trigger point. However, we may enter early on a drop below $45. (END)
Needless to say, the put options had a monster day. The February 42 puts (ANF120218P00042000, $2.25, up $1.60) were up a whopping 240% and the May 37 puts (ANF120519P00037000, $2.30, up $1.20) easily gained over 100%.
Abercrombie pre-announced results Thursday and said profits were up 16% for the quarter but U.S. sales were up just 4% due to heavy markdowns. Looking ahead, the retailer said it expects profits of $1.10-$1.15 a share for the current 3 months versus the suit-and-ties expectations for $1.54.
Although we missed another golden opportunity yesterday from a trade on our Watch List, Abercrombie could be headed below $30 so we may get another opportunity to short this name. We will be doing some more chart work over the weekend and we will let you know on Monday how things are looking.
The good news is we do have 2 current 100% winners on the books with half-profits already taken in one of them.
As far as this morning’s action, it looks like a green open and our headline says it all.
Dow futures are up 101 points to 12,767 while the S&P 500 futures are higher by 12 points to 1,334. The Nasdaq futures are showing a 24 point pop and are at 2,515.
Subscribers, check the Members Area for the updates and once again, stay on the lookout for Trade Alerts this morning.
Tags: anf, ANF earnings miss, call options, unemployment rate
Posted in Company Commentary, Earnings, Market Analysis | Comments Off
Thursday, February 2nd, 2012
12:45pm (EST)
The bulls continue their quest for new 52-week highs following better-than-expected economic news and a host of good earnings. Initial Claims came in at 367,000 versus expectations for a print of 371,000, while Continuing Claims were 3.43 million versus a forecast for 3.54 million. Elsewhere, Nonfarm Productivity was 0.7% versus expectations for a pop of 0.8%. Finally, Unit Labor Costs were up 1.2% compared to a forecast of a 0.8% increase.
Of course, Wall Street is eagerly awaiting tomorrow’s marquee report on Nonfarm Payrolls which is due out before the bell. Other headlines for Friday will include the latest numbers on Factory Orders and the ISM Services Index.
Green Mountain Coffee Roasters (GMCR, $64.53, up $10.90) and Mastercard (MA, $376.58, up $18.96) are trading higher after announcing better-than-expected earnings while Merck (MRK, $38.10, down $0.53) is trading lower after missing Wall Street’s revenue forecast.
We have been super busy today and we have more action to take on one of current trades. As we head to press, the Dow is down 28 points to 12,688 while the S&P is off a point to 1,323. The Nasdaq is higher by 9 points to 2,857.
Tags: GMCR, MA, mrk
Posted in Company Commentary, Earnings, Market Analysis, Market Commentary | Comments Off
Thursday, January 26th, 2012
12:45pm (EST)
Netflix (NFLX, $116.04, up $21) surprised Wall Street and the talking heads after the bell last night when they reported a better-than-expected quarter. The bar was already lowered so let’s get that out of the way but the results were impressive.
The company posted a profit of $40.7 million, or $0.73 a share, versus $47.1 million, or $0.87 a share, in the year-ago quarter. Total revenue checked in at $875.6 million, up 47% from the quarter last year.
Here was our chart work on Netflix at the beginning of the year when shares cleared the 50-day moving average (MA) and our thoughts:
“We aren’t sure if a bottom is in but shares could be on the verge of breaking out of a trading range (blue box) in the chart below. Yesterday’s close above $80 was bullish for a run into the $90’s (black line) which is where the next patch of resistance lies. If shares can clear this level there is a chance for a run back to triple-digits ($100-$120) believe it or not.” (END)
Here is what the chart now looks like with the $90 and $120 drawn out:
We mentioned the great chart work we have been doing lately but we failed to capitalize on this move as our portfolio has been pretty full and the options were expensive. We normally like to play options that cost $2 or less and we peaked at the Netflix February 115 calls (NFLX120218C00115000, $7.40, up $4.50) before yesterday’s close and they were at $2.80-$2.90. At the beginning of the month they were under 50 cents.
Netflix was at $95 before Wednesday’s closing bell and when we factored in a 10% price move it put shares at $104-$105 which was below the strike price. We were also nervous that customers wouldn’t be back so soon and their content costs so we sat on the sidelines. It would have been a big risk but the February 115 calls are up 150% today alone.
Netflix also trades WEEKLY options and the January 110 calls (NFLX120127C00110000, $6.30, up $4.15) were at $2.15-$2.25 before the close but these options expire tomorrow. Although the options are up 200%, we didn’t feel the risk/reward was favorable enough for us to pull the trigger. The option premiums were juiced and if Netflix would have missed estimates, these trades would have been all-or-nothings.
We’ve been doing fine without Netflix but we should’ve trusted our chart work.
As far as the market, following a gap higher at the open, the index are struggling to hold their gains. The Dow is up 10 points to 12,767 while the S&P is lower by a 4 points to 1,322. The Nasdaq is off by 9 points to 2,809.
We have a lot to cover in our Members Area today as we are taking action on another current call option trade that is up nearly 60%. We also want to cover the 2 new trades we released this morning so let’s get on it.
Tags: NFLX, NFLX earnings, NFLX options, weekly options
Posted in Company Commentary, Hot Stocks, Market Analysis, Trading Psychology | Comments Off
Friday, January 6th, 2012
9:00am (EST)
The market started yesterday’s session with a 1% drop at the open but the bears are having a hard time keeping the bulls pinned down. Yesterday’s strength came from an unlikely source but one that packs a lot of punch. Tech has shown some mojo this week as some of the oldies-but-goodies have led the charge higher.
We said in our Weekly Wrap on Monday that some of the larger caps would have to pick up the slack – and the Financial stocks would need to rebound with 4Q earnings starting next week in order for the market to make its next push higher. So far, so, so good.
Microsoft (MSFT, $27.68, up $0.28) has quietly made a move from under $26 before Christmas to nearly $28 which may not seem like much but oh is it ever. The 7% move in the stock has allowed our subscribers to enjoy a 108% gain in the call options we recommended. The charts are pointing to a test to the mid-$30’s sometime in 2012 so we may have to roll this trade into some later dated options as well.
Think about that for a second. In order to make a 100% return on shares of Microsoft, you would need the stock to go from $26 to $52. Considering the stock has been in a trading range of $22-$30 for a few years, this isn’t happening, especially in 6 weeks which is how long it took to play the options.
Also, to buy a 100 shares of Microsoft, it would have cost you $2,600. To buy 10 call option contracts (which controls 1,000 shares) it would have cost you $950, or $95 per option contract. The call options we recommended are now going for $2.70, or $270 per contract. In other words, $950 to $2,700 in 40 days. Not bad.
Cisco (CSCO, $18.92, down $0.07) is within spitting distance of breaking the $20’s after kissing $19 exactly over the past 2 trading sessions. Shares could be of legal drinking age by February or it will be the fastest “double-top” in history if shares retreat. We were recently “called-away” from our Cisco shares for our Weekly Wrap portfolio which was 1-of-the-16 winning trades from 2011 for our Covered Call portfolio.
Bank of America (BAC, $6.31, up $0.50), which is a CURRENT trade or ours as well, surged over 8% yesterday after opening at $5.75. There was a TON of action in the option pits as the BAC January 6 calls (BAC120121C00006000, $0.47, up $0.29) surged 161% after opening at 16 cents.
Even more impressive were the juicy gains the WEEKLY options made. These options expire TODAY but the BAC January 6 WEEKLY calls (BAC12010600006000, $0.33, up $0.30) soared a sizzling 1,000% after opening for two cents. Yes, 2 pennies!
Even though this week hasn’t felt like a breakout, it has been. Support has held like a rock all week and the market has made higher highs and higher lows. The bulls still face headwinds and we have already been exiting trades by closing half positions but we got the top rolled back and we are looking for more action.
The Dow started Thursday’s session with a triple-digit loss but managed to close the gap to end with a loss of only 3 points. The index touched a low of 12,362 and we have mentioned prior resistance at 12,350 should hold as short-term support. Check. There is further support at 12,200 and then 12,000 but we are still expecting a push towards 12,600 and possibly 12,800-13,000 – if 4Q earnings come in strong next week.
The S&P 500 added 4 points to finish at 1,281 after testing a low of 1,265. The 1,250 level has stuck all week and there is backup at 1,225-1,200. However, now that 1,275 is cleared, look for the bulls to push 1,300-1,325.
The Nasdaq jumped 22 points to settle at 2,669. Tech traded to 2,673 and we said if the 2,650 level was cleared on the close we could see a little run to 2,675-2,700 which is where the next big battle takes place. With Cisco and Microsoft pushing 52-week highs, and Apple (AAPL, $418.03, up $4.59) which is just $8-and-change away from it 52-week high, dare we say Nasdaq 3,000?
Futures are up but stay guarded. While we do think a test do the next layer of resistance is coming and 4Q earnings could surprise, we worry about February and what will be the next catalyst to take the market higher (or lower?). Europe, war and oil, White House bickering, and unemployment can offer nasty headlines and are the bears’ wild cards.
As we head to press, futures look like this: Dow (+44), S&P 500 (+5); Nasdaq 100 (+7).
Special Alert: We could be very busy this morning as we close out a few profitable trades and add up to 2 NEW TRADES. We have some beautiful charts to show you today so make sure you check them out inside the Members Area. We will send out a Trade Alert if we take action but we normally like to see how some of the stocks we are following open.
Subscribers, check the Members Area for the updates and stay locked-and-loaded.
Tags: BAC calls options, binary options, call options, futures options, high beta stocks, Hot stocks, momentum options, Momentum stocks, MSFT, option market, option tips, options, options mentoring, options trading, options trading course, stock market options, weekly options, what are options
Posted in Company Commentary, Covered Calls, Hot Stocks, Market Analysis, Market Commentary | Comments Off
Thursday, December 29th, 2011
12:35pm (EST)
The bulls have gotten off to a good start today following yesterday’s 1% drubbing on semi-inspiring U.S. economic news. Jobless Claims came in under 400,000 at 386,000 but up from last week’s print of 366,000. Wall Street was expecting 379,000. Despite the slight miss, this is the fourth-straight week claims have held under 400K which is considered the break-even level for jobs creation.
Elsewhere, Pending Home Sales were up over 7% as the Index came in at 100.1 for November, its highest level in nearly 20 months. This number can fluctuate because not all sales lead to closings but nonetheless it was a good sign that home buyers are starting to poke around for good deals.
The Dow is up 103 points to 12,254 while the S&P 500 is higher by 10 points to 1,259. The Nasdaq is showing a 19 point pop and is at 2,609.
We would love to see these levels hold and then Dow 12,350; S&P 1,275; and Nasdaq 2,650 on Friday but we also have downside targets we are watching.
There seems to be a split on where the market is headed for January with half the “pros” saying we are in for a bear market while the other half is betting on a bullish breakout. We are more on the bullish side but our portfolio is getting light as we wind down the year and WAIT for the market’s next move. We said this morning to stay light because the trading range could continue if the bulls hold support.
If there isn’t a breakout over the next month or two, and support fails, we aren’t nervous about a market pullback or selloff. We can make just as much profit from buying put options, but the possible trading range we continue to ride doesn’t have to be played unless you are selling options which is a new strategy we may introduce in 2012.
We have been talking about this 2-month range for weeks as we said it could be ongoing. The charts we went over in our video on Monday and in our Weekly Wrap showed the current range we are in and we outlined these “boxes” to give you a clearer picture.
The charts are still bullish and maybe the bulls will need another Bernanke rescue to break through resistance. However, we are keeping our eye to the downside on specific breaking points but until they are triggered, we will sit tight.
Before we go we wanted to remind you of the special we have. Remember, there is also only 2 days left to hit us up on our special offer to get our trading manual and ongoing videos at no cost (an $899 value!). The options course and videos are ongoing and all you have to do is sign-up for a 1-year membership to our Daily newsletter.
We are also including a 1-year Weekly Wrap subscription with your purchase. (Current subscribers, if you recently renewed a 1-year Daily subscription and would like to get this added, please contact us). This newsletter went 16-0 for 2011 and we have a number of trades which could get “called-away” in January. This newsletter recommends solid stocks with high options premiums which act like dividends to produce MONTHLY double-digit gains.
A 1-year membership to the Daily is priced at $924 and the Weekly Wrap 1-year is priced at $599. The trading course, How to Trade Options on Momentum Stocks, is priced at $899. If you go to our subscription page you will see “Annual subscription to Daily and Weekly” for $995, a savings of over 55%! Click on that and we will do the rest.
There aren’t too any option newsletters who can say they have had a good 2011. We can and we have the results to prove it. Our winning percentage will be near 70% for ALL of our trades for 2011 and most fund managers would be happy to be at 52% which means they made money. An exceptional hedge fund manager might average 60% wins on their trades. Obviously, we deserve the right to rub it in but it has been a hard market to trade and a lot of “smart” people were made to look “stupid” and that is not our style.
We try not to gloat because the market can always humble you and the first 7 months were just as hard on us as we were flat coming into August. However, we had an incredible run where we hit on 44 out of 52 trades winning trades which allowed us to coast into year end.
To take advantage, please go to the subscription page. Your discount and trading manual will be applied and shipped with your order and we look forward to another profitable year in 2012!
Subscribers, check the Members Area for the updates and we will be back in the morning with our next outlook.
Tags: options trading course
Posted in Commodities, Company Commentary, Covered Calls, Earnings, Entertainment Stocks, Hot Stocks, IPOs | Comments Off
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Unemployment Rate Falls to 8.3%
Friday, February 3rd, 2012
9:00am (EST)
The market finished flat on Thursday ahead of this morning’s unemployment numbers with Tech showing strength while the blue-chips slipped.
The Dow fell 11 points to 12,705 while the S&P added a point to end at 1,325. The Nasdaq added 11 points to finish at 2,859 after kissing a high of 2,868.
Before we get into this morning’s action, we wanted to give you an update on Abercrombie & Fitch (ANF, $40.40, down $6.43) which dropped 14% yesterday. We have been watching this stock for over a decade so we know how it trades and we could fell this big breakdown coming which may not be done. This is one of the beauties of trading options because sometimes you can just feel a trade is going to be good and we have targeted a drop below $40 for 2 weeks.
Shares were downgraded on Monday but shares drifted higher throughout the week and we knew we were getting the perfect setup. In fact, as we have been closing trades this week, we had Abercrombie put options at the TOP of our Watch List. The company was expected to announce earnings next week and we have been telling our subscribers that they could report a terrible quarter.
It wasn’t too hard to figure out when some of our research revealed the company has been slashing prices for months and has been losing market share. Plus, with the warm weather, this pick was a no brainer.
Here were our thoughts with stock and option quotes from the Wednesday’s close:
Abercrombie & Fitch (ANF, $46.83, up $0.89)
February 42 puts (ANF120218P00042000, $0.65, down $0.25)
May 37 puts (ANF120519P00037000, $1.10, down $0.30)
Thoughts: We could be getting close for a nice entry point. The company will announce earnings on February 13 and we think it will be a terrible quarter. In fact, they could pre-warn Wall Street and we may open a position by Friday on ANF with one of these options.
There is a chance for a pop to $50 but a move below $42.50 will be our trigger point. However, we may enter early on a drop below $45. (END)
Needless to say, the put options had a monster day. The February 42 puts (ANF120218P00042000, $2.25, up $1.60) were up a whopping 240% and the May 37 puts (ANF120519P00037000, $2.30, up $1.20) easily gained over 100%.
Abercrombie pre-announced results Thursday and said profits were up 16% for the quarter but U.S. sales were up just 4% due to heavy markdowns. Looking ahead, the retailer said it expects profits of $1.10-$1.15 a share for the current 3 months versus the suit-and-ties expectations for $1.54.
Although we missed another golden opportunity yesterday from a trade on our Watch List, Abercrombie could be headed below $30 so we may get another opportunity to short this name. We will be doing some more chart work over the weekend and we will let you know on Monday how things are looking.
The good news is we do have 2 current 100% winners on the books with half-profits already taken in one of them.
As far as this morning’s action, it looks like a green open and our headline says it all.
Dow futures are up 101 points to 12,767 while the S&P 500 futures are higher by 12 points to 1,334. The Nasdaq futures are showing a 24 point pop and are at 2,515.
Subscribers, check the Members Area for the updates and once again, stay on the lookout for Trade Alerts this morning.
Tags: anf, ANF earnings miss, call options, unemployment rate
Posted in Company Commentary, Earnings, Market Analysis | Comments Off