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.
Get RSS Feed
One Step Forward, Two Back
Wednesday, February 15th, 2012
9:00am (EST)
You knew it was coming, right?
In a not so surprising turn of events, today’s planned meeting between the 17 European Union leaders was cancelled yesterday afternoon when Greece failed to deliver on several of the demands made by the currency union. The suit-and-ties remained locked in talks late Tuesday and said they needed more time but rumors surfaced about 30 minutes before the close that Greece’s leader of the New Democratic Party, Antonis Samaras, had agreed to the commitments and the market soared off its lows.
Europe’s top brass will still meet by a teleconference today with another meeting planned in person on Monday in Brussels. We’ve been mentioning how Germany seems reluctant to commit new money without firm assurances and wants to kick the can off the road instead of down it. They are sending Greece a firm message because they know a default is coming either way.
Moody’s (MCO, $38.66, down $0.05) tried to get another 15 minutes of fame and went on a rampage after downgrading Portugal, Italy and Spain – as well as threatening ratings cuts for a few other major European Union countries. The market seemed to yawn at the obvious and it’s hard to believe shares of Moody’s are nearing their 52-week high of $42. We haven’t checked the fundamentals on the company; we just don’t like them or trust them, is all we are saying.
Following the flood of headlines, the market recovered most of its losses to end the session mixed as the bulls were able to capitalize on the news.
The Dow gained 4 points to finish at 12,878 after touching a low of 12,786 while the S&P 500 slipped a point to close at 1,350 after testing a low of 1,340. The Nasdaq added a half-point and settled just under 2,932 after holding down the 2,900 level at 2,911 on the low.
We have added 2 more trades to our Watch List and we are excited about all of them. We have listed some longer-dated options but these are “cheap” out-of-the-money calls on 3 stocks that could explode this year. We may add one or two of the trades after the open so look for possible Trade Alerts before our normal afternoon update.
As we head to press, futures are showing a big open. Dow futures are up 45 points to 12,885 while the S&P 500 futures are higher by 5 points to 1,352. The Nasdaq 100 futures are advancing 12 points and are at 2,588.
Tags: MCO, option trade alerts, options Watch List
Posted in Company Commentary, Market Commentary | Comments Off