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MomentumOptionsTrading.com Weekly Wrap for 1/18/10

Monday, January 18th, 2010

8:00pm (EST)

It was a tough Friday for the bulls as the market suffered its worst decline for 2010 despite some solid earnings reports.  

The Dow fell 100 points for the day, erasing all of its gains for the week to close at 10,609.  The index reached a high of 10,767 and came thisclose to hitting our target of 10,800 which we set in August 2009.  For the week, the Dow lost 9 points…

The Nasdaq fell 1.2%, or 29 points, to close at 2,288.  The index had already blown past our target of 2,275, and for the week, the Tech-heavy index fell 30 points after touching a high of 2,326.

The S&P 500 fell 12 points, or 1.1%, and settled at 1,136.  We had set a target of 1,175 in August and the index reached a high of 1,150 this past week. 

Folks, we mention all of this for a reason (not to toot the horn) because it defines some of our trading strategies.  We have done well for our subscribers with the bull market rally that started in March 2009 and at some point the market will correct.  It may be 5%, 10%, or even 20% but no one knows when that will be.  When that happens there will be a time to buy put options and we saw some things on Friday that has made us cautious but it will take more than a 100 point drop to get any real “fear” in the bulls.    

We knew coming into the week there was the possibility of the market heading higher and we where there heading into Friday.  The two companies that we were counting on to take us past our target levels were Intel (INTC, $20.80, down $0.68) and JPMorgan Chase (JPM, $43.68, down $1.01). 

Both companies reported incredible earnings…Intel posted its highest gross profit margins ever, at 65% and JPMorgan earned a $3.3 billion profit in its latest quarter.  The fact that these two market heavyweights blew past Wall Street’s numbers and we could not get a nice rally was very discouraging for the most part.

We still think there’s a chance of a decent pop over the next few weeks as the heart of earnings season will get underway starting on Tuesday but a lot will depend on this week’s action. 

Here is a look at the earnings calendar (quotes are from Friday’s close):

Tuesday:  (Before the bell)  Citigroup (C, $3.42, down $0.09), Fastenal (FAST, $45.86, down $0.44), Parker Hannifin (PH, $58.56, down $0.23), Precision Castparts (PCP, $113.75, down $1.59), TD Ameritrade Holding (AMTD, $18.32, up $0.10). 

(After the bell)  Cree (CREE, $54.01, down $3.84), CSX (CSX, $50.04, down $0.51), International Business Machines (IBM, $131.78, down $0.53), NuVasive (NUVA, $30.68, down $0.28), Tessco Technologies (TESS, $17.51, up $0.25).   

Wednesday:  (Before the bell)  Bank of America (BAC, $16.26, down $0.56), Brinker International (EAT, $15.18, down $0.27), Coach (COH, $36.79, down $0.71), Jefferies Group (JEF, $25.48, down $0.34), M&T Bank (MTB, $73.16, down $2.18), Manpower (MAN, $57.06, down $1.88), U.S. Bancorp (USB, $24.62, down $0.71), Wells Fargo (WFC, $28.08, down $0.91). 

(After the bell)  Dr Reddy’s Laboratories (RDY, $26.98, down $0.14), eBay (EBAY, $22.47, down $0.41), F5 Networks (FFIV, $51.39, down $0.75), Kinder Morgan Energy Partners (KMP, $63.45, down $0.38), Seagate Technology (STX, $17.77, down $0.57), Starbucks (SBUX, $23.27, down $0.28). 

Thursday:  (Before the bell)  Charles Schwab (SCHW, $19.00, down $0.18), Fairchild Semiconductor (FCS, $8.77, down $0.45), Freeport McMoRan Copper & Gold (FCX, $84.30, down $0.78), Goldman Sachs (GS, $165.21, down $3.32), Morgan Stanley (MS, $30.38, down $0.82), PNC Financial Services Group (PNC, $56.68, down $1.16), Southwest Airlines (LUV, $11.28, down $0.18), United HealthGroup (UNH, $33.75, up $0.43), Xerox (XRX, $8.84, down $0.05).

(After the bell)  Capital One Financial (COF, $41.13, down $0.54), Deckers Outdoor (DECK, $108.72, down $0.37), Google (GOOG, $580.00, down $9.85), Intuitive Surgical (ISRG, $308.58, up $0.58).

Friday:  BB&T (BBT, $27.76, down $0.76), Exelon (EXC, $48.60, down $48.60, down $0.48), General Electric (GE, $16.44, down $0.26), Harley-Davidson (HOG, $25.08, down $0.65), Johnson Controls (JCI, $29.31, down $0.53), Kimerbly-Clark (KMB, $62.22, down $0.80), McDonalds (MCD, $62.28, down $0.37), Schlumberger (SLB, $70.83, down $0.46).

As you can see, some of the bigger names will be eBay, IBM, General Electric, Goldman, Google and the Financial stocks.  It is hard to say how the financials will trade over the near-term as Obama is trying to get as much as $120 billion from them as a fee or tax.  

Economic news:  Building Permits, PPI, and Housing Starts on Wednesday and Crude Inventories; Thursday Wall Street gets numbers on Initial Claims, Leading Indicators, and the Philly Fed.

We will be back in the morning with the trade updates and a fresh outlook.  We have updated the 2010 portfolio in the Members Area and hope to have a short video that will be ready on Tuesday as well.

As we head to press, Dow futures are up 32, Nasdaq futures are higher by 10 while the S&P 500 futures are getting a 4 point bump.

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Market Holds Up Despite Job Worries

Friday, January 8th, 2010

1:15pm (EST)

All the talk today is about the “weak” unemployment numbers we got but our main focus is how the market is doing.  Despite all the gloom-and-doom over the jobs report the Dow is only down 25 points to 10,582. 

We thought there would be more “fireworks” but from our point of view, it still looks like the bulls are willing to push this market higher.  The talking heads have been calling for a pullback for months but we have maintained our bullish stance since last March.  

In August, 2009, we set targets of 10,800 for the Dow; 2,275 on the Nasdaq and 1,175 for the S&P 500.  We are still short for our Dow and S&P 500 targets which leads us to believe the markets still has some bull left in it.

With earnings season kicking in gear next week, we either get there or fall back.  Then again, we could stay flat but as they say, pressure bursts pipes, so we could get a monster rally if companies blow out Wall Street’s 4Q earnings forecast.

We will be spending all weekend looking for clues on where the market is headed but we are also excited about the possible trades that might be added to our portfolio.  Folks, if you haven’t signed up for a subscription or UPGRADED then you have to make sure you are with us over the next few weeks. 

Why are we so excited?

Next week is what is known as “Expiration Week” to option traders and it’s your opportunity to take some serious swings at a few homerun trades.

We release these type of expiration week trades every now and again and they can be very rewarding.  In November, our subscribers banked over a 400% return on Priceline.com (PCLN, $218.10, up $1.97) as the stock zoomed from $173 to $204 after blasting Wall Street’s pencil pushers.  That is the power of playing options during expiration week.

Naturally, the risk of playing these types of trades is great but if you do your homework these types of returns are there.  Now, you can also lose 100% of your investment if you are wrong but if you make 400% you can have 3 losing trades of 100% and still double your money.  Pretty powerful, huh? 

It works like this.  If you invested a $1,000 and it returns 400% then you account is at $5,000.  If you do three more trades at $1,000 and they all lose 100% you would be left with $2,000.  Folks, that is still a 100% return although your track record was 1 for 4 in picking trades.  For 2009, our winning percentage was 75% on all of our trades…

On Monday, Alcoa (AA, $16.90, up $0.29) kicks off the parade followed by KB Home (KBH, $15.80, flat) on Tuesday, Intel (INTC, $20.62, up $0.02) and Charles Schwab (SCHW, $19.02, down $0.27) on Thursday and JPMorgan (JPM, $44.44, down $0.35) on Friday. 

We know you love the action of options trading or else you wouldn’t be reading this but you’re missing out on the real money making part of options if you are not a Member.  This is a great time to be joining us as we feel it is a perfect trading environment now AND in the months ahead. 

We expect to be using a mixture of calls and puts and we will be sending you quite a few new trades over the next few weeks along with follow-up updates to lock in your winners.

Before we go, we wanted to note that OSI Systems (OSIS, $32.00, up $3.10) continues to go higher and has set another 52-week high today.  The stock opened at $30.15 and has been in a strong uptrend all day.

U.S. Steel (X, $64.68, up $3.77) is jumping again today and we profiled a “free” option outside the Members Area for those of you thinking outside-the-box.  The January 55 calls (XAK, $10.00, up $3.85) are up 60% today and we mentioned how Goldman Sachs (GS, $175.52, down $2.15) knocked us out the trade when they were at $2. Wow…

We are excited about the market for 2010 and we hope you take the weekend to consider a subscription with us.  We have a lot of exciting things happening and we are rapidly approaching our membership limit.  Our trading manual is due out next month and we are bursting at the seams with the opportunity to teach you how to find these exciting trades as well.

We will be back Sunday night with the Weekly Wrap and a fresh outlook for next week.  There’s a chance of a strong market reversal next week but if there isn’t, we will be locked and loaded either way.  Current subscribers, check the Members Area for the trade updates.

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Futures Pointing Towards Lower Open

Tuesday, December 15th, 2009

9:00am (EST)

The bulls got some good news yesterday in the form of the Dubai $10 billion “bailout” package and the Dow’s advance could have been more if Exxon Mobil (XOM, $69.69, down $3.14) didn’t drop 4%.  The company said it would acquire XTO Energy (XTO, $47.86, up $6.37) for $30 billion or so and Exxon’s Dow impact accounted for 23 negative points. 

Still, the Dow rose 29 points to close at 10,501, its highest close since October 1st, 2008.  The S&P 500 added 7 points and closed at 1,114, while the Nasdaq gained 21 to finish at 2,212.

We would love to see Exxon drop to $66-$67 this week or next.

The Financial sector got a small lift after Citigroup (C, $3.70, down $0.25) said it would repay the $20 billion of the $45 billion it received last year from the government’s bailout package.  Citigroup tanked of course, but JPMorgan (JPM, $41.77, up $0.81), Goldman Sachs (GS, $166.10, up $0.10) and Morgan Stanley (MS, $30.17, up $0.39) got small pops.  Note: The government also will sell its 35% stake in Citigroup.

Wells Fargo (WFC, $25.49, up $0.08) must have felt left out because after the bell yesterday they announced they were repaying $25 billion.  Both Citigroup and Wells have followed Bank of America’s (BAC, $15.63, flat) lead as they recently announced they were repaying the $45 billion in bailout money it owed taxpayers.

Well, well, well…Apollo Group (APOL, $62.06, up $5.48) has agreed to settle a lawsuit over how it paid recruiters for its University of Phoenix subsidiary.  The company said it expects to pay $80 million in the settlement.  Wow!  Somebody didn’t want somebody talking.  We covered the firm’s shady practices and mentioned this “boiler room” atmosphere in our October 28th write-up “Apollo Group Has A Skeleton Or Two“.

Ahead of the opening bell, Dow futures are lower by 45 points to 10,392, while the S&P 500 futures are off 6 to 1,102.  The Nasdaq futures are down 9 to 1,799.  Stock futures got worse after the release of the producer price index report.  The index increased 1.8% versus the expected increase of 0.8%.

Before we go, we continue to notice the gains in Imax (IMAX, $12.93, up $0.35) which hit another 52-week high yesterday.  We have been pounding the table on this stock and we have been recommending different options trades on this one all year long.  In case you haven’t heard, Avatar is opening up this Friday.

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Futures Up, Market Set To Open Higher

Thursday, December 10th, 2009

9:10am (EST)

The bulls were feeling good before the bell yesterday as it appeared they were going to halt their two-day losing streak.  Futures were pointing towards a decent open and they got off to a good start but we mentioned in the 1pm update that the market was struggling with direction.

President Obama couldn’t provide a spark but the market began to pick up momentum shortly after our briefing.  There were a couple of stocks that showed some nice rebounds and we have mentioned a few of them over the past couple of weeks.

Goldman Sachs (GS, $166.44, up $4.60 made a strong bounce off $160 and is back over $165.  We told you it would be hard to bet against Goldman and although there was a small window of opportunity to buy put options, we know Goldman is a stock that tends to lead the market higher.

Apple (AAPL, $197.80, up $7.93) closed BELOW $190 on Tuesday but popped 4% after getting an upgrade and a $275 price target.  The options on Apple have gotten a little rich for our taste over the past few months and we would love for the company to do a 2-to-1 or even a 3-to-1 stock split early next year.  Once a stock gets over $150, we tend to look stay on the sidelines until it comes back down or splits.

The gains from Goldman and Apple spread to other names and sectors as the Dow added 51 points to close at 10,337.  The S&P gained 4 to 1,095 while the Nasdaq rose 11 to 2,183. 

The reversal yesterday was interesting and we have got accustomed to small pullbacks in this bull market that has had horns since March.  If we take a closer look at where we have been over the past month then it isn’t that impressive.  We are basically flat.  A month ago the Dow was at 10,250.  However, the index has been topping 10,500 which clears the way for our target of 10,800. 

Another stock we are watching closely is Research In Motion (RIMM, $64.14, up $2.98) which reports earnings next week.  Folks, this one is setting up for a sweet strangle trade and we think the next move in RIMM could easily make this a “risk-free” trade.  We have talked about these types of trades before and last time out the company announced earnings it got taken to the wood shed.

The stock dropped $83 to $69 on volume of 88 million shares as Wall Street turned its back.  The stock held up well after that September 25th debacle but had fallen to a low of $57 by the first week of November. 

We are reading the cards carefully because the chance of an EXPLOSIVE more either up or down is there.  In fact, it could be the perfect storm.  Will RIMM surprise Wall Street with its new phones and China news and will it be enough to push the stock back towards its 52-week high of $88?  Or will the company disappoint and we see a test of $57 again? 

As we head to press, Dow futures are up 51 points to 10,337.  Current subscribers, check the Members Area for the trade updates.

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McDonald’s Not Lovin’ It Today

Tuesday, December 8th, 2009

1:10pm (EST)

The market is treading water today as all three major indexes are in the red.  The Dow is down 90 points to 10,300 while the Nasdaq is lower by 8 to 2,181.  The S&P 500 is back below 1,100 as is off by 8 to 1,095.

One of the stocks weighing on the Dow is McDonald’s (MCD, $60.72, down $1.21).  The stock is down about 2% but its impact on the Dow is 9 points or 10% of the decline.  The company said monthly sales fell (1.9%) for the second straight month as other establishments pushed lower prices to attract customers.  Weakness overseas also pressured sales that analysts said were worse than expected throughout the world.

We wouldn’t step in here but if shares fall to $58 we will take another look…

Another stock taking it on the chin is Goldman Sachs (GS, $162.40, down $1.45).  We were hoping to get into this one once it broke below $165 but we were a little late.  Yesterday, the stock opened at $166 and hit a high of $167 but we took our eyes off of it. 

Last Wednesday in our Members Area we had this to say.  Quotes are from December 2nd:

“We are also watching Goldman Sachs (GS, $165.82, down $1.81) closely but we feel a little uneasy shorting such a strong company.  However, we are watching the $165 level closely and a break below this level could lead to further weakness. 

We have been looking at the December 160 puts (GPYXL, $1.92, up $0.33) and the January 150 puts (GPYMJ, $2.50, up $0.14) all morning but feel like a deer in headlights.  If the stock breaks below $165 we will add the January 150 puts.” (END)

The December 160’s are currently trading at $2.30, up $0.45, while the January 150 puts are at $2.80, up $0.35.  We listed this trade outside of the Members Area today because we did not get good entry points which is why we did not sent out a Newsflash. 

We aren’t sure if Goldman continues lower or bounces back but we felt there were better opportunities out there.  Having said that, we have two trades that have done pretty well today and we cover those in the Members Area.  Current subscribers, check for the updates…

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Trader Comments:

    LAWRENCE O.
    Hey Rick! Here is an update on what your picks have done in my accounts.

    1) Great call on the JoyG March 55. I bought when you said, then bought again on one of the dips. Booked 80+% profit. Made enough to pay for your service for years to come.

    2) Also booked profits on your Berk Feb 74 (80%) and threw a major chunk of change at the March 75’s (190+%). I would have never known that Buffet's stock had split if it weren’t for your service. Bought the shares also for the long haul. Won’t look at them for another 20 years. Great job on getting us in before the indexes did.

    3) Took profit on your Imax March 12.5. 20 cent trailing stop at 1.90 yesterday. Not sure what the profit on that was, but profit is profit.

    I see that you took a loss on some of these. It’s all good. I look to trade your “ideas” not your exact calls. I THANK YOU! For your ideas and commentary. Keep up the good work. And keep those ideas coming.

    C.J.
    Loving this subscription so far! I got into the BRK feb 76 calls the day you talked about right before the split...now up over 300% (0.70 to 2.475)! Keep the good picks coming and let's see some OSIS and EMC upside soon! Just wanted to share my positive enthusiasm on your newsletter...it gives us individual investors great ideas on not only the options market, but also the broader equity market! Case in point is BRK...I can't always read the breaking business news but its easy to read your twice daily updates on my smartphone...helped me get some BRK shares immediately after the split which I will hold for the long haul! Thanks again!

    SHAUN
    Aloha Rick - Thank you so much for the great CL pick. I am not sure if there was buy-out/merger news or what but at 3PM today Colgate-Palmolive absolutely EXPLODED to the upside, and my calls turned into green candy when they went from 1.40 to 3.8 in a matter of seconds! I even sold a few for over 4.0! Much thanks and keep the solid picks up my friend, honestly. Only a fool would scoff at 267% gains... Peace!

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    I like the fact that you ask for comments from subscribers. Good customer service. By the way, am enjoying the service so far. Some good
    profitable calls. Keep up the good work.

    PARAG P.
    Woo hoo! Out for 50% on WMT this am. Making up for my depression for getting out of pcln for a 30% gain monday :( you the man! any word on the manual? My friend Mike ( who I sent to your service) told me he emailed you about your integrity in reporting fills. I echo that sentiment big time.. keep it up! Cheers!

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    MIKE
    Rick, I am a new subscriber to your service, and I want to say I am impressed. I am impressed by your results, but more than that I am impressed by your reporting of your fills. You could have easily said you got that Wal-Mart call today for 80 cents, instead you reported 98 cents! Good job and keep it up, I watched the reporting of the fills first, and then I subscribed. Thank You.

    TRISH D.
    Hi, good morning. I jumped the gun a little on this one (PCLN). But still made $1,675.00 profit!! Very happy!! Keep up the good work!! Thanks.

    MIN L.
    Hi there, I have joined recently, and I am very happy to tell you that I am up over $10,000 on your picks in a month. I started on 10/7 with the Intel pick. I'll be your member for life. Please don't quit on us. Also, I am learning a lot about options. I didn’t get in your recent APOL and that gold trade and only had one loss on CHK. I appreciate all the DD you do. I enjoy your market commentaries. Best advice site period, and I have tried a few here and there. Again, you guys rock!

    JOE G.
    Thanks be to Momentum Options Trading for providing me with some fantastic wins. I just started with this service and am up nearly 50% in less than a month. There have been losses, but if I manage them properly, I will continue the best efforts given on the blog (in which there are no complaints). What a great cause for humanity. I feel more confident about my trades and continue to play the wins. Best of all, I am now keeping my regular paychecks in the bank! Thank you!

    GREG F.
    Rick - I wanted to say thanks for getting me started on the right foot with your service. I have made six trades since starting on October 22, 2009. Five are winners and One loser netting me $6,245. Thanks again and keep the trade recommendations coming.

    NOEL
    I got into the Nike 60 Call at 1.85, sold at 5.00, also bought a 55 put at 1.05, but got stopped out at .35. What a ride! $2830.00 in the black even with the put. It's right at 100% return. I hope earnings season coming up is going to look like this trade.

    TODD F.
    Nice call on Nike. I think I'll go buy a pair with my profits! : ) I did the straddle for safety but still made 62% on the trade. Not bad for less than 24 hours. If Goldman is right, then the Nov 70s or 75's could be a steal today.

    PAUL H.
    What a sweet way to get introduced to Momentum. My first trade based on your picks and it a 2X. Thank you!

    NOEL
    “Limit order was set at 1.60 on RIMM so it sold. I may have left some money on the table but you can't go broke making a profit. That was a fun trade. Thank you. Good call. I’ve been watching and trading Rick's advice since March. It’s usually a fun ride, but I give him heck when it's wrong to. :) ”

    CHRISTIAN
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    “I made $420.00 on ANF in 2 days. Thanks for the trade and updates on getting out of the trade.”

    CHARLES M.
    “I did follow a lot of your trades with 1-2 contracts per trade and YTD I’m up 108%. I try not to follow blindly by not entering all of your trades and sometimes entering the ones you don’t. I entered AIG a few weeks ago against recommendation – that one hurt.”

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    “I have been following you for several months and am interested in the new service. I hate to see the free service go away but as they say, “all good things must come to an end”. My ability to join will be greatly influenced by the monthly fee so I’m very curious to see the new prices. Thanks for making April a great month for me and my family.”

    JOHN H.
    “I have really enjoyed the past month since finding your blog. You have made some great calls. I would appreciate info. on the new options mentoring program. Thanks.”

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    “Hi Rick, I have been following your blog for several months now and I would like to be including on the list for your new service and to receive more information about it. And yes I was a Dendreon winner with your tips. Turned $280 into $7700, and literally saved my butt.”

    ED
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    GREG
    “Rick – Wow what a day! I got in at the Dendreon calls at $2.25. Thanks to for your advice. I appreciate that. This company has a lock on this type of therapy and no one else in the world is close. Kind of reminds me of the type of companies that Peter Lynch and Warren Buffet suggest that investments be made in. Companies that can build a moat around their business model, that allows them to charge a premium for their product or service. In other words - a monopoly.”

    KEN
    “Hi Rick, Thank you so much for the Dendreon trade, I made almost $10,000 with that trade with a little over $2,000 investment. You have shown me the power of options trading. Again, thank you so much for all your inputs.”

    GARETT
    “Hi Rick, thanks for the encouragement to play the dendreon calls! did freaking great! Got in the first lot at $1.44 on 3-24-09, sold at $2.45, 70% not bad. Bought it back at $2.30 on 4-7-09 closed out on 4-14-09 for 454% gain! Wow! I love it when that happens. So, thanks the encouragement to get back in when others were saying sell, sell, sell. Keep up the good work.”

    TERENCE
    “Rick – Thanks for Dendreon – it has made all the headlines today! I missed on RIMM earlier, but I’ve been holding onto DNDN calls since 3rd week March. Of course today it all paid off today, as DNDN rocketed up.”