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Tuesday, April 17th, 2012
1:00pm (EST)
The market got a huge pop at the open as the Dow tripped 13,000 on better-than-expected earnings from a couple of blue-chippers and the rally has strengthed as we head into the second half of trading.
As far as economic news, Housing Starts were a little disappointing as they fell 5.8% versus expectations for a 1% rise but Building Permits rose 4.5% to 747,000. Wall Street had forecast a drop to 710,000, or 0.7%.
Goldman Sachs (GS, $118.34, up $1.00) is trading higher after beating expectations and pumping up the dividend. The company reported a profit of $2.1 billion, or $3.92 a share. The suit-and-ties were looking for $3.55 a share.
Golden Slacks has gotten a bloody nose from all the recent negative publicity but the firm continues to battle. A rising tide often lifts all boats and in this case the Financial stocks are following Goldman’s lead. Also enjoying sweet pops are JPMorgan (JPM, $43.85, up $0.52), Citigroup (C, $35.28, up $1.28) and Bank of America (BAC, $9.87, up $0.18).
Speaking of BAC, we are on track to close out 3 more winners for our Weekly Wrap and our current covered call on BAC is set to return us 26%. We started taking positions in Bank of America when shares were at 5 bucks back in December and our first BAC returned 20% earlier this year. If you haven’t discovered the magic of writing covered calls on solid stocks with the potential of making monthly double-digit gains than we urge you to get interested. Remember, it only takes 5 winning trades of 20% to make a 100% or double your money.
We have a lot to cover inside our Members Area as we have a freshly minted Watch List that is loaded with some potential gems for our next batch of trades. We also have action to take on one of our trades which will make our 70th winning trade for 2012. Wow.
As we head to press, the Dow is up 200 points to 13,121 while the S&P 500 is higher by 21 points to 1,390. The Nasdaq is up double-nickels to 3,043. Subscribers, you know what to do but stay lock-and-loaded on a possible NEW TRADES if we see something we like before the close as we have updated our Watch List.
Tags: covered call trading, Golden slacks slang name, GS, Weekly Wrap
Posted in Earnings, Financial Stocks, Market Analysis, Option Trades | Comments Off
Wednesday, March 21st, 2012
9:00am (EST)
The bears snapped a 3-session losing streak on Tuesday as the bulls were unable to recover from the ambush at the open. Futures were weak as we headed to press so we knew it was going to be an uphill battle to get back to even. The blue-chips fell triple-digits at one point but the strength in Tech (and the Financial stocks) helped keep losses in check despite worries of a “hard landing” for China.
The Dow dropped 69 points, or 0.5%, to finish at 13,170. The index fell just below near-term support at 13,200 and we can imagine Wall Street traders getting nervous if we edge back down to 13,000. Yesterday’s low was 13,123. One bright spot was Bank of America (BAC, $9.81, up $0.28) which is a current covered call trade of ours for the Weekly Wrap. Shares pushed double-digits again after reaching a high of $9.97 yesterday. We started recommending shares at $5 back in December.
The S&P 500 slipped 4 points, or 0.3%, to close at 1,405. The index traded down to 1,397 on the open but was able to reclaim 1,400 by the close. There is further risk down to 1,375 but 1,425-1,450 is still in play.
The Nasdaq declined 4 points, or 0.1%, to settle at 3,074. Tech battled back from a low of 3,050 which was a nice round number and further support is at 3,000 should the bears keep the pressure on. We still believe the bulls will make a run at 3,250 before a pullback comes and yesterday’s action off the lows was encouraging which shows the bulls resiliency.
We still see a few choppy sessions ahead of us but if the bulls can get through March, we could see a big April with our near-term targets for the indexes being achieved. Remember, we said the back half of March is usually bearish with the first half bullish and so far the market is following that script. Our homework over the weekend showed any pullback we get could be mild before the market sets new 52-week highs in April (or sooner).
Futures are mixed as we head to press and look like this: Dow (+9); S&P 500 (+1); Nasdaq 100 (-2).
We have a NEW TRADE that we are spreading out to play longer-term options on so our goal is to get these options at the open. These are “cheap” out-of-the-money calls on a stock we feel is going to explode at some point this year.
Subscribers, check the Members Area for the specific trade instructions and why we like this trade a ton.
Tags: bac, Bank of America call options, bearish stocks, bullish stocks
Posted in Financial Stocks, Market Analysis, Trade Update | Comments Off
Tuesday, March 20th, 2012
9:00am (EST)
The bulls got off to a good start for the week following Friday’s flat action and put up some good numbers yesterday. Much of the advance was thanks in part to Apple’s (AAPL, $601.10, up $15.53) dividend announcement but the Financial stocks did well again and continue to set new 52-week highs.
The Dow gained 6 points to end at 13,239 after trading to a high of 13,269 and testing a low of 13,208. The S&P 500 also added a half-dozen points to close at 1,410 after kissing a high of 1,414. The index traded down to 1,402 at the open but held 1,400. The Nasdaq was strong from start to finish as Tech jumped 23 points, or 0.75%, to settle at 3,078. Side Note: The Russell 2000 added over 7 points to finish at 837.77 but more importantly, the index finally broke above resistance which we talked about in our Weekly Wrap and yesterday morning.
American Express (AXP, $57.27, up $0.72) added another 1% and reached a fresh 52-week high of $57.50 on Monday. We said last week shares were headed to $60 when we recommended a call option trade to our subscribers. It is now up 438% in under a week.
Capital One (COF, $55.10, up $0.60) came within spitting distance of breaking its 52-week high of $56.26 set last May after closing at double-nickels and peaking at $56.19. We also have a near-term target of $60 for shares and subscribers are now up over 300% on our Capital One call option trade since last Tuesday.
Bank of America (BAC, $9.53, down $0.27) broke double-digits but didn’t set a new 52-week high. Shares did, however, trade to a high of $10.10 before the talking heads ruined it as they finished the session down 3%. The 52-week high is at $14.05 for BAC but we have been recommending the stock since it was at $5 back in December for our Weekly Wrap.
We were watching Apple’s WEEKLY options yesterday and we wanted to pull the trigger on the March 600 calls (AAPL120323C00600000, $10.75, up $2.60) but they opened at $12.20 and we were looking to send out a Trade Alert to buy them for under $10. The calls traded to a high of $14.40 but the premiums at the open were already built-in after the dividend announcement.
The calls did trade down to $6.95 but we didn’t want to get whipsawed because shares are in uncharted blue-sky territory. It is still an expensive trade and one we don’t often do but we are looking at ways to play Apple because they aren’t splitting the stock anytime soon. However, we won’t be trading 10 or 20 contracts because we would be risking a half or third of the profits we have already banked for the year. A 10 contract trade on an option priced at $10 will set you back $10,000 and 1 contract would cost $1,000.
This is another reason why we don’t typically trade options on stocks over $100 because it is so much easier to take smaller risks than to try and day trade Apple. We would rather buy 30 or 40 contracts on a 40 or 60 cent option or 10 or 20 contracts on options under $2.
Sure, if Apple goes to $650 by Friday, those March 600 Weekly call options will be worth $50 for nearly a 400% gain but if shares retreat and fall back below $600 and you aren’t out of the position, you will lose 100% of your investment. It is also easier to make 400% on a 40 cent option on a stock that moves from $53 to $57 which is what we have done with our American Express (AXP, $57.27, up $0.72) call option trade in just under a week.
This should help answer any questions on why we don’t trade Apple but we have been giving you powerful hints for those of you that want to play at the high-limit tables.
As we head to press, futures are showing a lower open and look like this: Dow (-63); S&P 500 (-8), Nasdaq 100 (-12).
Subscribers, check the Members Area for the updates as we have moved up the Hard Stops to lock-in gains on these two massive trades.
Tags: AAPL, Apple Weekly options, AXP, call options, COF
Posted in Apple, Financial Stocks, Market Analysis, Market Commentary | Comments Off
Monday, March 19th, 2012
9:00am (EST)
“We mentioned how the first half of March was seasonally bullish while the back half of the month is usually bearish. March options expire this week and Friday also represents triple-witching which is when all index, futures, and options expire. Volatility has picked up this month but this is usually a mixed day. The good news is that the Monday before triple-witching is typically bullish as the Dow has posted gains nearly 70% of the time over the past 25 years.
We also mentioned last week how we haven’t seen a 4%-5% frantic surge to new highs in the market while in the same breath we talked about how there hadn’t been a 1% pullback for 2012. Well, the 1% selloff happened last Tuesday. We would love to see a 3% pop this week which would be enough to get the indexes past our fluff targets. After that, we would expect a pullback like the Wall Street pros have been calling for all year and still are because they didn’t buy Tuesday’s dip.” (END) from 3/11/2012…
Following a flat Monday, the bulls went ballistic on Tuesday after pushing the major indexes nearly 2% higher and past our fluff targets (Dow 13,000; S&P 1,400; Nasdaq 3,000). We can thank the Fed for that after keeping rates low and the fact that most U.S. banks passed their annual stress test. The Fed also allowed a few of them to raise their dividend which sparked a powerful sector rally in the Financial stocks.
The results weren’t due until Thursday but there may have been some leaks which led to Tuesday’s announcement after the close. Of the 19 banks that were tested, 4 failed. The big surprise was Citigroup (C, $36.69, up $0.42), but SunTrust Banks (STI, $24.38, down $0.11) and MetLife (MET, $38.38, down $0.03) also have brand awareness. Ally Financial rounded out the group of losers while the 15 that passed were led by JPMorgan Chase (JPM, $44.57, down $0.13) which raised its quarterly dividend and initiated a $15 billion stock buyback program.
Wednesday was a flat day following Tuesday’s big pop as Wall Street took a wait-and-see approach to Thursday’s jobless claims numbers and the Philly Fed. Both came in better-than-expected which pushed the market higher by another half-percent (0.5%) by the end of the day. Friday was mixed as the indexes traded in a tight range and consolidated the week’s gains.
Last week we showed you 3-month charts for the indexes and how close they were to breaking out. This week we will go over the longer-term charts and our near-term targets for the indexes. We said if the bulls cleared our fluff targets there could be a continued rally and at the end of January we listed further upside targets for the indexes in case the momentum was more powerful than we thought. We often say that markets tend to overshoot support and resistance after staying in a tight trading range and the major indexes are showing classic examples of this right now.
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Tags: bank stress tests, stock options trading advisors
Posted in Financial Stocks, Market Analysis, Market Commentary | Comments Off
Thursday, March 15th, 2012
9:00am (EST)
The bulls made another run at greener pastures on Wednesday but ran out of steam at the next resistance levels following Tuesday’s big push. The Financial stocks helped the bulls from the start and had another good day while other sectors lagged. The strong gains in American Express (AXP, $56.15, up $1.90) and Capital One (COF, $52.33, up $1.33) were good to see as each rallied 3%, on average, but the options gains we made for our subscribers were jaw-dropping. More on this in a minute.
The Dow added 16 points, or 0.1%, to finish at 13,194. The index had trouble at our 13,200 resistance target but did reach a high of 13,221.
The S&P slipped 2 points, or 0.1%, to settle at 1,394. The index reached a high of 1399.42 and once the talking heads started cheering for 1,400 we knew the bulls weren’t going to hit the upper-end of our fluff targets.
The Nasdaq gained nearly a point and closed at 3,040 after kissing 3,051 while the Russell 2000 fell 8 points, or 1%, to end at 823 and is sending us warning signals. The index struggled at the open and once again failed to advance past 835 which will be the next “all clear” sign for the bulls.
Despite the mixed session, we had one of our best days ever as far as closing winning trades as we were quick to the punch on Tuesday morning. We knew coming into this week that the bank stress tests were due out Thursday so our plan was to target a few of the stronger Financial stocks for a quick trade. We spent a lot of time over the weekend looking at the charts and the option chains and went with American Express and Capital One. We listed some option trades on Tuesday morning on our Watch List before the opening bell in our 9am update and this is how we drew it up in the sand (quotes from that day):
American Express (AXP, $52.77, down $0.43)
April 55 calls (AXP120421C00055000, $0.40, down $0.25)
July 57.50 calls (AXP120721C00057500, $0.80, down $0.20)
Thoughts: The financial stocks could rally in the back-half of the week on the bank stress tests which will be out on Thursday. The banks could be better capitalized than most people expect which, dare we say, could start another rally. The April calls may be a good trade for the week at current prices. (END)
An hour after the opening bell, we sent this Trade Alert to our subscribers (quotes from that day) as we felt the momentum building:
American Express (AXP, $52.87, up $0.10)
Buy to OPEN April 55 calls (AXP120421C00055000, $0.40, flat)
Action: Use limit orders up to 45 cents but do not pay more than 50 cents to establish positions.
This trade will be quick in nature as we plan to be out of them by Thursday or Friday. (END)
As you can see, American Express has rallied $3 in two days which is a nice 6% pop but here is what our subscribers will be reading this morning inside our Members Area:
American Express (AXP, $56.15, up $1.90)
April 55 calls (AXP120421C00055000, $2.05, up $1.15)
Entry Price: $0.40 (3/13/12)
Exit Target: $0.80 (closed half at $1.75 on 3/14/12)
Return: 375%
Stop Target: $1.55 (HARD STOP)
Action: Shares of American Express went out near their high of $56.28. We said a break above $55 could lead to $60 but we have raised our Hard Stop on the other half to $1.55 in case the stock retreats. If not, we will move it higher if American Express continues to perform. (END)
This trade will be easy to manage from here on out as we now have the luxury of the Hard Stop which helps take the emotion out of the trade. The reason we mention all of this is because too many times option traders will hold out for higher prices but it is always important to follow your trade setups and stick to your plan. Often times, by waiting for higher prices that don’t come, option traders can and do give back a lot of their gains.
While we would love to keep this trade open until mid-April, this wasn’t the plan and here is why. If shares of American Express are UNDER $55 by mid-April then these options will be worthless. Of course, shares could continue to zoom higher and hit $60 before there is a pullback but anytime you make 375% in 48 hours, it best to lock in some gains.
We were both good and lucky on this trade. Good because we did the research and we got in before the crowd, and lucky because our gains are now at 375% and shares moved quicker and faster than we had expected. This gives us the luxury of riding the other half of these call options higher or once again, we let the Hard Stop take us out on a pullback which still locks in a total return of over 300%.
In fact, it’s so easy, well, you know the rest of the story.
Our Capital One call option gains are up 167% in 2 days while we also hit a triple-digit winner on another call option trade as well. Oh, and we have made 60% so far on a bullish Pepsico (PEP, $64.06, down $0.28) trade in just over a week. Talk about fast money. Although February was sloppy and choppy we decided to step on the gas in March one last time because we have been expecting this breakout and we have called this market perfectly since November.
It should be an exciting rest of the week so let’s go see where we are at.
Tags: AXP, AXP call options, bank stress tests, COF
Posted in Financial Stocks, Hot Stocks, Market Analysis | Comments Off
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Tech Shines as Nasdaq Advances
Tuesday, March 20th, 2012
9:00am (EST)
The bulls got off to a good start for the week following Friday’s flat action and put up some good numbers yesterday. Much of the advance was thanks in part to Apple’s (AAPL, $601.10, up $15.53) dividend announcement but the Financial stocks did well again and continue to set new 52-week highs.
The Dow gained 6 points to end at 13,239 after trading to a high of 13,269 and testing a low of 13,208. The S&P 500 also added a half-dozen points to close at 1,410 after kissing a high of 1,414. The index traded down to 1,402 at the open but held 1,400. The Nasdaq was strong from start to finish as Tech jumped 23 points, or 0.75%, to settle at 3,078. Side Note: The Russell 2000 added over 7 points to finish at 837.77 but more importantly, the index finally broke above resistance which we talked about in our Weekly Wrap and yesterday morning.
American Express (AXP, $57.27, up $0.72) added another 1% and reached a fresh 52-week high of $57.50 on Monday. We said last week shares were headed to $60 when we recommended a call option trade to our subscribers. It is now up 438% in under a week.
Capital One (COF, $55.10, up $0.60) came within spitting distance of breaking its 52-week high of $56.26 set last May after closing at double-nickels and peaking at $56.19. We also have a near-term target of $60 for shares and subscribers are now up over 300% on our Capital One call option trade since last Tuesday.
Bank of America (BAC, $9.53, down $0.27) broke double-digits but didn’t set a new 52-week high. Shares did, however, trade to a high of $10.10 before the talking heads ruined it as they finished the session down 3%. The 52-week high is at $14.05 for BAC but we have been recommending the stock since it was at $5 back in December for our Weekly Wrap.
We were watching Apple’s WEEKLY options yesterday and we wanted to pull the trigger on the March 600 calls (AAPL120323C00600000, $10.75, up $2.60) but they opened at $12.20 and we were looking to send out a Trade Alert to buy them for under $10. The calls traded to a high of $14.40 but the premiums at the open were already built-in after the dividend announcement.
The calls did trade down to $6.95 but we didn’t want to get whipsawed because shares are in uncharted blue-sky territory. It is still an expensive trade and one we don’t often do but we are looking at ways to play Apple because they aren’t splitting the stock anytime soon. However, we won’t be trading 10 or 20 contracts because we would be risking a half or third of the profits we have already banked for the year. A 10 contract trade on an option priced at $10 will set you back $10,000 and 1 contract would cost $1,000.
This is another reason why we don’t typically trade options on stocks over $100 because it is so much easier to take smaller risks than to try and day trade Apple. We would rather buy 30 or 40 contracts on a 40 or 60 cent option or 10 or 20 contracts on options under $2.
Sure, if Apple goes to $650 by Friday, those March 600 Weekly call options will be worth $50 for nearly a 400% gain but if shares retreat and fall back below $600 and you aren’t out of the position, you will lose 100% of your investment. It is also easier to make 400% on a 40 cent option on a stock that moves from $53 to $57 which is what we have done with our American Express (AXP, $57.27, up $0.72) call option trade in just under a week.
This should help answer any questions on why we don’t trade Apple but we have been giving you powerful hints for those of you that want to play at the high-limit tables.
As we head to press, futures are showing a lower open and look like this: Dow (-63); S&P 500 (-8), Nasdaq 100 (-12).
Subscribers, check the Members Area for the updates as we have moved up the Hard Stops to lock-in gains on these two massive trades.
Tags: AAPL, Apple Weekly options, AXP, call options, COF
Posted in Apple, Financial Stocks, Market Analysis, Market Commentary | Comments Off