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Thursday, September 22nd, 2011
1:15pm (EST)
We have been warning of volatility for weeks and we mentioned in our Weekly Wrap on Sunday night that the market could see a big move this week. As we started preparing this morning’s update (last night) futures were already pointing at a weak open here at home but when the overseas markets fell apart, we knew the bears would bite hard.
The bulls were in a quandary (love that word) as they pushed the upper end of the current trading range, and had their chips on the Fed to break through resistance. Problem is, the Fed is light on ammo so their Twist, or bluff should we say, was called by the bears.
All sectors are in the red and it’s no surprise the Financial stocks are having another rough outing. The sector tanked nearly 5% yesterday on the market’s pullback but more of it had to do with the knuckleheads at Moody’s (MCO, $30.55, down $1.21) downgrading the debt of Bank of America (BAC, $6.22, down $0.16), Citigroup (C, $24.65, down $0.87), and Wells Fargo (WFC, $23.33, down $0.38). Bank of America nearly traded to a 5-handle, which is our target to add the stock to our Weekly Wrap, after kissing a low of $6.03 today.
We have avoided the Financial stocks for awhile and we still think there will be more, new 52-week lows before all is said and done. The three aforementioned stocks are within spitting distance of setting new bottoms while our favorite name, JPMorgan Chase (JPM, $29.36, down $0.98) has reached a new 52-week low of $28.80 today.
When the right time to start nibbling is hard to say because these stocks do look so cheap but we mentioned over the summer we would need to see back-to-back quarters of solid growth before we stick our toes in the water. The next earnings cycle is in October so we are only a few weeks away before we can get a better idea on their outlook, and more importantly, their results. If the Financial stocks can beat Wall Street’s already lowered forecasts next month and again in January, then maybe we would start to get excited but right now we still don’t trust them.
As we head to press, the Dow is down 372 points to 10,752 while the S&P 500 is lower by 34 points to 1,133. The Nasdaq is off by 68 points to 2,470. All three indexes are dancing around below the bottom layers of support we mentioned this morning so the bulls will need to rebound in the second half to try and hold these levels.
Our portfolio is light and we are trying to be patient as we wait for a break out of the current trading range. Although we only have a few put options we are following, our Research in Motion (RIMM, $21.35, down $0.19) trade continues to do well as shares struggle to hold $20. We are up over 150% so far and looking for more.
Freeport-McMoRan (FCX, $35.59, down $2.96), a strangle trade that we profiled on our Watch List on Tuesday when shares were at $40, has hit a 52-week low of $30.97 today.
Quotes from our Members Area:
“Freeport could test $35, possibly $30, and we wanted no part of the calls once $40 fell. With copper at 9 month lows, it may take Freeport a while before it recovers. However, at $30, we may start nibbling on shares for our Weekly Wrap.” (END)
The October 35 puts (FCX111022P00035000, $4.15, up $2.05) were at 72 cents on Tuesday morning and had closed near a buck by the close. This morning the puts have hit a high of $4.90. Folks, that is a return of nearly 600%!
The beauty of the strangle trade is that we listed the January 50 calls (FCX120121C00050000, $0.40, down $0.10) which were at $1.05 to offset the risk if Freeport held $40 and rebounded. With shares at $40, we knew Freeport could move $5 either way, depending on what the market did after the Fed announcement. Although the calls are down 60%, they do not expire until January 2012, or 120 days from now.
The total cost of this trade would have been $1.75 on Tuesday morning had it been official and it was our “Twist” on the Fed’s “Operation Twist”. If the put options were closed today, the trade would have made well over 100% either way in just 3 days.
We aren’t ready to throw the towel in, yet, on the bulls, but we may need to add some more put option ideas to our Watch List if the bears can crack the bottom of this 2-month range or some more strangle trades like the ones we just profiled.
The line in the sand is S&P 500 1,125. If the index closes below this level, then there could be real trouble in the bulls’ camp. However, just like we saw the bulls fail at the top 24 hours ago, they could run into the same trouble as the bulls try to hold the trading range.
Our point is, this may be one of the BEST times ever to trade strangles and we will be introducing a few more of these types of trades in the coming weeks. We will probably do a video this weekend for those of you who signed up for our Trading Course and we are excited on some of the topics we are going to be covering.
If you really want to learn how the market works, and if you really want to learn charts and how to find trades that work in this kind of market then you will not want to miss this weekend’s video. We will have more details in tomorrow’s daily updates so stay tuned.
Subscribers, check the Members Area for the updates. The close should be interesting today…
Tags: bears, blue-chip stocks, bulls, Dow, Dow quotes, gold quotes, momentum, momentum options, Nasdaq, option mentoring, option trading course, RIMM put options, RIMM’s earnings miss, S&P 500, VIX
Posted in Company Commentary, Financial Stocks, Market Commentary, strangle option trades | Comments Off
Wednesday, June 8th, 2011
8:45am (EST)
The bulls were looking good for much of Tuesday’s session as they started strong out of the gate and held their gains for much of the session. Although there was some slippage as the day wore on, the possibility of ending a 4-session losing streak was right there at the finish line. However, we warned of Ben Bernanke’s speech just before the close and in the final hour of trading the bears started to make a move.
Bernanke has done all he can do with the printing presses but said the U.S. economy has not grown as quickly as the Fed has been expecting. He went on to say that he expects the economy to pick up steam in the back half of the year (naturally) and there are no plans for another round of quantitative easing (poker face?).
Of course, Big Ben also blamed temporary setbacks such as the earthquake in Japan and higher gas prices for the weakening U.S. economy but overall his comments were a drag and did nothing to help the bulls’ case.
The Dow was up nearly 90 points after the open and reached a peak of 12,178 before falling 19 points by the close to end at 12,070. We had expected a run up to 12,200 but we kind of felt early on the rally would fade. The market went out on its lows and is with spitting distance of breaking down below 12,000. These two areas will be crucial today as far as momentum. The blue-chips have now fallen for five-straight outings, their longest losing streak since August.
The S&P slipped a little over 1 point and settled at 1,285 but never really managed a threat to take back the 1,300 level. The index traded to a high of 1,296 but a test down to 1,275 and then 1,250 appear to be on the bears’ agenda.
The Nasdaq also fell 1 point and finished at 2,701 after leading the pack for much of Tuesday’s trading. Tech reached a high of 2,723 but folded like a cheap lawn chair into the close. The index did manage to hold 2,700 but there is still risk down to 2,650-2,625 over the near-term if this level fails.
The Financial sector once again rolled over and we have been saying all year their lack of leadership could hurt the bulls. After an initial pop in the morning, many of the familiar names we often discuss continued lower. Bank of America (BAC, $10.65, down $0.18), another 52-week low. Wells Fargo (WFC, $25.77, down $0.49) looks to be headed below its 52-week low of $23.
Futures are pointing towards a lower start this morning following yesterday’s weak close. Dow futures are down 50 points to 12,022 while the S&P futures are off by 6 points to 1,279. Nasdaq futures are off by 16 points to 2,257.
We may release a trade shortly after the open that is on our Watch List. If we can get our price, look for a Trade Alert before our regularly scheduled 1pm update. Subscribers, check the Members Area for the updates.
Tags: bac, call options, high beta stocks, Hot stocks, momentum options, Momentum stocks, option tips, options, options mentoring, options trading course, stock market options, weekly options, wfc
Posted in Financial Stocks, Market Commentary | Comments Off
Tuesday, June 7th, 2011
12:50pm (EST)
The bulls have managed a slight bounce from the recent 4-day selloff but their momentum has been limited ahead of Fed Chairman Ben Bernanke’s speech on the economy. The headlines won’t hit the market until 15 minutes before the close as he is in Hot-lanta, Georgia and is scheduled to speak at 3:45pm (EST).
The Financial stocks got a nice pop at the open following the beat down from Monday but are off their best levels of the day and are struggling to hold gains.
There is a meet-and-greet session at the White House today between Obama and Germany’s Chancellor, Angela Merkel, who got the red carpet treatment. The two will be talking about the growing relationship between the U.S. and Germany and how important their input is on global matters.
Oil is back under $100 ($98/ -$1) ahead of OPEC’s meeting on Wednesday as most experts anticipate increased production to continue. Gold is down $10 to $1,537 an ounce while silver is off by 22 cents to $36.56 an O.
As far as the major indexes, the Dow is higher by 60 points to 12,150 while the S&P is up 6 points to 1,292. The Nasdaq is showing a 7 point gain and is at 2,709.
We have added a few more possible trades to our Watch List as we wind down some older positions and protect profits in others. We are setting up nicely for our next “batch” of trades which could be quick hits if support fails. Subscribers, check the Members Area for the updates.
Tags: Ben Bernanke, call options, high beta stocks, Hot stocks, momentum options, Momentum stocks, option tips, options, options mentoring, options trading course, stock market options, weekly options
Posted in Economic News, Financial Stocks | Comments Off
Tuesday, June 7th, 2011
9:00am (EST)
We knew yesterday (and this week) was going to be a challenge for the bulls following 5-straight weeks of losses and Friday’s push towards lower support levels was a confirmation they would be tested on Monday. The bears grabbed the bulls by their horns shortly after the open but failed to tie them up as they fought back by lunchtime. However, shortly afterwards, the momentum picked up and by the closing bell the bears had gained their 4-straight session win.
Yesterday’s sell-off has the major indexes on the verge of their March lows as both the S&P and Nasdaq dropped over 1% for the day. The Dow managed to keep its losses to half of what its counterparts experienced but the landscape was still the same as it neighbors no matter how you dress it up.
The Dow fell 61 points to finish at 12,089 and traded to a low of 12,070 for the day. The crucial test will come at 12,000 and a break below this level could lead to 11,500. If the bulls hold, 12,200 and then 12,350 will act as short-term resistance.
The S&P 500 dropped 14 points and closed at 1,286 after kissing a low of 1,284. We have targeted 1,275 to the downside but said 1,250 could come into play if there is continued weakness. The 1,295-1,300 level is now short-term resistance followed by 1,325.
The Nasdaq got whacked for 30 points and ended at 2,702 and at its lows for the day. The index held 2,700 which we outlined as support but there is further weakness down to 2,650-2,625. Short-term resistance remains 2,775-2,800.
One sector that continues to get pounded harder than a football dummy is the Financials which fell 2%, on average. At some point these heavyweights will be a “Buy” but by looking at the carnage from yesterday, we would still wait to start nibbling.
Bank of America (BAC, $10.83, down $0.45) hit a fresh 52-week low of $10.75 and here is what we said about the stock on March 24, 2011:
“We talked a little about the Financial stocks yesterday and it’s the one sector that we want to trust, know is going to rebound, but when? Despite the fact that many of Banking stocks are ready to resume their dividend payouts or raise their dividend altogether, it seems they have to ask the Fed’s permission to do so.
Bank of America (BAC, $13.65, down $0.23) fell nearly 2% and traded down to $13.37 after the Federal Reserve rejected its plan to raise their dividend. The boys on the hill are allowing several major banks to increase their dividends after passing stress tests but BofA wasn’t one of them. The company said it expects to submit another request to increase its dividend this year so stay tuned.
Shares of Bank of America have been stuck in the $13-$15 range since the beginning of the year and are at the bottom. While there is still risk down to $10 on a market sell-off, shares will rebound eventually depending on your time horizon.
This situation reminds us of 2009 when the stock was at $5 and we suggested buying calls to take advantage of a strong rebound. Some of our recommendations returned incredible gains (567% and 433%) as Bank of America rebounded strongly and traded back above $10. (Check out our 2009 track record to see all of our results).
While it is hard to predict a bottom for a stock, shares of BofA are looking like a bargain. By no means do we think shares will double over the next month and they could trade even lower from current levels. What we do believe is that shares will trade $20 (6-12 months) at some point if they can report solid numbers in their upcoming quarter and afterwards. However, we are still on the fence with recommending an option trade on it.” (END)
At $10-and change, Bank of America is getting very attractive to lock away for a few years but there is now risk to the high single-digits for the stock.
We aren’t a big believer in Citigroup (C, $38.07, down $1.78) because it looks like a pig with lipstick following its 1-for-10 reverse stock-split. We do like JP Morgan Chase (JPM, $40.53, down $1.04) as well but it too has been hit hard.
The bank stock are set to rebound just a day later after news that broke late last night that the Fed supports a 3% surcharge instead of the 7% surcharge that had been expected. This means banks will have to keep less cash reserves on their books then expected which means they can loan more.
We have a lot more to cover in our Members Area including a Special Update which explains our trading strategies and style in better detail. We have a lot of new subscribers who have signed up for our option trading course so we have will also try release a NEW video in the next day or two. Thanks to everyone who purchased the 1-yr membership to the Weekly Wrap to get the course at no charge. Speaking of which, we were able to close one of our trades from that portfolio yesterday for a 9% profit.
Futures are pointing towards a higher open so let’s see if it holds.
Tags: call options, high beta stocks, Hot stocks, momentum options, Momentum stocks, option tips, options, options mentoring, options trading course, stock market options, weekly options
Posted in Financial Stocks, Market Analysis, Market Commentary | Comments Off
Wednesday, May 25th, 2011
9:10am (EST)
We thought there would be a little more bullish action yesterday following Monday’s selloff, but the bulls struggled to hold onto their early gains as the bears finished the day on top for the third-straight session.
Economic news started off with better-than-expected housing data but the market lost some steam after learning the Richmond Fed’s manufacturing index fell from an April reading of 10 to a May print of negative 6. After seven consecutive months of growth, this was not a good sign as it suggested business activity in the region is contracting.
Elsewhere, Financial stocks traded slightly higher despite news of the FDIC saying the number of problem banks in the U.S. is now up to nearly 900 for 2011. Bank of America (BAC, $11.46, up $0.04), Citigroup (C, $40.51, up $0.35) and Goldman Sachs (GS, $136.34, up $0.50) all saw a green close. More on Goldman in a minute…
As far as the market, the Dow slipped 25 points to settle at 12,356 and above our 12,350 downside target which happened to be the intraday low. There is still risk down to 12,200-12,000 over the short-term.
The S&P 500 fell a point and closed at 1,316 after kissing 1,313 and settled right between our 1,300-1,325 zone. The index reached a high of 1,323.72 which was enough to tease the bulls but a break below 1,300 could cause panic.
The Nasdaq caused us a little concern for the bulls as the index dropped a dozen points and finished at 2,746. We have been preaching the 2,750 level as serious support and it was the first close for Tech below this level in more than a month. The bears will now target 2,725-2,700 over the next few days.
Back to Goldman Sachs. From May 12 (quotes and chart from that day):
“Goldman Sachs (GS, $140.74, down $7.14) is down 5%, following an analyst downgrade from “Hold” to “Sell” and broke major support at $145. From the chart, you can see there is downside risk to $135 which is probably where they fall into a trading range. Shares have traded to a low of $140.66 after falling through the first wave of support at $145 which was prior resistance.
The next test could come in at $135 if the $140 level is violated.” (END)
Folks, Goldman touched a low of $139.25 the very next day and tried to hold the $140 level all last week. They did until Friday as shares fell over $4 to close at $134.99. On Monday, the stock traded to a low of $133.64 before finding buyers.
Although shares appear cheap, trading at just 15 times earnings, there could be further weakness in Goldman which seems to be losing its luster. The 52-week low is $129.50 for Golden Slacks and it just feels like the stock is going to hit new lows before there is a serious rebound.
Futures are pointing towards a lower open this morning so we expect our aforementioned targets to come into play today. Dow futures are down 33 points while the S&P futures are off 5 points. The Nasdaq futures are lower by 6 points.
Subscribers, check the Members Area for the updates.
Tags: call options, high beta stocks, Hot stocks, momentum options, Momentum stocks, option tips, options, options mentoring, options trading course, stock market options, weekly options
Posted in Financial Stocks, Hot Stocks, Market Analysis, Market Commentary | Comments Off
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Dow Plunges 4%, S&P Faces Critical Test
Thursday, September 22nd, 2011
1:15pm (EST)
We have been warning of volatility for weeks and we mentioned in our Weekly Wrap on Sunday night that the market could see a big move this week. As we started preparing this morning’s update (last night) futures were already pointing at a weak open here at home but when the overseas markets fell apart, we knew the bears would bite hard.
The bulls were in a quandary (love that word) as they pushed the upper end of the current trading range, and had their chips on the Fed to break through resistance. Problem is, the Fed is light on ammo so their Twist, or bluff should we say, was called by the bears.
All sectors are in the red and it’s no surprise the Financial stocks are having another rough outing. The sector tanked nearly 5% yesterday on the market’s pullback but more of it had to do with the knuckleheads at Moody’s (MCO, $30.55, down $1.21) downgrading the debt of Bank of America (BAC, $6.22, down $0.16), Citigroup (C, $24.65, down $0.87), and Wells Fargo (WFC, $23.33, down $0.38). Bank of America nearly traded to a 5-handle, which is our target to add the stock to our Weekly Wrap, after kissing a low of $6.03 today.
We have avoided the Financial stocks for awhile and we still think there will be more, new 52-week lows before all is said and done. The three aforementioned stocks are within spitting distance of setting new bottoms while our favorite name, JPMorgan Chase (JPM, $29.36, down $0.98) has reached a new 52-week low of $28.80 today.
When the right time to start nibbling is hard to say because these stocks do look so cheap but we mentioned over the summer we would need to see back-to-back quarters of solid growth before we stick our toes in the water. The next earnings cycle is in October so we are only a few weeks away before we can get a better idea on their outlook, and more importantly, their results. If the Financial stocks can beat Wall Street’s already lowered forecasts next month and again in January, then maybe we would start to get excited but right now we still don’t trust them.
As we head to press, the Dow is down 372 points to 10,752 while the S&P 500 is lower by 34 points to 1,133. The Nasdaq is off by 68 points to 2,470. All three indexes are dancing around below the bottom layers of support we mentioned this morning so the bulls will need to rebound in the second half to try and hold these levels.
Our portfolio is light and we are trying to be patient as we wait for a break out of the current trading range. Although we only have a few put options we are following, our Research in Motion (RIMM, $21.35, down $0.19) trade continues to do well as shares struggle to hold $20. We are up over 150% so far and looking for more.
Freeport-McMoRan (FCX, $35.59, down $2.96), a strangle trade that we profiled on our Watch List on Tuesday when shares were at $40, has hit a 52-week low of $30.97 today.
Quotes from our Members Area:
“Freeport could test $35, possibly $30, and we wanted no part of the calls once $40 fell. With copper at 9 month lows, it may take Freeport a while before it recovers. However, at $30, we may start nibbling on shares for our Weekly Wrap.” (END)
The October 35 puts (FCX111022P00035000, $4.15, up $2.05) were at 72 cents on Tuesday morning and had closed near a buck by the close. This morning the puts have hit a high of $4.90. Folks, that is a return of nearly 600%!
The beauty of the strangle trade is that we listed the January 50 calls (FCX120121C00050000, $0.40, down $0.10) which were at $1.05 to offset the risk if Freeport held $40 and rebounded. With shares at $40, we knew Freeport could move $5 either way, depending on what the market did after the Fed announcement. Although the calls are down 60%, they do not expire until January 2012, or 120 days from now.
The total cost of this trade would have been $1.75 on Tuesday morning had it been official and it was our “Twist” on the Fed’s “Operation Twist”. If the put options were closed today, the trade would have made well over 100% either way in just 3 days.
We aren’t ready to throw the towel in, yet, on the bulls, but we may need to add some more put option ideas to our Watch List if the bears can crack the bottom of this 2-month range or some more strangle trades like the ones we just profiled.
The line in the sand is S&P 500 1,125. If the index closes below this level, then there could be real trouble in the bulls’ camp. However, just like we saw the bulls fail at the top 24 hours ago, they could run into the same trouble as the bulls try to hold the trading range.
Our point is, this may be one of the BEST times ever to trade strangles and we will be introducing a few more of these types of trades in the coming weeks. We will probably do a video this weekend for those of you who signed up for our Trading Course and we are excited on some of the topics we are going to be covering.
If you really want to learn how the market works, and if you really want to learn charts and how to find trades that work in this kind of market then you will not want to miss this weekend’s video. We will have more details in tomorrow’s daily updates so stay tuned.
Subscribers, check the Members Area for the updates. The close should be interesting today…
Tags: bears, blue-chip stocks, bulls, Dow, Dow quotes, gold quotes, momentum, momentum options, Nasdaq, option mentoring, option trading course, RIMM put options, RIMM’s earnings miss, S&P 500, VIX
Posted in Company Commentary, Financial Stocks, Market Commentary, strangle option trades | Comments Off