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Monday, April 11th, 2011
12:45pm (EST)
The market is mixed as we head towards the second half of trading.
The Dow is up 16 points to 12,396 while the S&P 500 is lower by a point to 1,327. The Nasdaq is down 7 points to 2,773.
Tech has been weak as shares of Apple (AAPL, $330.67, down $4.39) and Google (GOOG, $576.03, down $2.13) weigh on the Nasdaq while the Financial stocks have helped the blue-chips.
In M&A news, Level 3 Communications (LVLT, $1.60, up $0.16) will acquire Global Crossing (GLBC, $23.29, up $8.49) in a stock-for-stock deal worth $3 billion. The combined companies will form a unique global services platform operated by fiber optic networks on three continents which are connected by extensive undersea facilities.
Global Crossing shareholders will get 16 shares of Level 3 common stock for each share of Global Crossing common stock or preferred stock that they own. Based on Level 3’s closing stock price from last Friday, the transaction is valued at $23 a share for each Global Crossing common or preferred share.
We have been following Global Crossing for nearly a decade and recently had the stock on our Watch List. On March 4, here is the trade we were watching and our thoughts (quotes are from that day):
Global Crossing (GLBC, $15.40, up $0.20)
September 20 calls (GLBC110917C00020000, $0.70, flat)
Thoughts: The bid is 45 cents, the “ask” is 70 cents but these options are so thinly traded. The stock doesn’t trade the volume we would like to see either but we think shares are headed to $20. (END)
Well, the Global Crossing September 20 calls (GLBC110917C00020000, $4.80, up $4.40) have surged today. These options are still thinly traded but hit $7 this morning at the open. We would have loved to have made this an official recommendation but the lack of volume kept us on the sidelines.
We have had the same problems getting good fill prices on options with Boston Beer Company (SAM, $91.01, down $0.49) whose shares we have been following since the $50’s and Diamond Foods (DMND, $60.01, down $1.60), a stock we have been covering since the low $40’s.
The point is, when you see strong companies growing their businesses and gaining market share, then sometimes it is okay to pay a little more for the options. We were hoping for a little more volume in these options but it is a lesson learned. Next time, we will go with our instincts.
The good news is we have a few trades today that are showing solid gains and we have quite a few ready to go if the market can break resistance. We have also listed some put options on our Watch List to take advantage of a pullback but it is too early to tell which way this battle is going to shake out.
Subscribers, check the Members Area for the updates.
Tags: (LVLT), call option trades, chicken trades, Global Crossing (GLBC), Level 3, momentum options, Momentum stocks, options trading course, put options, stock market options, stocks that trade weekly options, strangle option trades, weekly options
Posted in Financial Stocks, Market Analysis, Mergers and Acquisitions | Comments Off
Tuesday, April 5th, 2011
9:00am (EST)
We were hoping for a little more momentum on Monday following last week’s push to the top of resistance, but the market was choppy all day and stayed in a tight range to end mixed.
The bulls were hoping Ben Bernanke would provide a spark but he was tight-lipped and did not make any comments on the Fed’s $600 billion government bond-purchase program. We were hoping he would at least say something about the U.S. economy in his speech but not a word was mentioned about the 8.8% unemployment rate or the 216,000 jobs that were added.
Despite the lack of backup, the bulls managed to make a small push higher without giving up ground which was a good sign.
The Dow managed to close at a 52-week high by adding 23 points and finished at 12,400. It was the blue-chips first close above 12,400 since June 2008. Our near-term target remains 12,500-12,600 while support comes in at 12,200.
The S&P 500 was up a half-point and settled at 1,332.87 but faced resistance at 1,334 which represents a double off the March 2009 low. The index traded as high as 1,336 but we are watching this level carefully for clues on a push to 1,350. Support is at 1,325 so we are right in the middle of a breakout or breakdown.
The Nasdaq failed to clear and close above 2,800 again and ended with a half-point loss at 2,789. Our near-term target remains 2,850 but Tech is struggling.
After the bell yesterday, Texas Instruments (TXN, $34.11, down $0.12) said it would be acquiring National Semiconductor (NSM, $14.07, down $0.16) for $6.5 billion, or $25 a share. The deal is one of the industry’s largest in years and could lead to further consolidation. Shares of NSM closed at $24.30 in after-hours trading and nets shareholders a 75% premium versus Monday’s closing price.
Other chips stocks rallied in extended trading; Nvidia (NVDA, $17.55, down $0.65) was up 45 cents to $18 while Broadcom (BRCM, $38.08, down $0.28) was also higher by 2.5% to $39.02.
Despite the M&A news, futures are pointing towards a lower open. Dow futures are down 23 points to 12,314 while the S&P 500 futures are lower by 4 points to 1,325. The Nasdaq 100 futures are showing a decline of 15 points and are at 2,326.
Tags: call option trades, chicken trades, momentum options, Momentum stocks, NSM, put options, stock market options, stocks that trade weekly options, strangle option trades, TXN, weekly options
Posted in Market Analysis, Mergers and Acquisitions | Comments Off
Monday, March 21st, 2011
1:00pm (EST)
The bulls have continued last week’s late push on merger-and-acquisition (M&A) news which has helped push the major indexes back towards resistance. The market is off its session highs but only slightly despite some nasty housing numbers. Existing home sales for February came in at 4.88 million units, which was less than the 5.05 million that had been expected.
The news was released shortly after the market opened but the bulls ignored it and have even pushed the Homebuilding sector higher today. KB Home (KB, $13.31, up $0.22), which reports earnings this Friday, and Lennar (LEN, $19.79, up $0.12) have come off their highs but are seeing some action.
As far as M&A news, AT&T (T, $28.37, up $0.43) and Deutsche Telekom AG got the ball rolling early as they announced a $39 billion, cash-and-stock deal on Sunday in which AT&T will acquire T-Mobile from the company. In return, Deutsche Telekom will now own 8% of AT&T but the merger could face some headwinds with regulatory approval which is expected to take up to a year.
Elsewhere, Charles Schwab (SCHW, $17.44, down $0.11) has agreed to buy optionsXpress (OXPS, $17.70, up $2.37) for $1 billion as Chuck looks to expand his company’s options. Schwab will pay a little over 1 share of its common stock for each share of optionsXpress stock which, based on Friday’s closing price, gets the bid up to $17.91. Both brokerage firms will initially retain their separate brand identities and the deal is expected to close in the third quarter.
As far as the market, things are also looking up although the bulls need to close above resistance to keep the momentum going this week.
The Dow is up triple-digits, or 182 points, to 12,040 while the S&P 500 is higher by 19 points to 1,298. We are looking for a close above 12,000 for the Dow and 1,300 for the S&P. The Nasdaq is showing a 48 point gain and is at 2,691. The index has traded up to 2,699.70 but has once again failed to clear 2,700.
We have a lot to cover in our Members Area today, including a NEW TRADE! We think we have found a “safe” trade that should do well through this market volatility as shares continue to set new 52-week highs.
Tags: Charles Schwab, KB Home, NYSE< KBH, optionsXpress, OXPS
Posted in Market Commentary, Mergers and Acquisitions | Comments Off
Monday, March 7th, 2011
1:05pm (EST)
The market opened slightly higher and was showing a little momentum as oil came off its highs of the session. There was news that Libyan President Gadhafi was looking to negotiate a deal with rebel forces for his safe departure from the country but those rumors haven’t been confirmed. This gave the bulls some hope the crisis could be resolved but the bears are attacking as the market is now trading well off its highs and is negative territory as we head into the second half of trading.
In Merger & Acquisition (M&A) news, Western Digital (WDC, $33.56, up $3.55) is up over 12% after the company announced it was acquiring Hitachi’s hard-disk drive business for nearly $4.3 billion in cash and stock. Normally, when a company buys out another, the acquiring company’s stock price will head lower but this deal is a little different. Western Digital will pay $3.5 billion in cash but is giving Hitachi 25 million of its shares, or 10%.
We did a big write-up in our Weekly Wrap on Western Digital in mid-January
“As for Western Digital, its HDDs (hard disk drive) are used in desktop computers, notebook computers, enterprise storage products, servers, workstations, video surveillance equipment, networking products, digital video recorders, satellite and cable set-top boxes, and external storage appliances. It also offers hard drives as stand-alone storage products for personal data backup. The iMac uses its HDD. And Mac sales are projected to double. The company also makes SSDs (solid state drives).
Although HDDs may eventually get replaced by SSDs, that won’t happen for at least several years. SSDs are primarily used in small devices such as the iPhone, iPod, and iPad. The Macbook Air is currently one of the few laptops using SSDs. Other laptops and desktops still use HDDs. Price for HDDs is still cheaper than SSDs of the equivalent memory and storage. And that will stay that way for some time with prices for both dropping. Storage demand is expected to stay strong with the increasing need for servers to store all the content being shared or steamed over the internet. PC demand is also expected to grow, too.
The technical picture also shows that a strong move upward may be developing.” (END)
The deal will give Western Digital’s a market share of 50% for HDD’s and pad its lead as top dog. Seagate Technologies (STX, $13.85, up $1.41) is second and has 30% covered, so, in essence, these two companies will own over three-quarters of the market pie. Don’t be surprised if some anti-trust issues pop-up.
As we head to press, the Dow is lower by 78 points to 12,091 while the S&P 500 is off by 12 points to 1,309. The Nasdaq is showing the most weakness and is down 49 points to 2,735.
Tags: best option trader, best trading signals, call options, chicken trade, Covered Calls, financial options advice, momentum options, Momentum stocks, option quotes, option signals, Option Trades, option trading, options broker, options mentoring, options newsletter, options prices, put options, stock broker, stock price, stock quotes, strangle option trade, WDC, winning option trades
Posted in Hot Stocks, Mergers and Acquisitions | Comments Off
Monday, January 3rd, 2011
9:00am (EST)
We covered a lot of this week’s outlook in our Weekly Wrap last night and the targets from last week are still intact. The bulls are looking for Dow 11,600-11,700; S&P 500 1,275; and Nasdaq 2,700 over the near-term. We start 2011 at 11,577; 1,257; and 2,652, respectively. If the aforementioned targets are broken then we could see Dow 13,000; S&P 500 1,300; and Nasdaq 3,000.
In our Weekly, we mentioned some factors that could get the bulls motivated over the next few weeks but let’s not put the horse before the cart just yet. The bears will be looking for a fresh start and we haven’t forgotten about them, so, we will also be watching for any weakness over the next few weeks for signs of a pullback, if there are any. With 4Q and yearend earnings coming up in two weeks, the battle could be just beginning as companies confess their results.
One stock we have to mention this morning is Imax (IMAX, $28.07, up $1.21) which hit another 52-week high on Friday of $32.30. Many of our long-term subscribers know we were one of the first publications, maybe the first, to say Imax would be a double-digit stock when shares were under $3 just two years ago. At the time, we said 3D technology was starting to get better and so would the movies.
When the stock broke $10 on the strength of Avatar in 2009, we said shares would double again and reach $20. We had a feeling Imax would continue higher throughout 2010 on the continued strength of 3D movie sales but the company is more than just a “chain” of theaters.
If you look at our track records over the years, you will see we have profiled some sweet triple-digit options returns on Imax but we really should have told our subscribers to buy 1,000 shares as well, along with playing the options. By now, you would be approaching a 10-bagger, or a $25,000 profit.
This is one of the reasons we started more coverage of small-cap and low priced stocks in our Weekly Wrap. Our goal is to provide you more ways of using options but sometimes it just makes sense to buy a stock instead of the options on a company if you really feel they are going to be a “game-changer” or the stock is ridiculously cheap, or a turnaround story. (Sirius XM Radio, SIRI, $1.63 was another double we missed by not telling you to buy the stock). Imax has been ALL three and shares got a nice pop on renewed takeover chatter.
Sony (SNE, $35.71, up $0.14) and Walt Disney (DIS, $37.51, up $0.03) were the latest suitors and Imax would make a nice “division” for either company. Although we don’t see anything happening soon, we do feel there is a good chance Imax gets a takeover bid in 2011.
As we head to press this morning, Dow (+86) S&P 500 (+10), and Nasdaq (+22) futures are up. Folks, we are going to have a BIG open this morning to the upside which bodes well for our portfolio.
Special Notice: For those of you who ordered a 1-year subscription to our Daily or Weekly Wrap newsletters, your options course, How to Trade Options on Momentum Stocks, will ship in the next 24-48 hours. The course also includes our Momentum Stocks Watch List. In addition to the trading manuals, we offer ongoing videos that help explain some of the situations we talk about in the course.
We made a video last night which should be in your email inbox sometime this morning. It covers a few companies reporting earnings this week as well as a look back on U.S. Steel (X, $58.42, down $0.60) which has moved 20% since breaking strong resistance at $50 back at the start of December.
Tags: NASDAQ: IMAX, NYSE: DIS, NYSE: SNE, siri
Posted in Hot Stocks, Mergers and Acquisitions | Comments Off
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M&A Activity Helps Bulls Push Resistance
Monday, March 21st, 2011
1:00pm (EST)
The bulls have continued last week’s late push on merger-and-acquisition (M&A) news which has helped push the major indexes back towards resistance. The market is off its session highs but only slightly despite some nasty housing numbers. Existing home sales for February came in at 4.88 million units, which was less than the 5.05 million that had been expected.
The news was released shortly after the market opened but the bulls ignored it and have even pushed the Homebuilding sector higher today. KB Home (KB, $13.31, up $0.22), which reports earnings this Friday, and Lennar (LEN, $19.79, up $0.12) have come off their highs but are seeing some action.
As far as M&A news, AT&T (T, $28.37, up $0.43) and Deutsche Telekom AG got the ball rolling early as they announced a $39 billion, cash-and-stock deal on Sunday in which AT&T will acquire T-Mobile from the company. In return, Deutsche Telekom will now own 8% of AT&T but the merger could face some headwinds with regulatory approval which is expected to take up to a year.
Elsewhere, Charles Schwab (SCHW, $17.44, down $0.11) has agreed to buy optionsXpress (OXPS, $17.70, up $2.37) for $1 billion as Chuck looks to expand his company’s options. Schwab will pay a little over 1 share of its common stock for each share of optionsXpress stock which, based on Friday’s closing price, gets the bid up to $17.91. Both brokerage firms will initially retain their separate brand identities and the deal is expected to close in the third quarter.
As far as the market, things are also looking up although the bulls need to close above resistance to keep the momentum going this week.
The Dow is up triple-digits, or 182 points, to 12,040 while the S&P 500 is higher by 19 points to 1,298. We are looking for a close above 12,000 for the Dow and 1,300 for the S&P. The Nasdaq is showing a 48 point gain and is at 2,691. The index has traded up to 2,699.70 but has once again failed to clear 2,700.
We have a lot to cover in our Members Area today, including a NEW TRADE! We think we have found a “safe” trade that should do well through this market volatility as shares continue to set new 52-week highs.
Tags: Charles Schwab, KB Home, NYSE< KBH, optionsXpress, OXPS
Posted in Market Commentary, Mergers and Acquisitions | Comments Off