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Monday, January 11th, 2010
1:00pm (EST)
The market started off on a strong note but has given back some of its gains as Wall Street awaits Alcoa’s (AA, $17.25, up $0.23) earnings report. The Dow is currently up 10 points to 10,628 while the S&P 500 is off by 3 points to 1,142. The Nasdaq is showing a decline of 13 points and is trading at 2,304 as we head to press.
The VIX is down 0.56 to 18.36, Oil is up fractionally at $82.75 and Gold is up $16 to $1,155 an ounce.
Alcoa will report earnings after the bell and Wall Street is looking for a profit of 6 cents a share on revenue of $4.8 billion. In the year ago quarter the company reported a loss of 28 cents a share on revenue of $5.7 billion.
The options pits are exploding with traders placing bets but we are staying on the sidelines with this one. The January 17.50 calls (AAAT, $0.53, up $0.25) are up 90% and have traded nearly 30,000 contracts while the January 17.50 puts (AAMT, $0.77, down $0.22) have dropped over 20%. This means the market is pricing in a 7%-8% move in the stock and a straddle trade would cost you $1.30 at current prices. No thanks, we’ll pass.
We have been busy updating our portfolio positions this morning and we were able to get into two NEW trades at the open. We are also CLOSING one trade for a slight profit to make room as we like the prospects a little better on our newer trades.
Current subscribers, please check the Members Area for the important updates.
Tags: Alcoa 4Q earnings report, Alcoa Earnings, alternative investments, asset management, blog Wall Street, buying call options, buying put options, call option trading, chicken option trades, Covered Calls, financial, financial investment, funds, future option trading, futures trading, gold investing, guide to investment, guide to options, guide to options trading, hedge fund, hedge funds, how to invest, income, index funds, index options, invest, invest money, investing for dummies, investing market, investment, investment advisor, investment management, investment services, investment strategy, investments, journal Wall Street, momentum stock option trading, mutual investing, new Wall Street, on Wall Street, online option trading, online trading system, option call, option exchange, option investment, option picks, option price, option selling, option trade, option trade picks, option trading online, options, options alerts, options blog, options expiration, options mentoring, options newsletters, options signals, options track record, options trade, options trading, options trading strategies, private equity, put option trading, Rick Rouse, software options, stock, stock exchange, stock investment, stock market, stock market options, stock option trade pick service, stock option trading, stock price, stock quotes, stock share, stock trading, straddle option trades, strangle option trades, strategies options, support and resistance levels, the Wall Street, trading, trading option, trading options, triple-digit option trades, wall st, Wall Street, Wall Street article, Wall Street blog, Wall Street history, Wall Street online, wealth management
Posted in Company Commentary, Earnings, Gold, Market Analysis, Oil, VIX | Comments Off
Thursday, January 7th, 2010
9:00am (EST)
It is amazing the price swings stocks and options can go through. The best part about being an option trader is that there is always a trade out there. With so many sectors and ways to use options, the possibilities are endless as sectors get hold or cold and investors rotate money around. That is all there is to it, folks.
The key of course is figuring out where the money is going before the rest of the crowd…
We knew the start of 2010 would be a make or break month for the market and after a big pop on Monday, we have been flat for two days. The Dow finished Wednesday with a 2 point gain and closed at 10,573 while the S&P 500 added 1 point to settle at 1,137. The Nasdaq finished with a 7 point decline and went to bed at 2,301.
Despite the “lack of action” in the overall market there are several stocks making new highs and interesting stories developing in others. We keep a lot of notes and sometimes we find trades that look good on paper but don’t start off quite the way we would like.
For instance, we profiled a U.S Steel (X, $60.40, up $2.47) option trade back on September 28, 2009 when the stock was at $46 and when of our first sentences were “There are conflicting reports on just how strong demand is for steel but August showed steel output actually increased.”
We were trying to get a jump on an option trade because we felt U.S. Steel would set new highs by January 2010. However, we knew the road would be rocky.
The trade was slightly profitable but we shut it down because of Goldman Sachs came out and downgraded the sector the very next day. U.S. Steel was pushing $47. Here is what we told our subscribers in our Members Area:
“Folks, we got bit by the Goldman Sachs whammy as they downgraded the steel sector on Monday. I did not see the news until late in the afternoon. It was just a few weeks ago Goldman loved U.S. Steel and had a price target of $50 for the stock which was hit last week several times. It seems although production was up like I had mentioned, prices are falling.
I am normally not this quick to pull the trigger on a trade but Goldman’s words carry weight and that could send the stock back under $45. As such, raise the stop and lower the exit target. We may not reach $3 and if you can get out with a small gain or break even, CLOSE the trade. If the call options get cheaper, we may revisit the story.” (END)
A week later the stock was at $40 so we made the right call by getting out of the trade. It got even worse for U.S. Steel as the stock dropped to a low of $33 by the first week of November.
At the time, we profiled the January 55 calls (XAK, $5.85, up $2.30) which were at $2.55 but soared a whopping 70% yesterday as the stock set a new 52-week high. The options were probably under 50 cents and left for dead back in November but as you can see, options can and do go on wild price swings over the life of their expiration.
Steel got hot, then cold, and now it’s white hot again. Wall Street will take us out of some great trades from time to time but if you know how the system works then you can use it to you advantage. By that we mean sectors are always falling in and out of favor with the Street and the analyst’s upgrades and downgrades do move them. Sometimes these ratings help your trades and sometimes they don’t. We may have missed a double on our option trade but it just proves our “thesis” was right on.
Another stock waking up from the dead is JDS Uniphase (JDSU, $8.92, up $0.43) which also set a 52-week high yesterday. The company makes communications equipment and testing instruments, as well as optical components for machines such as photocopiers and scanners.
Ten years ago this stock would hit hit triple-digits and split like clockwork. Well, we don’t think it will hit triple-digits anytime soon but we do see double-digits. We are looking at a possible option trade for JDSU this morning but we want to do some more research before jumping in.
We already have quite a few open trades in our 2010 portfolio that are doing well but we don’t want to lose sight of a possible good trade…
A couple of drug stock making some noise this morning…Vivus (VVUS, $9.23, down $0.09) is up nearly 7% in pre-market trading to $9.90 and Dendreon (DNDN, $29.41, up $1.27) is over $30 again.
Dendreon’s 52-week high is $30.42 which has been hit twice meaning the “double-top” that has formed over the past six-months could be broken. The stock has traded between $25-$30 since April, after exploding from $4, and is due another breakout.
We have been mentioning the drug candidates for Vivus and we said this stock could hit double-digits quickly based on its strong pipeline. That could happen today.
Retailers will also be on the move as retail sales came in better-than-expected.
As we head to press, Dow futures are lower by 22 points to 10,494. Current subscribers, check the Members Area for today’s important trade updates.
Tags: alternative investments, asset management, blog Wall Street, buying call options, buying put options, call option trading, chicken option trades, Covered Calls, Dendreon, financial, financial investment, funds, future option trading, futures trading, gold investing, guide to investment, guide to options, guide to options trading, hedge fund, hedge funds, how to invest, income, index funds, index options, invest, invest money, investing for dummies, investing market, investment, investment advisor, investment management, investment services, investment strategy, investments, JDS Uniphase, journal Wall Street, momentum stock option trading, mutual investing, new Wall Street, on Wall Street, online option trading, online trading system, option call, option exchange, option investment, option price, option selling, option trade, option trade picks, option trading online, options, options blog, options expiration, options mentoring, options newsletters, options track record, options trade, options trading, options trading strategies, private equity, put option trading, Rick Rouse, software options, stock, stock exchange, stock investment, stock market, stock market options, stock option trade pick service, stock option trading, stock price, stock quotes, stock share, stock trading, straddle option trades, strangle option trades, strategies options, support and resistance levels, the Wall Street, trading, trading option, trading options, triple-digit option trades, U.S. Steel, Vivus, wall st, Wall Street, Wall Street article, Wall Street blog, Wall Street history, Wall Street online, wealth management
Posted in Company Commentary, Hot Stocks, Market Analysis, Market Commentary, Oil, Option Trades, Sectors, Trading Tips | Comments Off
Friday, December 11th, 2009
1:10pm (EST)
The bulls are looking to end the week on a high not as they have pushed the market higher for the third straight day. The interesting thing about today is that the dollar is higher. We have mentioned how the market has trended higher on a weaker dollar and that Wall Street has been worried about the “reversal trade”. Basically, it means that they believe once the dollar started to rebound the market would head lower. Well, we aren’t seeing that today and we have talked about how overblown this theory may be.
Of course, anything can happen but our end-of-year target for the Dow is 10,800. The Dow is currently at 10,418, up 12 points, so that would mean we are looking for another 400 points. That might be a reach for the bulls and next week could get interesting as there a number of key events we will be watching.
Gold is at a one-month low while oil is at a two-month low. The yellow metal is down another $10 to $1,117/ oz. while “black gold” is down 54 cents to $70 a barrel.
Well, it didn’t take long for Wall Street to come out with a rating for AOL (AOL, $23.45, down $0.07). Sanford Bernstein came out with an “Outperform” rating for yesterday’s IPO. We followed the company when it traded in the 90’s…that would be the 1990’s, but can’t see the logic in slapping an “Outperform” rating on a company Time Warner (TWX, $30.52, up $0.07) was dying to get rid of.
Elsewhere, Research In Motion (RIMM, $63.80, down $2.00) has been all over the map and bets are being placed on if the stock is either going to test its 52-week high of $88 or its recent low of $55. We have an option trade waiting in the wings Monday morning for this one…
It is a strangle option play and we think it has a chance of hitting a triple-digit return. The company will announce earnings next Thursday AND the December options expire the following day. Folks, the last time RIMM announced earnings the stock dropped from $82 to $68. If you are not a current subscriber, signup this weekend as we think this one trade could bring some holiday cheer.
We have updated our current trades before we head out for the weekend. We will be back Sunday night with the Weekly Wrap…
Tags: call option trading, chicken option trades, Covered Calls, momentum stock option trading, option trade picks, option trading online, options blog, options mentoring, options newsletters, options track record, put option trading, Rick Rouse, stock option trade pick service, straddle option trades, strangle option trades, support and resistance levels, triple-digit option trades
Posted in Company Commentary, Earnings, Gold, Oil | Comments Off
Sunday, December 6th, 2009
10:40pm (EST)
The bulls were off and running on Friday as the Dow opened with a triple-digit gain after Wall Street learned the unemployment rate fell to 10% in November from 10.2% in October before the bell. Most of the suit and ties figured the jobless rate would remain at 10.2% but a positive nonfarm payrolls report offered clues on Thursday.
The market also got a better than expected factory orders report 30 minutes after the open but before lunch the bulls were packing it up and heading out for the weekend. The markets then fluctuated the rest of the day on the strengthening U.S. dollar but still managed to finish the day and week higher.
The Dow was up 22 points to 10,388 and finished the week with a slight 0.8% increase. Not bad for five days worth of work but the Nasdaq carried the load as it settled at 2,194, up 21 for the day, and 2.6% for the week. The S&P 500 gained 6 to 1,105 and added 1.3%, respectively.
As you can imagine, some stocks rallied off the “good” unemployment report. Manpower (MAN, $56.77, up $5.39) soared 10% and hit a high of $58, Monster Worldwide (MWW, $16.83, up $1.80) popped 12% and Robert Half International (RHI, $25.74, up $2.56) jumped 11%.
Big Lots (BIG, $28.08, up $4.54) had a BIG Friday as shares zoomed nearly 20% after the national closeout retailer announced 3Q profits that more than doubled Wall Street’s expectations. The company earned $30 million, or $0.37 a share, compared with $12 million, or $0.15 a share, a year earlier. Wow. We were eyeballing this one in the Weekly Wrap last Sunday as an “earnings play” but felt nervous on recommending this one after our Aeropostale (ARO, $28.95, flat) debacle.
We should have stuck with our game plan as the Big Lots December 25 calls (BIGLE, $3.10, up $2.50) gained over 400% on Friday. Want one better? The BIG December 27.50 calls (BIGLY, $1.10, up $1.00) were up an astounding 1,000%! Now you know why we like earnings trades…
Elsewhere, Bank of America (BAC, $16.28, up $0.52) added 3% after it announced plans to repay $45 billion in TARP funds as it looks to find a new CEO. Hard to believe this stock was at $3 in March. We made some great option trades on the stock’s climb back to $20 which is where it ran out of gas back in October. We aren’t ready to jump back into this one but we are watching the developments.
Gold has a wild week and hit a record high of $1226 per ounce, but ended the week at $1161/ oz. after plunging $52 on Friday. We were preaching that the gold bugs were getting ahead of themselves last Wednesday when we heard “Gold $5,000″.
We don’t think the rally in gold is over but it only took two days after that retarded call for gold stocks to plunge. Barrick Gold (ABX, $42.68, down $4.16) fell 9%, Newmont Mining (NEM, $52.05, down $2.43) dropped nearly 5% and Goldcorp (GG, $42.27, down $2.88) sank 6%. Also, Freeport-McMoRan (FCX, $79.87, down $3.93), a play on copper and gold, slipped 4.7%.
Crude oil closed down $1 to $75 while natural gas gained 13 cents to $4.59.
We will be back in the morning with the companies reporting earnings this week and the current trade updates.
Tags: call option trading, chicken option trades, Covered Calls, momentum stock option trading, option trade picks, option trading online, options blog, options mentoring, options newsletters, options track record, put option trading, Rick Rouse, stock option trade pick service, straddle option trades, strangle option trades, support and resistance levels, triple-digit option trades
Posted in Commodities, Company Commentary, Gold, Market Analysis, Market Commentary, Oil, Option Trades, Weekly Wrap | Comments Off
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Amazon Showing Weakness, Exxon Pops
Monday, February 1st, 2010
12:30pm (EST)
The bulls are back today as they attempt to pump new money into the market after the drubbing they got in January. The Dow has powered higher for much of the day and is currently at 10,148, up 80 points. The S&P 500 is higher by 11 ticks and is at 1,085 while the Nasdaq is showing a 10 point gain and is at 2,158.
There are a number of stocks on the move today but Amazon.com (AMZN, $115.60, down $9.81) has got our attention. Shares are down 8% after opening at $123. The steady decline has been intense and the volatility is likely to pick up as the bulls try to keep this one from dipping to $100 which is where it looks headed from this side of the pond.
Exxon Mobil (XOM, $66.03, up $1.60) is getting some Wall Street love today as the company beat estimates again although profits dropped 23% versus last year’s quarter. Revenue came in at $90 billion as Exxon reported a profit of $6 billion, or $1.27 a share, versus Wall Street’s estimate of $1.19.
We have seen the market open with gains in the morning and have watched them get wiped away by the closing bell lately. February has not been a good month for the market over the last 5 or so years and we have talked about watching the Friday and Monday closes. The recent dip in the market might continue if we close lower today.
Tags: option picks, option signals, options alerts, stock options trading
Posted in Company Commentary, Earnings, Market Analysis, Market Commentary, Oil | Comments Off