Get RSS Feed
9:05am (EST)
The market struggled to hold its early gains on Monday and finished mixed after the bulls lost their enthusiasm.
The bulls were able to squeeze a fraction of a point for the Dow as it finished at 11,205 after trading as high as 11,258. If it weren’t for Caterpillar’s (CAT, $71.65, up $2.87) powerful results, the Dow would have lost over 22 points which is how much the shares accounted for in the index yesterday.
The S&P 500 fell 5 points to finish at 1,212 but above 1,210 which had been short-term resistance. The index kissed a new 52-week high of 1,219 earlier on Monday and is still above its 10-day moving average.
The Nasdaq also finished lower as it slipped 7 points to settle at 2,522. The Tech-heavy index also hit a fresh intra-day high of 2,535 before it gave up its gains.
There were pockets of strength yesterday and one sector that continues to outperform are the Entertainment/ Movie stocks.
Imax (IMAX, $21.13, up $1.02) continues to amaze us and set another 52-week high. We have been on this company like grass on dirt when shares were at $3 a few years ago and when they broke $10 back in October we mentioned shares could run to $20+. Bingo.
Netflix (NFLX, $108.17, up $8.44) has also blown past our price target of $100 which we set back in November when the stock was in the$50’s and nobody else on Wall Street would touch it.
And what about Walt Disney (DIS, $37.04, up $0.25) which we’ve flirted with a few times by playing call options? That stock also set a new annual high yesterday.
This sector remains white-hot and we think there will be some M&A activity over the next few months that could take this sector even higher.
Turning our focus to the Financial stocks, Goldman Sachs (GS, $152.03, down $5.37) will take center stage today after being blamed for dumping 100’s of billions of dollars of toxic assets into everyone’s lap.
Testimony begins today that will bring Goldman’s CEO, Lloyd Blankfein, and other key executives before Congress. Somewhere Barney Frank is licking his chops. This is going to be great drama and we will probably tune-in to catch some of the action.
As we head to press, futures are pointing towards a slightly lower open. The Dow futures are off by 11 to 11,140 while the S&P 500 futures are down by 6 points to 1,202. Nasdaq 100 futures are off by 5 to 2,046. Subscribers, check the Members Area for the updates.
Education Stocks Feeling the Heat
Tuesday, August 17th, 2010
9:00am (EST)
The market ended mixed on Monday as the bulls and bears battled to a draw on what was the second-lightest volume day of the year. The bears held an early advantage as the major indexes dropped nearly 1% after the open but the bulls managed a steady comeback the rest of the day.
As we enter the dog days of summer, we expected volume to dry up, but yesterday’s action wasn’t a good sign if you are bullish. Trading has been light in recent weeks but the bulls will need volume to pick up if they expect to have a sustained rally.
The Dow traded to a low of 10,209 before finishing the day down 1 point at 10,302. We have been mentioning that 10,200 would act as the first layer of support with a possible test of 10,000 should a break below this level occurs. Overhead resistance is at 10,400.
The S&P 500 was up fractionally and settled right where it started the day at which was 1,079. The index traded down to our 1,070 target, making a low of 1,069, which could clear the way for a test of 1,050 again. Short-term resistance remains at 1,100 for the bulls.
The Nasdaq continues to be the most volatile of the major indexes and has been making the bigger moves of late. The index added 8 points to close at 2,181 but touched a low of 2,155. Our near-term targets are 2,150 and then a possible test to 2,050. Tech traded to a high of 2,193 but continues to have trouble with the 2,200 region.
One sector on the move yesterday were the Education stocks which got slammed over regulatory uncertainty. There are concerns the government will impose tighter controls on student loans and Wall Street has been downgrading these stocks in a hurry.
Corinthian Colleges (COCO, $5.22, down $1.44) tanked over 20% and traded 40 million shares, or 10x normal daily volume. The August 7.50 put options (COCO100821P0007500, $2.45, up $.135) zoomed 120% as the stock made a fresh 52-week low.
Strayer Education (STRA, $163.26, down $36.75) got slammed for an 18% loss but the August 155 puts (STRA100821P00155000, $1.75, up $1.20) soared nearly 220%.
Capella Education (CPLA, $60.94, down $9.26) fell 13% but touched a low of $56.44 before rebounding. Now you know why we trade options…
We have been mentioning the Education stocks, specifically, Apollo Group (APOL, $40.98, up $2.04) which bucked the trend yesterday, and their shady business practices for nearly two years now and this bubble is finally popping.
We tried playing options on Apollo back in May and lost 16% after shutting the trade down due to volatility. At the time, shares were at $55 and we knew the stock was setting up to test 52-week lows. We were just a little early at the time but the chart said it all.
The good news is that we took another look at Apollo over the weekend and the selling pressure might not be over. If shares break below $38, we could quickly see a run to the lower $30’s. Currently, the 52-week low is $38.39 and some support should come in at $35, but over the next month or two this stock could lose another 25%.
Futures are pointing towards a slightly higher open despite some less-than-stellar economic news which we will go over this afternoon. Dow futures are higher by 63 points to 10,336 while the S&P 500 futures are up 10 points to 1,087. The Nasdaq 100 futures are showing a 12 point pop and are at 1,832.
Tags: APOL, COCO, CPLA, option picks, stock options trading, STRA
Posted in Company Commentary, Market Analysis, Sectors | Comments Off