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Thursday, January 19th, 2012
1:10pm (EST)
The bulls got a bevy of good news before the bell this morning which led to a good start for the market as the major averages continue to push the July 2011 highs. Bank of America (BAC, $7.11, up $0.31) is giving the Financial stocks a lift after beating Wall Street’s revenue expectations. The suit-and-ties were floored when the company posted a profit of 15 cents a share on revenue of $25.1 billion which beat their projection of $24 billion in revenues. We have been pounding the table on the stock when shares were at $5 back in December as it is a current member of our Weekly Wrap Covered Call portfolio which could start January at 10-0.
Economic news was fantastic as Initial Claims fell to 352,000 versus expectations for 384,000 while Continuing Claims were 3.43 million versus forecasts for 3.6 million. Elsewhere, Consumer Prices were unchanged which was below calls for an increase of 0.1%. The core reading, excluding food and energy, matched the hype and was up 0.1%. And finally, from the crib, Housing Starts dropped for the month of December, coming in at 657,000 versus expectations for 680,000 while Building Permits matched forecasts.
Google (GOOG, $636.00, up $3.09) will confess their quarterly numbers after the bell and shares have a history of making huge moves after they announce earnings. Of course, this is option expiration week and the January options are still in play so let’s take a look at the stock and some of the options.
The last time the company reported their quarterly results (mid-October 2011), shares surged $32-and change from $559 to $591, on better-than-expected numbers. The high that day was $599. In July 2011, Google also beat estimates and zoomed from $529 to $597 and kissed a high of $600.
A 10% move in Google would equate to a 63-point move in the stock and we could see that on an earnings miss to the downside. However, the upside may not be quite as huge if it is not a blowout quarter and could only be 5% or less which is still $30 but is it enough to create a possible strangle option trade?
The Google January 700 calls (GOOG120121C00700000, $1.10, down $0.20) and the January 575 puts (GOOG120121P00575000, $0.90, down $0.70) would cost $2 together and are a possibility but the stock would need to be at $702 or $573 for us to break even. At $704, or $571, the trade would double but again, the options expire tomorrow.
This is NOT an official option trade recommendation but we wanted to show you how strangle option trades work since we have a ton of new subscribers. The risk/ reward on this trade doesn’t look great and it may be better off to SELL these options but that is another strategy altogether and one we certainly don’t recommend on a $600+ stock.
We will take a look at these options again on Friday to see where they are at and we would like to see a blowout quarter which would help the Tech sector keep its momentum.
As we head to press, the Dow is up 14 points to 12,593 while the S&P 500 is higher by 5 points to 1,313. The Nasdaq is showing a pop of 20 points to 2,790.
As usual, we have a number of open trades and there is a lot to talk about so let’s go see where we are at. Microsoft and IBM and Intel also report after the bell so tomorrow could be explosive for either the bulls or bears depending how things go. Subscribers, check the Members Area for the updates.
Tags: goog earnings, momentum options, Momentum stocks, stock option picks
Posted in Earnings, Market Analysis, strangle option trades, Strategies | Comments Off
Monday, November 28th, 2011
9:00 (EST)
The market continued its recent slide as the bears had their best bull feast in nearly 80 years as Wall Street fell 5% last week. The recent selling pressure became much more serious as all of the indexes fell below their 50-day moving averages (MA) with the bears stretching their winning streak to seven-straight sessions.
The headline news read like a Vegas betting parlor as a number of European countries face further risks of defaulting. Germany was the latest country which showed a chink in the armor after trying to raise $6 billion euro but was only able to raise a little over half of it. Spain also went to the well and was successful in its bond auction but the yields came at a hefty price. Italy faces a huge crisis in 2012 if they can’t raise more dough, and they are trying, but it’s costing them an arm-and-leg.
The news here at home continues to come in better-than-expected and this week will be big with a number of month-end reports due out. As far as the charts, they have been stretched which often happens when headline news trumps the technical picture. The bears have clearly had the advantage and at some point there will be a rebound but until Europe can figure out its mess, the market will be held hostage.
The Dow slipped 26 points, or 0.2%, to finish at 11,232 on Friday’s shortened session. We went into the week looking for 11,600 to hold but that level was taken out on Monday. Our next downside targets were 11,400 and then 11,200, which held, but there is risk down to 10,800 this week if current levels don’t hold. If the bulls can get past 11,400 (black line, purple circles) then they could make a run back towards 11,600 and then 12,000 but the news has got to be awfully good. For the week, the Dow dropped 564 points, or 4.8%, and is now down 346 points, or 3% YTD…
************************
If you are not a subscriber but would like to read more about where the market is headed and to take a closer look at our chart work along with our current trades, please click here. Since early August we have made 48 recommendation, both calls and puts, and have hit on 40 out of 48 trades for a winning percentage of over 80%! Some of our recent winners include:
+169% on Joy Global (JOYG) call options in 2 days
+137% in Research In Motion (RIMM) put options in 3 weeks
+130% in Spreadtrum Communications (SPRD) call options in 4 weeks
+164% in FedEx (FDX) put options in 6 days
+184% in Goldman Sachs (GS) put options in 5 days
+191% in O’Reilly Automotive (ORLY) call options in 17 days
+100% in VMWare (VMW) call options in 4 days
We are one of the fastest growing stock options trading advisors on the internet. We offer powerful call and put option trades aimed at triple-digit returns for our Daily newsletter. Our Weekly Wrap Covered Call Portfolio strides for double-digit returns on a monthly basis. Sign-up now and receive access instantly!
Futures are pointing towards a strong start for today’s session and look like this: Dow (+255), S&P 500 (+34), Nasdaq 100 (+53). We recommended 4 new trades on Friday and after two weeks of being patient and building new positions, hopefully we get the surge we have been expecting. Subscribers, check the Members Area for the updates.
Tags: Dow, Momentum stocks, stock options trading advisors
Posted in Apple, BioTech, China, Commodities, Company Commentary, Covered Calls, Earnings, Economic News, Entertainment Stocks, European Union (EU), Financial Stocks, Futures, Gold, Google, Hot Stocks, IPOs, Market Analysis, Market Commentary, Mergers and Acquisitions, Money Management, Oil, Option Trades, Rick's Account, Sectors, Stock Earnings, strangle option trades, Trade Update, Trading Psychology, Trading Tips, Uncategorized, VIX, Watch Lists, Yahoo / Microsoft | Comments Off
Wednesday, October 26th, 2011
8:45am (EST)
Tuesday’s action showed nervousness by the bulls as they fretted over growing sentiment on Wall Street that the finance leaders of the European Union (EU) are having difficulty on agreeing what is the best course of action to deal with the debt crisis. Meanwhile, there were a number of disappointing corporate earnings announcements and economic news was less than stellar which weighed on the indexes. As a result, the bulls took a breather yesterday as Europe’s timetable to come up with a plan to deal was pushed back once again.
We expected some choppiness as the indexes battled their 200-day moving averages which can be hard to clear if momentum fades but the market held support for the most part. There will still be an EU meeting today (their 14th!) but there will be no official game plan in place by today’s close unless a miracle happens.
The Dow fell 207 points, or 1.7%, to settle at 11,706. The index opened in the red and hit a low of 11,682 as it slipped below the 11,800 level which will now serve as short-term resistance. The next area of support for the blue-chips is at 11,600 and then 11,350 if there is further selling pressure.
The S&P 500 gave back 25 points, or 2%, to finish at 1,229. The index slipped to a low of 1,226 which was still above support at 1,225. Should this level fall, the next test could be down to 1,200 while 1,250 remains resistance.
The Nasdaq dropped 61 points, or 2.3%, to close at 2,638. We were looking for 2,650 to hold but the low came in at 2,633. There is further risk down to 2,600 and then 2,550 if Tech weakens from here. The bulls are still shooting for a close above 2,700.
We have covered some interesting trades over the past month and although we are working on a 20-trade winning streak, we missed another great opportunity yesterday even though shares were on our Watch List a few weeks ago. As we have seen, and we will see again today, when momentum stocks lose their luster they can get pummeled.
First Solar (FSLR, $43.27, down $14.68) shares got canned for a 25% loss on Tuesday following the abrupt change in CEO’s. There was no specific reason given for the switch as the company said the move was effective immediately. Usually when something of this magnitude happens, other skeletons come out of the closet but we have noticed the weakness in shares.
We had listed another possible strangle option trade for First Solar, Friday before last, when shares were at $55 but we didn’t think another 30% down move was possible before the options expired. Wrong.
The November 40 puts (FSLR111119P00040000, $4.75, up $4.20) were at $1.15 when we profiled the trade along with the November 70 calls (FSLR111119C00070000, $0.40, down $0.90) which were at $1.75. Although we didn’t feel like shares would run to $70, we looked at the calls as insurance because we had penciled in a higher market for the rest of October.
Needles to say, the puts were up a whopping 780% yesterday while the calls dropped 70%. It was another round-trip trade that would have cost $2.90 to get into but the return would have been fat despite the call options taking a dive.
These types of strangle trades are also called “chicken trades” because you know a big move is coming but you aren’t sure which way the stock is going to go.
This morning, Amazon.com (AMZN, $227.15, down $10.46) is being taken to the woodshed after they missed Wall Street’s estimates. The company reported earnings after yesterday’s close and missed forecasts by 10 cents after occurring higher sales costs for the third-straight quarter.
Shares are at $200 in pre-market trading, down $27, and kissed the low $180’s in after-hours trading last night.
As far as futures, they are pointing towards a higher open despite the high-profile miss. Dow futures are up 71 points to 11,733 while the S&P 500 futures are higher by 8 points to 1,233. The Nasdaq 100 future are showing a 14 point pop and are at 2,336.
We have added 6 NEW TRADES to our Watch List and some of the names had heavy option trading in them yesterday. We have added a few put trades in the mix but we have listed some more call options as we look for the bulls to hold support and push the 200-day MA’s. If we decide to make one (or more) of them official trades, we will send out a Trade Alert before 11am so stay locked and loaded. Subscribers, check the Members Area for the updates.
Tags: chicken option trade, strangle option trade
Posted in Market Analysis, Market Commentary, strangle option trades | Comments Off
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, March 16th, 2011
9:05am (EST)
The heavy selling pressure at the open on Tuesday shows just how quickly the bears can strike despite not being around for months. The 5-month rally the bulls have been enjoying suffered another major setback as world events continue to cloud a global recovery.
The news got worse yesterday as dangerous levels of radiation continued to leak from a Japanese nuclear plant which caused even more uncertainty. Most overseas markets also fell sharply as investors worried over what impact the nuclear crisis might have not only on Japan, but also on companies around the world. The Fed provided a little relief but showed up after the “smack down” at the open.
As a result, the Dow fell triple-digits, or 137 points, and finished at 11,855. The index touched a low of 11,696 and danced around our 11,800 target for much of the day. We mentioned further risk down to 11,500 with resistance now at 12,000 and then 12,200. The Dow is up 2.4% for the year but anything under 11,577.51 would put the index in negative territory YTD.
The S&P 500 declined nearly 15 points and settled at 1,282. The index touched a low of 1,261 and danced near our first lower level target of 1,275 for much of the day. We mentioned there is further pressure down to 1,250 and anything under 1,257.64 will put the index in the red for 2011.
The Nasdaq dropped 33 points and closed at 2,667 after touching a low of 2,618. The index was showing a YTD loss after starting the year at 2,652. It would be hard to imagine the other indexes NOT touching their lows as we doubt the market gets a straight bounce from here, although it would be nice. Tech led the charge higher from the October lows but has taken the brunt of the blows during the recent pullback. We mentioned support at 2,650 which was tested for much of the day and we said further risk could lead to a trip to 2,500. If 2,600 is cracked then all bets are on for a test to 25 hunge.
Japan is the world’s third-largest economy and accounts for 10% of U.S. exports. Fukushima Daiichi is the power plant which is in question and is run by Tokyo Electric Power (TPO, $921, down $300) which trades on the Nikkei exchange. Shares were hammered 25% yesterday. General Electric (GE, $19.61, down $0.31) has been getting crushed as it has some exposure to the plant through its “Mark 1″ reactors which were designed decades ago.
Other companies doing business in Japan or have operations over there were hit heavy yesterday. A lot of Tech companies are dependent on Japanese factories for their products or components so the Chip sector was under pressure for much of the day.
Intel (INTC, $20.18, down $0.66) slipped 3% but held $20. Shares are looking cheap and pay a nice 3.5% yield but could trade in the teens’ which is where we would pull the trigger. We aren’t sure if we will do a buy a call option but shares are making a case for a covered call trade which we focus on in our Weekly Wrap.
We have 10 charts we are going over this morning. Some charts are for our current trades, others, for a few option trades that are looking really, really good. We will be adding up to 5 NEW trades in the coming weeks (market conditions permitting) but we may have to use straddle and strangle option trades to help offset some of the risk associated with the current volatility.
Folks, we are giving you a powerful chart lesson today which hopefully calms nerves and provides a bigger picture to your long-term trading plan. We explain straddles and strangles in more detail in our options trading manual, How to Trade Options on Momentum Stocks, and we currently have a few on our Watch List. One of straddle trades is playing out exactly like we have planned and although it’s not an official recommendation the trade is providing our new subscribers on how cool they are. We may have to start using these types of option trades for a while so we are trying to dummy things down for the newbie’s.
As we head to press, Dow futures are up 2 points to 11,791 while the S&P futures are higher by a point to 1,276. The Nasdaq futures are showing a 4 point pop to 2,249. Subscribers, check the Members Area for the updates.
Tags: Bear market strategies, bearish option trades, straddle and strangle option trades
Posted in Market Commentary, strangle option trades | Comments Off
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Bulls Walking on Thin Ice
Monday, November 28th, 2011
9:00 (EST)
The market continued its recent slide as the bears had their best bull feast in nearly 80 years as Wall Street fell 5% last week. The recent selling pressure became much more serious as all of the indexes fell below their 50-day moving averages (MA) with the bears stretching their winning streak to seven-straight sessions.
The headline news read like a Vegas betting parlor as a number of European countries face further risks of defaulting. Germany was the latest country which showed a chink in the armor after trying to raise $6 billion euro but was only able to raise a little over half of it. Spain also went to the well and was successful in its bond auction but the yields came at a hefty price. Italy faces a huge crisis in 2012 if they can’t raise more dough, and they are trying, but it’s costing them an arm-and-leg.
The news here at home continues to come in better-than-expected and this week will be big with a number of month-end reports due out. As far as the charts, they have been stretched which often happens when headline news trumps the technical picture. The bears have clearly had the advantage and at some point there will be a rebound but until Europe can figure out its mess, the market will be held hostage.
The Dow slipped 26 points, or 0.2%, to finish at 11,232 on Friday’s shortened session. We went into the week looking for 11,600 to hold but that level was taken out on Monday. Our next downside targets were 11,400 and then 11,200, which held, but there is risk down to 10,800 this week if current levels don’t hold. If the bulls can get past 11,400 (black line, purple circles) then they could make a run back towards 11,600 and then 12,000 but the news has got to be awfully good. For the week, the Dow dropped 564 points, or 4.8%, and is now down 346 points, or 3% YTD…
************************
If you are not a subscriber but would like to read more about where the market is headed and to take a closer look at our chart work along with our current trades, please click here. Since early August we have made 48 recommendation, both calls and puts, and have hit on 40 out of 48 trades for a winning percentage of over 80%! Some of our recent winners include:
+169% on Joy Global (JOYG) call options in 2 days
+137% in Research In Motion (RIMM) put options in 3 weeks
+130% in Spreadtrum Communications (SPRD) call options in 4 weeks
+164% in FedEx (FDX) put options in 6 days
+184% in Goldman Sachs (GS) put options in 5 days
+191% in O’Reilly Automotive (ORLY) call options in 17 days
+100% in VMWare (VMW) call options in 4 days
We are one of the fastest growing stock options trading advisors on the internet. We offer powerful call and put option trades aimed at triple-digit returns for our Daily newsletter. Our Weekly Wrap Covered Call Portfolio strides for double-digit returns on a monthly basis. Sign-up now and receive access instantly!
Futures are pointing towards a strong start for today’s session and look like this: Dow (+255), S&P 500 (+34), Nasdaq 100 (+53). We recommended 4 new trades on Friday and after two weeks of being patient and building new positions, hopefully we get the surge we have been expecting. Subscribers, check the Members Area for the updates.
Tags: Dow, Momentum stocks, stock options trading advisors
Posted in Apple, BioTech, China, Commodities, Company Commentary, Covered Calls, Earnings, Economic News, Entertainment Stocks, European Union (EU), Financial Stocks, Futures, Gold, Google, Hot Stocks, IPOs, Market Analysis, Market Commentary, Mergers and Acquisitions, Money Management, Oil, Option Trades, Rick's Account, Sectors, Stock Earnings, strangle option trades, Trade Update, Trading Psychology, Trading Tips, Uncategorized, VIX, Watch Lists, Yahoo / Microsoft | Comments Off