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1:00pm (EST)
We have a lot to talk about today so we are going to throw the kitchen sink at you…
The market is once again choppy as a both the bulls and bears try to gain leverage ahead of the weekend and before Monday’s opening bell. The bears started off strong and had pushed the major indexes down over 1% but the bulls made it back to even and into positive at one point. Trading has been back and forth since.
Economic news is abundant today.
The bears used the latest GDP figure to take the market sharply lower at the open as data showed the economy grew 2.4% in the second quarter versus a forecast of 2.6%.
The bulls used a collection of good news to stage a comeback. The Chicago PMI for July was 62.3 versus expectations of 56.0 while the Consumer Sentiment Survey for July was 67.8 versus the anticipated 67.5 print Wall Street had penciled in.
As a result, the market is mixed as the Dow is down 15 points to 10,452 while the S&P 500 is down 1 point to 1,100. The Nasdaq is up 3 points to 2,254.
Next week is setting up to be an even bigger battle as we have seen the volatility pick up and we have watched the bears stand ground. It’s not to say the bulls won’t break through these hard resistance levels but if Vegas had a line on Monday’s action we would put a $20 on a lower Monday.
Earnings will be another key element in next week’s direction as well as economic news but we could see some explosive moves before today’s closing bell as mutual funds dress up the month and traders square up the books for July.
Our Watch List is PACKED with potential bearish and bullish trades and we have even profiled some LEAP options out until 2012 that we eyeballing. This weekend we will also be taking a closer look at Best Buy (BBY, $34.57, up $0.02) and Chesapeake Energy (CHK, $20.94, down $0.16), two beaten down stocks that look “interesting” at these levels. We also take a look at Gold and what is happening with it. We are expanding our Weekly Wrap to provide you more coverage of the market and a few stocks here and there.
We are also pleased to announce we have HARD copies of our trading manuals How to Trade Options on Momentum Stocks and Watch List Overview. This option course has been two years in the making and we are excited to show you how you too can find triple-digit return trades and set up Watch Lists to follow hundreds of stocks at once.
We are going to show you how we look at trades, how to figure out the returns on where a stock needs to be and how to read a few charts. And much more golden nuggets.
We will update all of this on Sunday in our Weekly Wrap so look for details over the weekend. Next week will be nail-biting and we will set you up on what to watch for. We have also updated our current trades including the one from this morning in our Members Area so make sure you check the latest up-to-the-minute updates.
Until then, have a good weekend!
Potash (POT) Pops on Takeover Bid, August Call Options Up 7,650%
Tuesday, August 17th, 2010
1:20pm (EST)
The bulls are trying to run today and have taken the market higher despite a downbeat report on housing. Other economic news has helped take the spotlight off the sector and merger and acquisition (M&A) news is also keeping the bears at arm’s length.
The market also got some decent earnings from Wal-Mart Stores (WMT, $51.37, up $0.96) and Home Depot (HD, $28.65, up $1.27) which has also put Wall Street in a buying mood.
Housing starts for July increased 1.7% month-over-month to 546,000 units, but was less than the 555,000 units analysts had been expecting. Building permits for July fell 3.1% to 565,000 and below the 573,000 number that had been penciled in.
The Labor Department reported the Producer Price Index for July showed a 0.2% monthly increase, as expected, and was the first increase since March. Excluding food and energy costs, the index rose 0.3% in July.
And finally, Industrial production jumped 1% in July, which was double the 0.5% growth forecast prediction.
Now to the good stuff…
In M&A news, Potash (POT, $140.45, up $28.30) rejected an unsolicited takeover proposal from BHP Billiton (BHP, $70.45, down $1.49) this morning and its shares are on fire. The company said the $130-a-share bid from BHP was not enough and that its bid was “grossly inadequate”.
This is always the normal, first reaction from a company and its board members when they get a takeover bid. At $130 a share, the offer by BHP represented only a 15% premium over Potash’s closing price on Monday so it was kind of a slap in the face. We have been following Potash for years and as matter of fact, we recently had some call option listed on them last week.
For those of you who haven’t been inside our Members Area, in addition to trade recommendations, we also have a Watch List where we focus on stocks and options that are about to breakout or breakdown. Sometimes we are waiting for a certain price to trigger point before we initiate the trade as we are waiting for a move below support or resistance. Other times, we list stocks and options on sectors that are on the move.
We listed the Potash August 120 calls (POT100821C00120000, $21.00, up $20.70) last Tuesday in our Members Area and at the time the options were going for 95 cents. Since the market was in a downdraft last week, it didn’t make sense to purchase these cheap out-of-the-money options since 70% of stocks move overall that the direction the market is going. As you can see though, the August call options have zoomed to the moon today and are up over 7,650% after closing at 30 cents yesterday!
We were also going to list the Potash September 120 calls (POT100918C00120000, $20.60, up $18.20) as a possible play and they have surged nearly 760%.
Of course, we can’t take credit for these being official trades but we did have some subscribers who did their homework and used our Watch List to their advantage.
Here was an email from this morning:
“Once again, thank you!
I trade POT almost every option expiration and had 20 options this morning. Just cashed in for $47.7K.
Thanks for adding it to your watch list.
Scott H.”
As we head to press, the Dow is showing a gain of 137 points, or 1.3%, and is at 10,439. The index has broken through slight resistance at 10,400 and has hit a high of 10,450 today.
The S&P 500 is higher by 16 points to 1,095, or 1.5%, but is once again fighting the 1,100 level while the Nasdaq is up 33 points to 2,215. Tech has busted out past the 2,200 level and it wil be interesting to see if it holds.
We were thisclose to bagging a big option trade but we are on the cusp of breaking through with others, we can feel it. The market has been choppy but we are still finding sectors and stocks that are hot or about to drop.
In fact, we have a couple of current trades that are on our Watch List that look ready to pop and we are releasing one of them today! Subscribers, check the members Area for the NEW TRADE!
Tags: BHP, hd, option picks, POT, Potash takeover bid, stock options trading, WMT
Posted in Company Commentary, Mergers and Acquisitions, Watch Lists | Comments Off