11:00pm (EST)
The bulls won the first week of 2010 as they took the market higher despite a weak unemployment report on Friday. The Labor Department said employers slashed 85,000 jobs in December while Wall Street had forecast a slight decline of 8,000 job losses.
The one silver lining was the government revised November’s unemployment figures to a gain of 4,000 jobs, marking the first monthly increase in almost two years. Although the unemployment rate remained at 10% last month, the bulls managed to blow off the report and finish the week on a high note.
All three indexes posted gains for the day and for the week which could mean good news if you believe in market history. Usually if the Dow is up in the first week of January it leads to a good month and year so goes the theory.
The Dow added 11 points on Friday and 190 for the week to close at 10,618. Our near-term target remains 10,800 and this could be the week we take it down.
The S&P 500 gained 3 points to close at 1,145 and for the week the index added 30. In August, we set our target at 1,175 so we are within spitting distance…
As far as the Nasdaq, we clearly saw the strength in Tech back in the summer and set a year-end 2009 target of 2,275 for the index. That level was taken out before Christmas. On Friday, the Nasdaq displayed its muscle once again and had the biggest percentage gain as it added 17 points to close at 2,317.
We remain bullish and our portfolio has consisted of mainly call options since March 2009. We have added put options as “insurance” along the way but we still feel like the market moves higher from here. Of course, once our targets are hit that could all change but the beauty of getting a pulse on the market is that it allows you to change accordingly.
If and when we reach those aforementioned targets, we either, continue higher, stay flat, or retreat to lower levels. The cards to figuring out the next six months on where the market could be headed are being dealt right now. A lot of investors and traders will be ready to pay the ”big blind” this week as 4Q corporate earnings start to come in. We will go over this more on Monday morning.
There is one stock we wanted to cover again tonight before we sign-off…
We have mentioned OSI Systems (OSIS, $31.64, up $2.75) a lot lately and we should have already been in this trade to be honest. Sometimes there are trades that just stare you in the face and they have to slap you to get your attention.
Well, OSI is punching us in the gut and we are gasping for air.
The alleged failed boxer bomber has heated up the talk of faster deployment of full-body-imaging machines at airports around the world. Talk about blowing up the family jewels…Our thoughts from December 31st (quotes are from that day):
“OSI Systems (OSIS, $27.46, up $2.40) is up 10% as investors rushed into the stock starting on Monday. The company makes these “body scanners” that could be used in airports that would allow tighter, faster security and the machines are selling for $150,000 a pop. Needless to say, the market is enormous and some people think they should be in every airport in every city RIGHT NOW.
The shares have rallied following last weekend’s failed terrorism attack and last Thursday they closed at $22. On Monday morning they opened at $23.04 and hit a high of $24.97. Usually these types of trades fade but we underestimated this story and it cost us a sweet call option trade.
Yesterday, the OSIS January 25 calls (UOJAE, $2.95) easily doubled and were under $1 on Monday. OSIS and others have been put on our short-term Watch List. (END)
Folks, the January 25 calls are now at $6.60! The January 30 calls (UOJAF, $2.10, up $1.55) soared a whopping 280% on Friday after opening at 95 cents.
Despite reservations from Congress, privacy advocates and airlines we think this movement has legs and we will take a look at a possible option trade in this one on Monday morning before the bell. We will also have an update on all of our current trades which will be on the move this week.
As we head to press, Dow futures are showing strong gains as they are up 36 to 10,602. S&P 500 futures are up 5 to 1,146 while the Nasdaq futures are higher by 8. The first trading day of “January Expiration Week” is usually bullish, which is one reason we left most of our option trades open.
Also, we have been seeing higher closes on Friday’s followed by solid Monday’s which leads us to believe the bulls are fully committed to taking the market higher.
One important factor on if the market is at a top or continues higher will come on Friday. January options will expire and over the past decade this has been a terrible day for the market. If the bulls can lift this curse then we could be off to the races again.
Portfolio Update: Our 2010 portfolio track record is posted in our Members Area and had been updated as of Friday’s close. There are 3 closed trades with two of them showing triple-digit gains; A123 Systems (AONE, $21.51, down $0.65) is profiled showing our subscribers banked a 119% gain; a 90% profit in Imax (IMAX, $14.13, down $0.29); and a 150% return in Green Mountain Coffee Roasters (GMCR, $81.85, up $0.27).
We still have 6 open trades but some will be closed for double-digits gains while we roll new trades in. That is what we love most about the market…there is always a trade.
The 2010 portfolio is viewable in the Members Area at the bottom of the page. We will start releasing the closed trade results to the public at the end of the month and they will be updated as we close them out but we wanted to give you a sneak peak before then.
We will be busy all week and will be back in the morning with the playbook. If you are not yet a subscriber you can still catch all of the action before the opening bell if you signup now!
See you in the AM…
MomentumOptionsTrading.com Weekly Wrap for 2/21/10
Sunday, February 21st, 2010
Bulls Make Another Run
8:00pm(EST)
The futures were pointing towards a nasty opening for the market early Friday morning but things got better as the bulls starting rising with the sun.
Thursday’s surprise discount rate hike by the Fed after the market closed scared the be-Jesus out of everyone as the Asian markets tanked and the Dow futures were down 90 shortly after midnight. However, the Fed may have done the bulls a big favor as they were able to take the market higher for the fifth day in a row.
We rarely talk about the specific indexes of the foreign markets but we often watch the action as they can and do have an effect on our markets. Hong Kong’s stock market is known as the Hang Seng and it tanked 2.6% on our Fed news and closed at 19,894, down 528 points, on Friday. Japan’s Nikkei fell 2.1%, or 212 points, and closed at 10,123.
A 2% drop in the Dow would have crushed the current rally but the Fed news was softened by the fact that the market had all night and some of the morning to figure out this really wasn’t a big deal. A better-than-expected consumer prices report also gave the bulls a lift.
The Dow traded in a narrow range for most of the day and ended at 10,402, up 9 points. The S&P and Nasdaq hit a “double-deuce” as each index gained 2 points and closed at 1,109 and 2,243, respectively.
It was a great week for the bulls as the Dow added 303 points, or 3%, and closed above 10-4 for the first time in over a month. It was also the Dow’s biggest weekly point and percentage gain since the start of November.
The S&P 500 was up 34 points last week, or 3.1%, and closed above the all important 1,100 level.
Finally, the Nasdaq jumped 60 points for the week, or 2.8%, and settled above 2,200 for the first time in a month.
We are back in that “upper” trading range we have been talking about for weeks and months which for the Dow are between 9,700 and 10,700. Once again, the targets we set back in August will now come into play again and they are at 1,175 for the S&P 500 and for the Nasdaq our target is 2,275. For the Dow, we have a target of 10,800.
The S&P traded 1,150; the Dow hit a high of 10,767; and the Nasdaq reached 2,326…all by mid-January which brings us to our next point.
The market was an easy read in 2008 as the Dow collapsed from 13,338 to a low of 7,392 by November. The Nasdaq fell from a high of 2,661 to a low of 1,295 by October of that year. Folks, that is a 50% haircut.
In 2009, the Dow rebounded off a low of 7,856 to a high of 10,605 while the Nasdaq soared from 1,476 to a high of 2,295. As you can see, this basically amounts to 50% gains which shows us two things.
In 2008, it was easier to trade put options and make money on the way down. Our track record shows this. In 2009, we mainly recommended call options. As we release our results for 2010 for all of our closed trades you will see our track record is around 60% for our trades.
It’s possible to make a good living if you hit 60% of your trades but we are more accustomed to hitting over 70% of our trades. The good news is that we aren’t ashamed of hitting 60% of our trades but we wanted to show you the “transition” the market is currently going through.
We saw this in mid-January when the market was approaching our targets and we knew we would either “breakout” or “retreat” from current levels. We still trade, regardless of market conditions, but we protected ourselves by going out to May, June and September with some of our call options trades. We have also used put options this year because when the market is this choppy and with this volatile, you need protection.
Even better news, is that there will be a pure play on the trend over the next few months as we think the volatility continues. We still think there is a chance the bulls push through our targets but we wouldn’t be surprised at all if we touch those targets and fade. If the market fades again, then the bears will take center stage.
As far as our portfolio, we are trying to preach these market conditions but IT IS a tougher market to trade and we do not send out trades just to grow our subscriber base. In fact, many of you know we will be limiting our membership to 1,000 subscribers because we don’t want to be like other option newsletters. One of our recent subscribers said that he was with another service which sent out 14 straight losing trades from mid-January up until now. The problem was his service dropped coverage of the trades and never responded to his emails about the current trades. Folks, we don’t roll that way.
We thought we would take some time to talk about the current market conditions and the trading atmosphere we are in to give you a better perspective on things. That said, we remain extremely excited because the current volatility will continue to offer us some fat trading opportunities but there will be risks.
Looking ahead to this week, we have a number of events that will be headwinds for the market.
Toyota’s (TM, $73.35, down $0.09) President changed his mind and will testify at a congressional hearing on Wednesday about the company’s recent recalls. The House Oversight and Government Reform Committee is investigating Toyota’s recall of more than 8.5 million vehicles for gas-pedal and sudden-acceleration problems.
Federal Reserve Chairman Ben Bernanke will be in front of Congress again on Wednesday and Thursday to give his semi-annual monetary policy report to Congress.
There will be some economic news the market will have to digest as well. The government will release new homes sales data for the month of January on Wednesday, while the National Association of Realtors will report its data for existing home sales on Friday.
We will be back in the morning with a fresh outlook and a complete update for all of the current trades. We are also looking at a number of stocks that we will be adding to our Watch List.
As we head to press, Dow futures are up 26 points…
Tags: option picks, option signals, options alerts, stock market summary, stock options trading, Toyota Motors
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