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Wednesday, May 12th, 2010
1:00pm (EST)
The bulls are pushing the market higher after a rosy report from the government said exports (up 3.2%) reached a 15-month high in March. The talking heads are reminding us gold continues to hit new highs and the euro continues to stink which is helping gold reach those record highs.
At midday, the Dow is showing a triple-digit gain of 107 points, or 1%, and is at 10,855. The S&P 500 is at 1,166, up 10 points, or 0.9%. The Nasdaq is flexing its muscles as it is higher by 34 points, or 1.5%, and is currently at 2,410.
Financial shares are mixed with Morgan Stanley (MS, $27.58, down $0.80) leading the losers lower. Shares are taking a hit after reports surfaced that the investment bank is facing an investigation into its dealings in mortgage securities. Federal prosecutors could bring charges any day.
Baidu (BIDU, $76.55, up $5.13) is at lifetime highs after a 10-for-1 stock-split. We normally don’t trade options on stocks that are over $150+ because the premiums are priced pretty high and we normally like to keep our trades under $2 per contract.
Of course, there are triple-digit strike prices under $2 but often times they are so far out-of-the-money that the stock would need to make a massive move which can and does happen. We have traded some of the higher priced premiums in the past but not on a $700 stock.
We are more comfortable trading options on stocks under $100 and now that Baidu has granted our wishes with a stock-split we can add it to our Watch List as a possible trade down the road. Splits are usually bullish as shares tend to gap higher afterwards.
Our Watch list continues to grow as we expect the market to fade at the close today. While today’s action is nice if you are a bull, we still think the market heads lower from here. Next week is option expiration week which will only add to the volatility.
Subscribers, check for the updates and a NEW TRADE inside the MEMBERS AREA, now!
Tags: Baidu stock split, Morgan Stanley, option picks, option signals, options alerts, stock options trading
Posted in Company Commentary, Market Commentary, Trading Psychology, Watch Lists | Comments Off
Sunday, March 21st, 2010
5:00pm (EST)
The bears finally got a victory as they snapped the bulls’ eight-session Dow winning streak on Friday. There were numerous headwinds that made Wall Street nervous as renewed worries over Greece’s debt resurfaced and signs that other countries are/ will be increasing interest rates weighed on the market. Not to mention the healthcare bill that is expected to pass this weekend.
As far as interest rates, the Reserve Bank of India unexpectedly upped its key lending and borrowing rates, escalating concerns that China’s central bank could be next. Any tightening may curb global demand for commodities.
Meanwhile, the uncertainty over possible financial aid for Greece ahead of the European Union’s (EU) summit this week continues to be a headache. There was a lot of smack talk between several EU governments on how they will aid Greece with countries divided on whether to tap the International Monetary Fund (IMF) for a Greek rescue package.
As a result, the Dow fell 37 points to 10,741 after hitting a high of 10,819. We have been calling for Dow 10,800 and despite all the gloom and doom the index added 117 points for the week, or 1.1%. It was the third week in-a-row the Dow was up and 5 out of the last 6 have been positive. YTD the blue-chips are up 3%.
The S&P 500 slipped 6 points, or 0.5%, and closed at 1,159 but still added 0.9% for the week, or 10 points. The index hit a high of 1,169 and fell just short of our target of 1,175. We still believe if we can get past this level the index can run to 1,200.
Finally, the Nasdaq took the brunt of the bears’ blows as it fell 17 points, or 0.7%, and settled at 2,374. Tech has been leading the market higher since the end of February and our targets of 2,375-2,400 have come into play all week. There is a chance we can get to 2,500 but given the current environment that could be a stretch.
The next question, of course, is where do we go from here? Our initial thought is that this market wants to go higher but we realize many of you are nervous and given the current outlook, we are too. The futures market is already pricing in a lower open on Monday as the Dow futures are off by 30 points. That will surely change once we get word from Washington.
Some Democratic leaders are already predicting a victory for the historic healthcare bill but it will need to meet or exceed the 216 votes required for passage. Republicans are strongly opposed to the bill as well as Wall Street and this will be a close race.
We mentioned we were “nervous” but that doesn’t mean we aren’t ready for a pullback. We have spent much of the day looking at put plays in case the market does head lower. We will profile these trades in our Watch List section on Monday morning but we are still in the trend which has been up.
Our subscribers had a great week as they took quick profits in Nike (NKE, $73.52, down $1.14) to the tune of 190% and another 40% with a Qualcomm (QCOM, $40.05, down $0.38) call option trade.
We also wanted to follow-up on the Palm (PALM, $4.00, down $1.65) story from our update on Friday. The stock fell 30% for the session and at 1pm shares were at $4.42. We often talk about cheap out-of-the-money options and how stocks gyrate to certain strike prices on expiration day. Shares of Palm were at $5.65 before they announced earnings.
Well, once Palm opened at $4.64, the battle was going to be at the $4 or $5 strike price but with so much negativity we should have known shares were going to go to $4.
We mentioned the March 5 puts (UPY100320P00005000, $1.00, up $0.83) which expired on Friday when they were at 48 cents. It was an easy double into the close. These puts were at a dime on Wednesday…
The March option trades are over, of course, but keep an eye on the April 5 puts (UPY100417P00005000, $1.23, up $0.79) which were at 90 cents in our 1pm update. There were a couple of analysts on Wall Street that put a $0 price tag on Palm.
As far as trades we cover in the Members Area, we wanted to give everyone a quick update. We have mentioned the difference between 2008 and 2009 and the current market environment. To start, 2010 will be a tougher market to trade then those two. We expect MORE volatility in the months ahead but you have to remember, 2008 was a terrible year for the market and we made our subscribers money on the way DOWN. Most investors hate investing in a market that is going down because they don’t know how to short stocks or buy put options.
In 2009, our trades were mostly call options as the market bounced back. Now that we are back to where we were two years ago, we expect to have a mixture of both calls and puts going forward. Our track record isn’t as stellar as those years but for 2010 we are holding our own.
We have closed 26 trades this year with 17 winners and 9 losers which represents over a 65% win rate. Seven of those trades have been triple-digit winners. We also had some clunkers and there are a couple of things we want to mention. For instance, if a cheap out-of-the-money option is at $1.00 or less then we may not have a 50% stop loss on it. We carry these on our more expensive option trades but always remember they are “targets” and we may or may not leave them open. A 55% win rate is considered a huge success on Wall Street and the business world.
Also, carrying a 50% stop loss on a 50 cent option doesn’t make much sense and sometimes these trades will lose 100%. Don’t be alarmed with a trade that might show that kind of a loss. A 10 contract trade would only cost you $500 ( or 1 contract would be $50) and the key is to make enough on the other trades to where you can afford to leave these types of positions open.
For instance, our Qualcomm (QCOM, $40.05, down $0.38) trade was down over 50% and was in danger of expiring worthless before turning around. We knew the market was trying to keep shares under $40 but the day before the March options expired, the stock got an upgrade and subscribers ended up making 40%. With some positions, it just depends on what the market is doing and if the story has changed.
Also, if you annualized the returns then you will see our 2010 track record could be just as special as 2008 and 2009.
We wanted you to keep these things in mind because we have fielded a lot of emails on our results and remember, 2010 will be a different market. Option trading is for the long haul and is not meant to be a “get rich, quick” scheme. It takes patience.
As far as what to expect this week, earnings will come to a crawl but there are some big names reporting. Tiffany (TIF, $47.25, down $0.23) will report before the bell on Monday, Adobe Systems (ADBE, $34.67, down $1.08) on Tuesday, General Mills (GIS, $73.34, down $0.30) on Wednesday before the bell, and Best Buy (BBY, $40.99, up $0.54) on Thursday.
We will be back in the morning with the complete list but we wanted to give you an early preview of what Wall Street is watching. If we get a chance, we will send out a News Flash on the healthcare bill news but if we don’t, we will see you in the morning.
Tags: healthcare bill and Wall Street, option picks, option signals, options alerts, stock options trading
Posted in Market Commentary, Watch Lists, Weekly Wrap | Comments Off
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
Posted in Company Commentary, Economic News, Market Analysis, Market Commentary, Option Trades, Stock Earnings, Strategies, Trading Psychology, Trading Tips, Watch Lists, Weekly Wrap | Comments Off
Tuesday, February 16th, 2010
9:00am (EST)
The market futures are higher this morning as Wall Street returns from the three-day weekend on strength in the European markets and a rally in commodity prices.
With 30 minutes before the start of trading, the Dow futures are 37 points higher at 10,155. The S&P 500 futures have advanced 6 points to 1085 while the Nasdaq 100 futures are up 7 points to 1790.
Gold is getting a pop this morning and is up $25, to $1,117 an ounce. The euro rebounded against the dollar and investors seem to be buying gold this morning to protect against currency volatility.
Given the continuing uncertainty over the EU’s plans for Greece and limited corporate news, today could prove to be a little choppy. China is celebrating their New Year this week so we aren’t counting on any “headline events” from them but you never know.
Abercrombie & Fitch (ANF, $33.85) is slightly higher this morning in pre-market trading despite posting a lower quarterly net profit and missing Wall Street’s estimates. The company said it earned $47.5 million, or $0.53 a share, versus $68.4 million, or $0.79 a share, in the year-ago quarter.
Revenue fell 5% to $936 million, while sales at stores open at least a year fell 13%. Analysts had expected sales of $954 million. A 12% drop in U.S. sales, which account for the vast majority of Abercrombie’s revenue, was partly offset by an 85% surge internationally which is why we might be seeing a higher open for the stock.
We have a number of trades that we are looking at this week and we profile two trades this morning that are on our Watch List in our Members Area. Current subscribers, check for the updates.
Tags: option picks, option signals, options alerts, stock options trading
Posted in Earnings, Market Commentary, Watch Lists | Comments Off
Friday, February 12th, 2010
1:05pm (EST)
The market is taking one on the chin today as most of the major indexes are experiencing losses but have come of the lows. The bulls have traded blows, literally, every day this week and after the win yesterday, it’s the bears turn.
There are a lot of elements causing today’s sell-off but more news that China said it would require banks to increase reserve levels is the biggie. It was the second time in a month that this sentiment was echoed which would limit the amount their banks can lend.
Currently, the Dow is down 47 points to 10,097 while the S&P 500 is off by 4 points to 1,074. Meanwhile, the Nasdaq is higher by a point to 2,178 and now seems to be the “strongest” of the big three.
Trading continues to be choppy but our feeling is that individual investors do not want to commit new money to the market and traders are squaring up positions before the long holiday weekend. The market will be closed on Monday for President’s Day.
Next week is options expiration week as the February chains expire NEXT Friday.
Folks, there could be an explosive move in store with a possible Greece resolution, options expiration week, and more pending news out of Washington expected. China will be closed next week.
We should also get a clear signal on which way the market is headed. A lot of money is being bet on the short-side but we aren’t taking sides just yet. There are some interesting gyrations developing and there is a chance the market bounces off these current lows to much higher levels.
Remember, when the herd thinks alike, the herd is likely to be wrong. Right now, the sentiment on Wall Street is calling for a market correction, a pullback, or we are headed below previous lows, meaning Dow 7,500. We don’t see that in the cards but we always look at both sides of the ball and try to play the trend.
We mentioned this morning that our trading manual is ready and folks, we are really super excited to bring you this product. Our hope is to show you how to set-up a plan to follow the market, learn how it works and to find your own option trades.
You will be able to look at a stock and its chart and figure out EXACTLY what the stock needs to do for the trade to be profitable. You will learn to figure out the best entry and exit prices and what your risks and rewards are.
Plus, with our expanded Watch Lists that includes up to date charts and detailed descriptions of what each company does, you will able to follow hundreds of stocks. However, we teach you how to focus on where the money is flowing and what sectors are hot and which ones are turning cold.
We wanted to roll this out to start the New Year but we wanted to wait because of the current changes taking place in the options market right now.
We have been using new options quotes as many of you have seen in our Members Area and last weekend we did a special write-up on how to decipher the new symbols. If you haven’t read it, click here. It is a great read and it actually makes it easier to remember option symbols.
We are planning for hard copies to be available in March and there will be a special rate for the first month. We are making this an incredible deal and it is our way of thanking all of you who have followed us for the last 2 years. One bonus is that anyone who purchases our course will get an extra one-year membership added to their current subscription or if you are a new subscriber it will be included.
We are excited about the opportunity to teach you some of the neat features that will show you option trades that could provide you returns of up to 100%, 200%, 800% and even 2,500%. Our track records from 2008 and 2009 are littered with these types of returns and you can view them at anytime.
Our 2010 track record will be available in a few weeks as we still have open trades for February so look out for it as well. Of course, if you are already a subscriber then you have access to it daily. There you will find all of our CURRENT trades AND all of the closed ones for the year. If you have any questions on the manual, please email us over the weekend and we will get them answered.
We will be back MONDAY night with the Weekly Wrap so everybody have a safe and happy 3-day weekend.
Tags: option picks, option signals, options alerts, stock options trading
Posted in Company Commentary, Hot Stocks, Market Analysis, Market Commentary, Option Trades, Sectors, strangle option trades, Strategies, Trading Psychology, Trading Tips, Watch Lists | Comments Off
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Morgan Stanley (MS) Hearing Footsteps
Wednesday, May 12th, 2010
1:00pm (EST)
The bulls are pushing the market higher after a rosy report from the government said exports (up 3.2%) reached a 15-month high in March. The talking heads are reminding us gold continues to hit new highs and the euro continues to stink which is helping gold reach those record highs.
At midday, the Dow is showing a triple-digit gain of 107 points, or 1%, and is at 10,855. The S&P 500 is at 1,166, up 10 points, or 0.9%. The Nasdaq is flexing its muscles as it is higher by 34 points, or 1.5%, and is currently at 2,410.
Financial shares are mixed with Morgan Stanley (MS, $27.58, down $0.80) leading the losers lower. Shares are taking a hit after reports surfaced that the investment bank is facing an investigation into its dealings in mortgage securities. Federal prosecutors could bring charges any day.
Baidu (BIDU, $76.55, up $5.13) is at lifetime highs after a 10-for-1 stock-split. We normally don’t trade options on stocks that are over $150+ because the premiums are priced pretty high and we normally like to keep our trades under $2 per contract.
Of course, there are triple-digit strike prices under $2 but often times they are so far out-of-the-money that the stock would need to make a massive move which can and does happen. We have traded some of the higher priced premiums in the past but not on a $700 stock.
We are more comfortable trading options on stocks under $100 and now that Baidu has granted our wishes with a stock-split we can add it to our Watch List as a possible trade down the road. Splits are usually bullish as shares tend to gap higher afterwards.
Our Watch list continues to grow as we expect the market to fade at the close today. While today’s action is nice if you are a bull, we still think the market heads lower from here. Next week is option expiration week which will only add to the volatility.
Subscribers, check for the updates and a NEW TRADE inside the MEMBERS AREA, now!
Tags: Baidu stock split, Morgan Stanley, option picks, option signals, options alerts, stock options trading
Posted in Company Commentary, Market Commentary, Trading Psychology, Watch Lists | Comments Off