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Market Pops Then Drops

Friday, December 4th, 2009

1:30pm (EST)

“Momma’s got a squeezebox she wears on her chest and when Daddy comes home he never gets no rest”…

“Come on and squeeze me…”

This song by The Who has to sum up how the bears are feeling today.

The bulls have been singing all morning after the Dow rushed out to a 150 point gain and reached a high of 10,516. However, the bears clawed their way back and actually took the Dow lower to 10,311. Folks, that is a 200-point swing and we are only at halftime. Currently we are at 10,385, up 19. The S&P is holding 1,104.

We still have a target of 10,800 for the Dow but remember the market always looks forward and can turn on a dime. Having said that, while we continue to be bullish, January could get ugly if and when volatility gets insane…and it will.

Folks, it’s been a busy day and a busy week but we thought we would spend a little time talking about our service today instead of the market.

We know some of you are new and some of you have just been with us for 90 days or less. Well, the past few weeks have been rough and some of you may not have gotten the results you have been hoping for with our service.

The first thing to remember is that options are all about momentum which is where we came up with our name. For those subscribers that have been with us for months and since our inception (18 months) know that we have been pretty dead on with our market analysis. We were right when we called for the crash in late 2008 and we were right when we called for a rebound from the March lows. Check out our 2008 and 2009 portfolios and really analyze it. Take a look at the option positions we started in March 2009. We weren’t sure of a market bottom but we were acting as if it was by going 2 or 3 months out on our call option picks. They returned our subscribers some incredible profits.

Just recently we have been calling for Dow 10,800 and back in August and September we said the market would still rally. But what happened last Friday was an EVENT that can happen to all good option traders. We were stopped out of 4 of our trades when the market tanked on the Dubai news. By Tuesday of this week we told you Wall Street has put that in its rearview mirror.

The point is we had stops in place and nobody knew last Friday just how bad the Dubai news was. The picture brightened, unemployment came down and the market is rallying.

One of the trades we were stopped out of was Microsoft (MSFT, $30.06, up $0.23). We were in the December calls (MSQLF, $0.55, up $0.07) for 65 cents and we showing a profit but the stock kept having trouble at $30. However, we said once this level broke the call options could do well. Well, they hit a high of 87 cents this morning as the stock traded to a high of $30.37 this morning. This would have represented a 34% gain but instead we show a 54% loss for the portfolio as we were stopped out.

The point is, we are incredibly accurate with market direction and you buy call options in a bull market and put options in a bear market. Of course, it’s a little harder than that but you get the general idea. The fact that last Friday took us out of some great trades didn’t let it affect our mental toughness. We are still trading.

There is also the fact that some subscribers take some trades but not ALL of them. So, one subscriber could be selective and have all losing trades which would lead them to believe we don’t know what the heck we are talking about and want to cancel their service. Another subscriber might be selective and have all winners and think we are the best thing since two-piece bikinis.

Folks, we will have losing trades. And we are not ashamed to admit them. But, if we show in our track record and one trade was a 100% winner and one was a 100% loser in the same week you would think we lost money. Well, that would not be the case.

If we did a full position on one trade and invested $2,000 on 10 contracts and a half of a position (5 contracts) on an earnings trade that could go either way, then we still made money. And we explain the trades this way in our Members Area. Earnings trades are all or nothing. They can make you over 400% like our Priceline.com (PCLN, $220.24, up $0.23) did or they can lose 97% in a day. However, if you did a full position on Priceline.com like we recommended and a half position on Aerospostale (ARO, $29.05, up $0.10) then you felt little impact on your portfolio. If you did the trades in reverse, then your results could be worse.

FedEx (FDX, $87.21, up $1.27) is pushing $90 and we were in a trade that got stopped out as well. FedEx still looks strong but got weak just for a minute which put us on the sidelines.

Also, some subscribers have asked for a cell phone alert service.

The easiest way to keep in touch with us is this way and it will ensure that you get our email updates as soon as they are released.

First, go out and buy a smart-phone or if you have one make sure our emails are coming through.

When we send out an email you should get it in a few seconds. Once we send out an email our phone makes a “ding” sound and it lets me know I have an email. (We copy ourselves on all emails we send out and it works every time).

Then, if there is action you need to take or want to take you can make the trade right from your phone. We have all of our brokerage accounts loaded on the phone as most of them have apps.

We understand that people work and can’t watch the market which is why we try to have select times at which we do the trade updates…9am and 1pm. Today’s is late because we are doing a long update…

The update by 9am gets you prepared for the market and the 1pm update keeps you caught up. Now, if we do an update outside of those time frames OR we do the 1pm update a little early or a little late then you can rely on your email to keep updated.

The trading manual…

It will be $2,495 and a one-year membership is included. The manual will teach you how to really look for option trades and will give you a better insight to how we break down our trades. This is a one-time special offer because all of you are our charter members. Remember, we are limiting our circle of subscribers so that our trades don’t get crowded. Once we reach our limit, the trading manual will be $2,495 with NO free one-year membership. If you already have a membership, this will be added to your current membership.

The last thing we want to say is this. We get more joy in teaching people how to trade options than actually trading. Yes, we still trade and yes, we like money and yes, we trade our own accounts. But when you write us and tell us your success stories then we know we have a happy subscriber.

Look. We wanted to create this service to teach people how to trade options and find trades. The picks we provide are a bonus and we realize there are subscribers who want us to do the work which is cool. If we make them money maybe they will tell their friends about us. The bottom line is that we want you to make money and we don’t want you to be afraid of options or some of the “transgressions” you may have. (Insert Tiger Woods joke here…)

We have updated all of our current trades before we head out for the weekend and we will be back Sunday night with the Weekly Wrap…

Tags: call option trading, chicken option trades, Covered Calls, momentum stock option trading, option trade picks, option trading online, options blog, options mentoring, options newsletters, options track record, put option trading, Rick Rouse, stock option trade pick service, straddle option trades, strangle option trades, support and resistance levels, triple-digit option trades
Posted in Market Commentary, Money Management, Option Trades, Sectors, Strategies, Trading Psychology, Trading Tips, Yahoo / Microsoft | Comments Off

Dow Having Trouble Holding 10,000

Friday, October 23rd, 2009

12:55pm (EST)

Despite some solid earnings report, the market is struggling to end the week on a high note.

We are at the heart of earnings season and this week has been full of good news and good trades if you picked the right options. It’s no secret that earnings can move stocks but picking the right stock and the right option is an art. The great thing about option investing and taking these types of trades is that you don’t have to risk a lot of money to make an incredible return. In fact, a 5% move in the STOCK can easily return over a 100% on an OPTION. Of course, these types of trades are all-or-nothing because if you are on the wrong side you can lose a major portion of your investment.

Not only that, a company can report great earnings and give tempered guidance which sometimes sends the stock reeling. For the current quarter, we said weeks ago the key would be revenue growth and the good news is we are seeing that. Although we didn’t take this trade, we thought we would show an you an example of just how powerful an earnings announcement is and how much of a return or loss you can expect if you trade these types of events. We profiled a Nike (NKE, $63.69, down $1.49) earnings trade a few weeks ago in the Members Area that returned our subscribers up to 175% but we didn’t see this one coming from Microsoft (MSFT, $28.39, up $1.80).

We mentioned Microsoft’s earnings this morning and yesterday in the 1pm update but didn’t recommend a trade because the stock has not traded well the past few quarters after the earnings announcements. This stopped us from buying any call options. However, it certainly wasn’t a stock we felt comfortable shorting or buying puts because the stock has been in an uptrend albeit a slow one and we didn’t think there was any money there either way.

Well, as you know, Microsoft crushed it and its stock is up 7% today. Not bad, but let’s look at how the options did. Remember, I told you a 5% move in the stock gets you a 100% return or a 90% loss with the right and wrong options. Well, wait until you see what a 7% move in a stock does…

Microsoft shares closed at $26.59 yesterday so at 3:30pm (EST) you could have bought options based on which way you thought the stock was going to move. You did your research on the company and figured they were going to have a blowout quarter and you knew XBox could be a key catalyst to an earnings and revenue surprise. You figured the stock could move 5% so you go long or buy call options.

Folks, the MSFT November 27 calls (MSQKB, $1.62, up $0.97) are up 150% today. These were the closest call options that were “out-of-the-money” and you could have picked them up for 65 cents yesterday. A 10 lot trade would have cost you $650 yesterday and as of today you would have over $1,600. That is $1,000 in less than 24 hours.

Now, let’s look at the other shoe…

Let’s say you thought Microsoft was going to report a lousy quarter or say some negative things and you thought the stock was going to drop. You could have went slightly out-of-the-money and found some cheap put options for about the same price as the call options you were looking at.

The November 26 puts (MSQWA, $0.12, down $0.55) closed at 67 cents yesterday so your $670 is now worth $120. That is a loss of 82%. Now, you could still hold onto to these put options but they will probably go to zero because the stock is unlikely to trade back down to $26 by November 20th which is when the options expire. But they could…the stock would have to get to $25.35 for you to break even, if not, your options are worthless and you lost 100% of your investment.

Earnings trades are bets but just like most things in life you can put the odds in your favor by doing some research. Again, things may not go your way on all of these types of trades but often times you can find the companies that are going to wow Wall Street and make a sweet return.

We do play earnings and there are probably a few trades that we will be looking at next week. Most of our trades are profiled BEFORE or AFTER earnings as we try to eliminate a little of that risk and the emotion of one-day trades. However, we see some really good opportunities on a few companies that could provide for some excellent trades for next week.

Having said that, there is TWO trades that we are playing today and current subscribers can check the Members Area RIGHT NOW for the trade. One is a speculative play, the other is an earnings play. The company reports earnings on Monday BEFORE the bell and traders are building positions before the weekend.

We will talk about them more in the Weekly Wrap and in the Members Area on Monday morning. If you are not a current subscriber you can signup NOW to get instant access or over the weekend to get the Weekly Wrap and Monday morning’s Current Trade updates…

As we head to press, the Dow is down 72 points to 10,008…

Tags: momentum options, MomentumOptionsTrading.com, options help, options mentoring, options track record, options trading, trading options
Posted in Company Commentary, Earnings, Hot Stocks, Market Commentary, Option Trades, Sectors, Strategies, Trading Psychology, Trading Tips, Yahoo / Microsoft | Comments Off

Wednesday’s Wake-Up Call

Wednesday, July 29th, 2009

9:00am (EST)

Futures are pointing towards a negative open after Durable Goods orders came in lower than expected. Dow futures are down 38, S&P 500 index futures were down 6, while Nasdaq futures were down 7.

I mentioned the bulls were trying to hold Dow 9,000 and with earnings season nearing a close the bulls are looking for the next catalyst.

Bank of America (BAC, $13.34, up $0.25)

November 15 calls (BYOKO, $1.00, up $0.05)

Entry Price: $1.50 (6/12/09)
Exit Price: $2.25
Return: -33%
Stop: If BAC falls below $11, close the position.

Action: This position has gained over 30% since Sunday night’s Weekly Wrap but is still down from an entry price of $1.50. Open Interest continues to build in the November options as the 15’s have an OI of over 100,000 contracts. That means there are a lot of bets being placed at the $15 strike and they are very liquid. This is great if you are trading 50 or 100 lot contracts. I still like current positions at these levels.

For our new subscribers, BofA was below $5 on March 11th when I recommended a couple of call options, May 6’s and July 10’s. They returned 400% and 500% as BofA stood at $10 a month later. If you do the math and the stock doubles from here it puts BofA at $26. These calls would be worth $11 and you would have a 1,000% return on you hands. Anything is possible, right? However, all we are looking for is a run past $15 so we can double or triple or money. (PS, if you haven’t gotten my track record for 2009 or 2008, email us by going to the website and sending us a request)

Cisco Systems (CSCO, $21.93, up $0.09)

October 20 calls (CYQJD, $2.50, up $0.05)

Entry Price: $1.50 (6/2/09)
Exit Price: $3.00
Return: 67%
Stop: $2.00

Action: Tech held up well on Tuesday and Cisco traded up to $21.99. The 52-week high is $25.25 which is my target for the stock. The options traded as low as $2.16 so we will keep the $2.00 stop in place.

Green Mountain Coffee Roasters (GMCR, $67.50, down $0.25)

August 80 calls (QGMHP, $1.50, down $0.10)

Entry Price: $1.40 (7/27/09)
Exit Price: $2.10+
Return: 7%
Stop: $0.70

Action: The goal is to be out of this trade by the closing bell. We will be watching this one all day as the company reports earnings after the bell today. These options are inflated meaning the premiums are rich so be careful with this one. If you can escape with a gain, even if it’s 10%, it may be better than leaving this one open.

Buffalo Wild Wings (BWLD, $39.32, up $2.21)

August 40 calls (BQUHH, $1.25, up $0.01)

Entry Price: $1.10 (7/27/09)
Exit Price: $1.50 (7/28/09)
Return: 36%
Stop: CLOSED

Action: I told you the best time to sell is at the open and these calls traded as high as $1.60. The first 20 minutes are when the sharks are in the water and we all know sharks usually win these battles. I can’t stress this point enough to the beginners we have on board. If a stock is hot, the best time to sell is shortly after the bell because all of the rookie options traders were in there BUYING these call options on Buffalo reporting and beating Wall Street’s estimates. Each earnings trade is different as you will see and it’s best to have a plan going in and an exit on when to close the trade.

This trading tip is invaluable.

Cerner (CERN, $64.18, down $0.81)

August 70 calls (CQNHN, $1.20, down $0.15)

Entry Price: $1.30 (7/27/09)
Exit Price: $2.20
Return: -8%
Stop: $0.65

Action: Cerner got a 50 cent pop at the open and these call options trades as high as $1.50. The company reports after the bell on Wednesday.

Another point I want to make is how some option traders will only look for a 20 or 30 cent move in an option and then sell it. If you buy 20 contracts and an option goes up 30 cents in price you have made $600. Do it twice a week and you are making $50,000 a year. Hard but not impossible.

I’m throwing all of this information and tips at everybody this morning because I’m trying to teach you how to use options and the many different ways people trade them. What kind of profits you want to make is up to each trader. And each trader’s strategy is different. Some people like straddles and strangles, some investors write covered calls while others get naked. “Naked” option trading is not my game but all it means is that you are taking on a ton of risk.

Microsoft (MSFT, $23.47, up $0.36)

August 23 calls (MSQHQ, $0.98, up $0.23)

Entry Price: $0.78 (7/27/09)
Exit Price: $1.60
Return: 26%
Stop: $0.30

Action: Well, well, well…Yesterday I said “these calls options are technically in-the-money and we only need the stock to recover by 5% to make a decent return off of the trade.” Microsoft was in the red all morning but made a comeback along with the Nasdaq. The stock only made a 1.5% gain but the options gained 30%. Again, it was a short-term trade and I wanted to be out Friday. Hopefully we can ride this one a little higher but 25% is 25%.

IBM (IBM, $117.28, down $0.35)

August 105 calls (IBMHA, $11.69, down $1.17)

Entry Price: $3.40 (7/14/09)
Exit Price: $12.00 (7/24/09 1/2 the trade was closed)

Return: 253%
Stop: $11.00

August 115 calls (IBMHC, $3.70, down $0.40)

Entry Price: $1.05 (7/16/09)
Exit Price: $2.00 (7/24/09 1/2 the trade was closed)
Return: 281%
Stop: $2.00-$2.25, raise to $3.25

Action: We closed half of each side of these call options to make it a risk free trade from here on out. Our stops are in place and you’ll notice I raised the stop on the August 115’s. IBM has made a nice run but $118 is the new hurdle. The stock was down 60 cents in after-hours so we may be close to getting stopped out on the other half of the trade.

Visa (V, $66.30, down $1.89)

August 70 calls (VEHHN, $1.30, down $0.50)

Entry Price: $1.60 (7/27/09)
Exit Price: $3.20
Return: -19%
Stop: $0.80

Action: Visa will no doubt be the crown jewel of announcements on Wednesday. On Monday, the company said it would “continue to meet or exceed” Wall Street’s expectations. The numbers we want to watch for after the close is 64 (cents a share) and $1.63 billion on the revenue side. Warning: If Visa misses or doesn’t impress the Street then these options will drop like a rock if the stock heads south.

DryShips (DRYS, $6.79, down $0.29)

August 7 calls (OOCHJ, $0.50, down $0.15)

Entry Price: $0.25 (7/21/09)
Exit Price: $0.65 (7/27/09)
Return: 160%
Stop: CLOSED

September 7.50 calls (OOCIU, $0.60, down $0.13)

Entry Price: $0.35 (7/21/09)
Exit Price: $0.70
Return: 71%
Stop: $0.40, raise to 50 cents

Action: I don’t like giving gains back which is why we closed the August calls on Monday for a 160% return. The September call options had given us over a 100% gain and our stops were set just above our entry point to protect profits. I didn’t like the action in DryShips yesterday which is why I raised the stop. These calls hit a low of 45 cents on Tuesday so if DryShips doesn’t rebound we will let the market take us out with a small profit. This is exactly why we sold the August options. DryShips is a very liquid stock capable of making huge moves but let’s take what the market gives us.

Ford (F, $7.14, down $0.13)

December 6 calls (FLI, $1.63, down $0.07)

Entry Price: $1.25 (5/18/09)
Exit Price: $2.50
Return: 30%
Stop: $1.00, raise to $1.45

December 7 calls (FLJ, $1.06, down $0.01)

Entry Price: $1.00 (5/18/09)
Exit Price: $1.50-$2.00
Return: 6%
Stop: 50 cents, raise to 75 cents

Action: It is looking as though Ford is trying to build a solid base at the $7 level which would be perfect for this longer-term play. If we can build a base at $7 then move towards $8-9 then were are golden.

Check back after lunch for an update on today’s action.

Rick Rouse

Rick@MomentumOptionsTrading.com

Tags: Bank of America, Buffalo Wild Wings, Cerner, Cisco Systems, DryShips, Ford, Green Mountain Coffee Roasters, IBM, Microsoft, Visa
Posted in Earnings, Option Trades, Stock Earnings, Strategies, Trading Tips, Yahoo / Microsoft | No Comments »

Weekly Wrap for 4/19/09

Sunday, April 19th, 2009

1. Commentary
2. Dendreon’s Next Move
3. Olin – Under the Radar
4. Earnings
5. Current Trades
6. Monday Morning Playbook
7. Closing Thoughts

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1. Commentary

The market extended its winning streak to six straight weeks although the gains were marginal. Still, the streak was in jeopardy after the pounding we got on Tuesday and part of Wednesday as the Dow slipped below 8,000. However, we got a turnaround late in the day on Wednesday that carried through for the rest of the week. At one point on Friday, the Dow hit a high of 8,250.

The bears showed their faces after Goldman Sachs (GS, $120.60, down $0.59) and Intel (INTC, $15.60, down $0.29) reported earnings and both stocks fell hard following the announcements. However, both stocks ended only slightly down from where they started the week despite reporting stellar profits. Goldman hit $130 on Monday, then fell to $113 on Tuesday and closed above $120 everyday afterwards. Intel started the week off at $15.98.

With April options expiring on Friday, I thought we would see more volatility then we did. I used “option expiration week” to show you how to make some incredible gains using cheap out-of-the-money options. We got into the Goldman Sachs April 140 calls on Monday morning and were out by the afternoon for a 229% profit. The calls were $20 out-of-the-money and the options were trading for 70 cents. Our exit was $2.30.

We rode the Intel April 17 calls from 16 cents to 32 cents for a quick 100% return and there were four Citigroup (C, $3.65, down $0.36) trades that did rather well. The Citigroup April 3 and 4 call options returned 257% and 333% respectively. Overall, there were nine trades that were profiled last week for this special event and all of them returned over 100%. Now that’s making money.

For the week, the Dow added 47 points to finish at 8,131, up 0.6% for the week. As far as the other indexes, the Nasdaq added 20 points, or 1.2%, and finished at 1,673 while the S&P 500 was up 1.5%, or 13 points, and closed at 869.

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2. Dendreon’s Next Move

It was a great week for Dendreon (DNDN, $17.99, up $0.96), a stock I have been talking about for a month, after they gave the market some details concerning its drug, Provenge. Although we didn’t get any numbers concerning the survival rate, the company’s CEO delivered an upbeat message which was enough to lift the stock from $7 to over $22 last Tuesday.

Many of you emailed to thank me for the trade and I was glad that some of you took my advice. The April 10 call options soared from a closing price of 20 cents on Monday to over $11.00. That folks is a 2,650% return. Incredible.

When I first talked about the trade back in March I had said it was one of those trades that comes around once or twice a year and it was by far, the biggest winner I have profiled this year. My point is that you shouldn’t always expect these kinds of returns because they just don’t happen.

When the news came out, you should have sold all of your position because the April calls were at their highest point on Tuesday. I also suggested you could roll positions out until August by using the August 10 calls (UKOHB, $9.30, up $1.35 which were going for $2.20 last Monday. They are up over 300%.

I also recommended the May 25 calls (UKOEE, $1.75, up $0.50) on Friday morning at $1.25.

Naturally, your next question is “where is the stock headed”?

Two years ago when we went through this same process, the stock hit a high of $25. That is my first target. However, things are different this time. I don’t think the company’s CEO comes out and says the things he does without the survival data being stronger than what it is. If that were the case and the data isn’t as revealing then the stock could get hammered.

It’s still a crapshoot on where the stock will trade and technical charting does not help. This stock is news driven and it is impossible to get a feel on the daily gyrations that it makes.

If the news is so unbelievable, then there is a chance we go higher than $25. The bottom line is that approval of the drug could still be a long wait but there could be the possibility of a larger drug company making a pitch for Dendreon.

Of course, this is all speculation on my part but I do think we head higher from here. The big date is set for next Tuesday and I still want to be in Dendreon when that news comes out. Is it risky? You bet.

It’s always dangerous to go back to the well after such a big move in a stock but I’m still thirsty. Obviously, don’t go overboard with the May 25’s if you do decide to go long and you could always pick up a few cheap out-of-the-money put options for protection. The May 10 puts (OKOQU, $0.39, down $0.08) could be used just in case the news isn’t all that rosy.

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3. Olin – Under the Radar

I stumbled upon Olin (OLN, $15.97, down $0.01) over the weekend in my quest for another profitable option trade.

The main thing you need to know about Olin is that is basically has two businesses. One is its chemical business (chlorine…think pools) and the other is ammunition. I recently did a write-up on Smith & Wesson (SWHC, $6.61, up $0.12) and profiled an option trade that doubled in 10 days back in early March.

I’m not sure if lightning will strike twice but there is a chance that Olin could be that bolt.

The company’s Winchester segment is the part of the business that has me stoked. In case you haven’t heard, there has been a major shortage of ammo and demand is at a feverish pitch. Some guns shows are only allowing customers to buy two boxes per person. The price of guns has nearly doubled in a year on some models and you can bet ammunition has followed suit.

The chemical business had weighed on Olin’s share price up until March which is when this “ammo shortage” started. Sure enough, when I looked at the chart, the stock started its move from $10 to current levels which is about a 60% pop. Naturally, some of that has to do with the market moving up for five-straight weeks but is there something else here? Maybe.

In January, when the company reported its 4Q earnings, it said it expected 1Q’s profits to come in between 50 and 65 cents a share. On March 18th, Olin raised that guidance to 60-65 cents a share. That means they are expecting earnings at the higher end which could also mean a surprise.

Since they have given guidance and then updated that guidance again, that means its Winchester unit is doing really well. In fact, Olin had this to say when it raised guidance: “Demand in our Winchester business has remained strong and we now expect Winchester to achieve a record level of quarterly earnings in the first quarter”…

Bingo. I like the sound of that but I don’t like the chemical Gremlin that could affect the trade. In any event, instead of doing a full position on this trade, maybe do half positions. Given the punishment stocks have gotten for actually beating earnings recently, this trade carries those same risks.

However, this is a low-profile trade so hopefully Wall Street doesn’t catch on to this one. I’m pretty sure there aren’t that many analysts that cover the stock so we should be good. I’m watching the May 15 calls (OLNEC, $1.60, unchanged) and the May 17.50 calls (OLNEW, $0.50, down $0.05). Set a limit price to enter the 15’s at $1.20 and the 17.50’s at 30 cents.

The chart shows strong resistance at $20 and it is clearly visible. The ideal situation would be a bounce from these levels back up to $20 before earnings on April 28th. Then we could get out before the event. If the call options trade higher from here and we don’t get filled Monday or Tuesday then cancel the trade.

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4. Earnings

Monday: Bank of America (BAC, $10.60, up $0.26), Boston Scientific (BSX, $9.02, down $0.03), Eli Lilly (LLY, $33.75, up $0.48), Halliburton (HAL, $18.78, up $0.21), Hasbro (HAS, $27.91, up $1.72), International Business Machines (IBM, $101.27, down $0.16) and Texas Instruments (TXN, $17.97, up $0.17).

Tuesday: Bank of New York Mellon (BK, $30.22, down $0.99), BlackRock (BLK, $135.92, down $0.68), Brinker International (EAT, $19.33, up $0.55), Broadcom (BRCM, $22.93, down $0.13), Capital One Financial (COF, $17.85, down $0.01), Caterpillar (CAT, $32.29, down $0.42), Coca-Cola (KO, $45.02, down $0.08), Cree (CREE, $26.91, up $0.04), Gilead Sciences (GILD, $44.69, down $0.16), Lockheed Martin (LMT, $76.94, down $0.64), Merck (MRK, $25.73, down $0.12), Norfolk Southern (NSC, $37.79, up $0.57) and Yahoo (YHOO, $14.39, down $0.04).

Wednesday: Altria Group (MO, $16.99, up $0.01), Apple (AAPL, $123.42, up $1.97), Chipotle Mexican Grill (CMG, $79.25, up $0.24), eBay (EBAY, $14.39, down $0.02), F5 Networks (FFIV, $26.70, up $0.09), Freeport-McMoRan (FCX, $43.40, down $0.34), Kimberly-Clark (KMB, $50.24, up $0.46), Qualcomm (QCOM, $40.98, down $0.66), St. Jude Medical (STJ, $36.20, up $0.44), VMware (VMW, $30.70, up $0.51) and Wells Fargo (WFC, $20.26, up $0.81).

Thursday: Amazon.com (AMZN, $78.05, up $0.80), American Express (AXP, $21.81, up $1.12), Amgen (AMGN, $47.07, down $0.11), Black & Decker (BDK, $33.53, up $0.22), Cheesecake Factory (CAKE, $14.33, down $0.32), ConocoPhillips (COP, $40.17, p $0.38), EMC (EMC, $12.81, down $0.05), Juniper Networks (JNPR, $18.49, down $0.70), Microsoft (MSFT, $19.20, down $0.56), Netflix (NFLX, $48.83, up $0.56), PepsiCo (PEP, $52.13, up $0.17), PNC Financial Services (PNC, $41.60, up $2.54), Potash (POT, $86.77, down $0.55), Rambus (RMBS, $10.20, unch.), Raytheon (RTN, $42.51, down $0.77), Union Pacific (UNP, $48.29, up $1.11) and Zimmer Holdings (ZMH, $42.96, up $1.56).

Friday: 3M (MMM, $53.81, down $0.95), Arch Coal (ACI, $14.89, up $0.25), Ford Motor (F, $4.00, down $0.16), Honeywell (HON, $31.49, unch.), Schlumberger (SLB, $46.57, up $0.57) and Xerox Corporation (XRX, $5.92, up $0.17).

**************************************************

5. Current Trades

Dendreon (DNDN, $17.99, up $0.96)

May 25 calls (UKOEE, $1.75, up $0.50)

Entry Price: $1.25 (4/17/09)
Exit Price: $1.75 (open)
Return: 40%

August 10 calls (UKOHB, $9.00, up $1.05)

Entry Price: $2.20 (4/13/09)
Exit Price: $5.00 (open)
Return: 309%

The last thing I said Friday was to start small positions if you are already out of the other Dendreon trades. The August options should have been picked up on Monday when the stock was gaining another $1 and volume was surging. I still think we have a good shot at the mid $20’s when the company presents its research at a conference on April 28. The CEO’s body language convinced me that the stock was going higher. You can check out the interview on YouTube in case you missed it. There is no stop on the May calls and a $5 stop on the August calls.

International Business Machines (IBM, $101.27, down $0.16)

IBM May 110 calls (IBMEB, $1.15, down $0.10)

Entry Price: $1.00 (4/16/09)
Exit Price: $2.00 (open)
Return: 15%

We got into this position on Thursday before Wall Street started talking about next week’s earnings so we got and early jump ahead of the bulls who were buying on Friday. The calls traded to a high of $1.25 but pulled back slightly before the close. IBM announces earnings after the bell on Monday. Check the blog sometime during the day for an update.

NetApp (NTAP, $17.59, down $0.38)

May 17.50 calls (NULEW, $1.15, down $0.35)

Entry Price: $1.10 (4/9/09)
Exit Price: $2.20 (open)
Return: 5%

May 20 calls (NULED, $0.30, down $0.20)

Entry Price: $0.40 (4/9/09)
Exit Price: $0.80 (open)
Return: -25%

NetApp made a run at $18 Thursday and Friday but faded by the closing bell. The May 17.50’s traded to a high of $1.50 while the May 20’s traded to a high of 55 cents. I was hoping the call options would hold up and hopefully we bounce back this week. Set stops at 55 cents for the 17.50’s and which point you would also close the 20’s if it were hit.

ValueClick (VCLK, $10.02, up $0.21)

May 10 calls (QCSEB, $0.80, up $0.15)

Entry Price: $0.75 (4/9/09)
Exit Price: $1.50 (open)
Return: 7%

September 12.50 calls (QCSIV, $0.80, unchanged)

Entry Price: $0.80 (4/9/09)
Exit Price: $1.60 (open)
Return: 0%

ValueClick traded above $10 last Monday morning and struggled the rest of the week to get back there. Stops are set at half our entry prices.

**************************************************

6. Monday Morning Playbook

There are a couple of trades I’d like to get into Monday morning. One is Amazon.com, the other is Yahoo. The market has been in a strong uptrend and I like Amazon on the long side and, for protection, I like Yahoo. Over the past few weeks I have profiled mostly call options and that has worked. But it is never a bad idea to have some protection in case the market does fall back.

Having said that, these two companies have clearly gone in opposite directions. Last week, I went out of my norm and recommended a number of profitable plays on option expiration week. We used cheap “out-of-the-money” options and captured triple-digit returns in a matter of a day or two. Although very profitable, you would have had to follow me 24/7 to keep up with the activity we had last week. Kidding, but I was busy in the blog updating the action.

This week will be pretty much the same so check the blog daily. I usually post once before the market opens (9:00am) and once or twice between 10am and 2pm. Sometimes I’ll post after the market closes. All times are EST. The blog can be found by going to:

Blog.OptionsMentoring.com

As far as Amazon.com, they will be reporting earnings on Thursday. We were very profitable playing the April 80 calls on Amazon from March 27 through April 3. We got into these calls at 90 cents and we were out when they hit $2.35 for a 160% return.

The stock has held up extremely well even with the “downgrade” bombs being dropped on it weekly. One brokerage firm issued a “sell” rating on the stock last Wednesday which pushed the shares down $4 that day to a low of $73.50 but by Friday, Amazon’s share price was pushing $80 again.

The stock continues to turn heads and Wall Street analysts are growing leery of its lofty share price. The company surprised Wall Street with an unexpected earnings gain last quarter and has gained 50% for the year. However, Amazon is firing on all cylinders right now. It has a hot new product with the Kindle and sales should be strong. Amazon does not disclose sales figures and expect them to beat on this front. Also, Amazon is starting to steal eBay’s lunch money by focusing on newer items and offering free shipping.

The 52-week high for the stock is $91.75.

So do we get there? There are some risks with Amazon’s numbers and maybe the shares can get into the $80’s before earnings. We have four days before then so try to get the May 90 calls (ZQNER, $1.38, down $0.05) on Monday morning shortly after the market opens. If the calls are lower when we open then try and target $1.30 or less as an entry point. If the call options open higher, don’t pay over $1.50 for them.

With Yahoo, they announce earnings on Tuesday. The company is still a mess and it’s hard to short a stock or buy puts when there has been some momentum in a stock. Additionally, there is a “whisper number” of 10 cents a share being floated which would beat estimates by a penny.

This is one of those “gut feeling” calls, or should I say puts, that I have going into this week. For what it is worth, the May 14 puts (YHQQP, $1.04, up $0.01) could make a quick double if Yahoo fails to impress the Street. Even if Yahoo announces something special, the position has a lot of time to take shape in case Yahoo powers higher from here.

Try to get into the put options for under a $1.00 but do not pay over $1.10 for them.

There may be a few more plays this week but we have our fingers in a lot of pies right now with our other open positions. I try not to hold more than three positions at a time, personally, but there have been a lot of good trading opportunities lately.

**************************************************

7. Closing Thoughts

Last week I spent some time talking about trends and the current market environment. The “dip” that so many talking heads and analysts are talking about hasn’t come (yet) and more are piling on calling for a correction. Of course you are going to look good if you call for a pullback after we have rallied for six straight weeks but many on Wall Street have said the rally was done three weeks ago.

Last week I went out on a limb and said that we could still go higher with a pullback in May but that could come sooner, it might not come at all, or it could come this week. I could care less because when it does we will switch gears. But for now the trend has been our friend.

We saw a lot of companies beat earnings last week, sell-off, then we watched the stocks bounce back or hold steady after an initial sell-off. There were a few stocks that powered higher as a result of good earnings and the fact that the market held up along with the major stocks of the companies that reported was another bullish sign.

So far, over 50 companies in the S&P 500 have reported earnings and over 30 have beaten Wall Street’s expectations. This means that 60% of the companies reporting are beating their numbers. Granted, the bar has been lowered but this is also another bullish sign.

The start of the week was not all that great but the market held support as the bears roamed around through Wednesday. The Dow held at 7,800 (7,600 is further support) and the S&P 500 held 825 (800 is floor support). The real story is the Nasdaq which is now up 6% YTD. Tech has been leading us higher and for now that trends remains in tact.

This week will be another huge test for the market because we will get the bulk of the earnings announcements and a key housing report. Existing Home Sales come out Thursday and Durable Goods Orders will be released on Friday.

If IBM can get the ball rolling on Monday then we could see the market extend its winning streak to seven straight weeks. The January high for the S&P 500 is 943. The Dow reached a high of 9,175. At current levels, a 10% move from both would get them right around their highs.

That might be asking a lot and it’s hard to say if we get that much of a pop. With so much on the line it does appear this week will be a true test for both the bulls and bears.

Rick Rouse
Rick@OptionsMentoring.com

Tags: Citigroup, Dendreon, Goldman Sachs, Intel, International Business Machines, NetApp, Olin, Smith & Wesson, ValueClick
Posted in Google, Market Analysis, Option Trades, Stock Earnings, Weekly Wrap, Yahoo / Microsoft | No Comments »

Blog 500!

Thursday, February 19th, 2009

Well folks, its been nearly a year since we started the blog and today’s entry is my 500th. I guess that means one or two things. I talk too much or there has been a lot going on with the market. I guess you could say both but what is really cool about the blog is that in seconds, it can take you back to what the market was doing on whatever day you pick.

This information is so valuable and I refer to a lot of my notes by searching this site. If you ever want to get a quick history of anything I have written about, like Google (GOOG, $353.11, up $10.45) or any other stock that you might be researching, just type it in the “search” box. Want some cool Watch Lists to track certain sectors that have three or four of the top stocks in that industry? Just click on the “Watch Lists” link.

Want to relive the hard fall Merrill Lynch or Lehman Brothers took? Just type them in the “search” box. Wanna check how oil flowed from $40 to nearly $150? Yeah, you get the hint…

We started the blog to provide you with another resource to learn about options. I wanted to take this time to thank all of you who check in to keep up to date with the stock market or to read what I am rambling about. I’m working on some other cool stuff to make the blog more interesting and valuable. I’ve been researching everything I have blogged about and the option trades I have profiled and I’m putting everything together in a spreadsheet.

What you should know about the trades is that I like to trade options on stocks I know. You will see how we have played the same stock over and over, up and down, with options that have made triple-digit moves. Of course, the portfolios are for informational purposes but you should use them to your advantage. It only takes a little bit of money to make a lot of money in options. I’m working hard to get this information out by the end of the month.

Anyways, feel free to drop me a line and let me know your thoughts on the blog, options, or the market in general. I really want to hear from everyone who reads the blog even if it’s to say “Happy 500!”. Send me your ideas, thoughts, and questions and I will try to cover most of the topics in the future. I won’t be able to answer all of you back but I do try and respond to a lot of them and I do read all of your emails. Thanks everybody for making the blog a huge success!

Rick Rouse
Rick@OptionsMentoring.com

Tags: Blog 500
Posted in Apple, Commodities, Company Commentary, Earnings, Economic News, Financial Stocks, Gold, Google, Hot Stocks, IPO's, Market Analysis, Mergers and Acquisitions, Oil, Option Trades, Sectors, Stock Earnings, Strategies, VIX, Watch Lists, Yahoo / Microsoft | No Comments »

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No fancy spreads. No iron condors. No need to watch the markets all day long.

LAWRENCE O.
Hey Rick! Here is an update on what your picks have done in my accounts.

1) Great call on the JoyG March 55. I bought when you said, then bought again on one of the dips. Booked 80+% profit. Made enough to pay for your service for years to come.

2) Also booked profits on your Berk Feb 74 (80%) and threw a major chunk of change at the March 75’s (190+%). I would have never known that Buffet's stock had split if it weren’t for your service. Bought the shares also for the long haul. Won’t look at them for another 20 years. Great job on getting us in before the indexes did.

3) Took profit on your Imax March 12.5. 20 cent trailing stop at 1.90 yesterday. Not sure what the profit on that was, but profit is profit.

I see that you took a loss on some of these. It’s all good. I look to trade your “ideas” not your exact calls. I THANK YOU! For your ideas and commentary. Keep up the good work. And keep those ideas coming.

C.J.
Loving this subscription so far! I got into the BRK feb 76 calls the day you talked about right before the split...now up over 300% (0.70 to 2.475)! Keep the good picks coming and let's see some OSIS and EMC upside soon! Just wanted to share my positive enthusiasm on your newsletter...it gives us individual investors great ideas on not only the options market, but also the broader equity market! Case in point is BRK...I can't always read the breaking business news but its easy to read your twice daily updates on my smartphone...helped me get some BRK shares immediately after the split which I will hold for the long haul! Thanks again!

SHAUN
Aloha Rick - Thank you so much for the great CL pick. I am not sure if there was buy-out/merger news or what but at 3PM today Colgate-Palmolive absolutely EXPLODED to the upside, and my calls turned into green candy when they went from 1.40 to 3.8 in a matter of seconds! I even sold a few for over 4.0! Much thanks and keep the solid picks up my friend, honestly. Only a fool would scoff at 267% gains... Peace!

MICHAEL K.
I like the fact that you ask for comments from subscribers. Good customer service. By the way, am enjoying the service so far. Some good
profitable calls. Keep up the good work.

PARAG P.
Woo hoo! Out for 50% on WMT this am. Making up for my depression for getting out of pcln for a 30% gain monday :( you the man! any word on the manual? My friend Mike ( who I sent to your service) told me he emailed you about your integrity in reporting fills. I echo that sentiment big time.. keep it up! Cheers!

JAY P.
Hi Rick, as a new member all I can say is, 'show off' LOL, with PCLN.

MIKE
Rick, I am a new subscriber to your service, and I want to say I am impressed. I am impressed by your results, but more than that I am impressed by your reporting of your fills. You could have easily said you got that Wal-Mart call today for 80 cents, instead you reported 98 cents! Good job and keep it up, I watched the reporting of the fills first, and then I subscribed. Thank You.

TRISH D.
Hi, good morning. I jumped the gun a little on this one (PCLN). But still made $1,675.00 profit!! Very happy!! Keep up the good work!! Thanks.

MIN L.
Hi there, I have joined recently, and I am very happy to tell you that I am up over $10,000 on your picks in a month. I started on 10/7 with the Intel pick. I'll be your member for life. Please don't quit on us. Also, I am learning a lot about options. I didn’t get in your recent APOL and that gold trade and only had one loss on CHK. I appreciate all the DD you do. I enjoy your market commentaries. Best advice site period, and I have tried a few here and there. Again, you guys rock!

JOE G.
Thanks be to Momentum Options Trading for providing me with some fantastic wins. I just started with this service and am up nearly 50% in less than a month. There have been losses, but if I manage them properly, I will continue the best efforts given on the blog (in which there are no complaints). What a great cause for humanity. I feel more confident about my trades and continue to play the wins. Best of all, I am now keeping my regular paychecks in the bank! Thank you!

GREG F.
Rick - I wanted to say thanks for getting me started on the right foot with your service. I have made six trades since starting on October 22, 2009. Five are winners and One loser netting me $6,245. Thanks again and keep the trade recommendations coming.

NOEL
I got into the Nike 60 Call at 1.85, sold at 5.00, also bought a 55 put at 1.05, but got stopped out at .35. What a ride! $2830.00 in the black even with the put. It's right at 100% return. I hope earnings season coming up is going to look like this trade.

TODD F.
Nice call on Nike. I think I'll go buy a pair with my profits! : ) I did the straddle for safety but still made 62% on the trade. Not bad for less than 24 hours. If Goldman is right, then the Nov 70s or 75's could be a steal today.

PAUL H.
What a sweet way to get introduced to Momentum. My first trade based on your picks and it a 2X. Thank you!

NOEL
“Limit order was set at 1.60 on RIMM so it sold. I may have left some money on the table but you can't go broke making a profit. That was a fun trade. Thank you. Good call. I’ve been watching and trading Rick's advice since March. It’s usually a fun ride, but I give him heck when it's wrong to. :) ”

CHRISTIAN
“Your service rocks! I made bank on Dendreon last week! The other thing I have to say is that it took me quite a while to find a REAL options trading service like yours. Most of what’s out there is 99% scam and very sketchy. Momentum Options Trading is the first service I found that I can trust and seriously make money with.”

JOHN
“I made $420.00 on ANF in 2 days. Thanks for the trade and updates on getting out of the trade.”

CHARLES M.
“I did follow a lot of your trades with 1-2 contracts per trade and YTD I’m up 108%. I try not to follow blindly by not entering all of your trades and sometimes entering the ones you don’t. I entered AIG a few weeks ago against recommendation – that one hurt.”

BRYAN C.
“I have been following you for several months and am interested in the new service. I hate to see the free service go away but as they say, “all good things must come to an end”. My ability to join will be greatly influenced by the monthly fee so I’m very curious to see the new prices. Thanks for making April a great month for me and my family.”

JOHN H.
“I have really enjoyed the past month since finding your blog. You have made some great calls. I would appreciate info. on the new options mentoring program. Thanks.”

JEFFREY
“Hi Rick, I have been following your blog for several months now and I would like to be including on the list for your new service and to receive more information about it. And yes I was a Dendreon winner with your tips. Turned $280 into $7700, and literally saved my butt.”

ED
“I made over 6k on your Dendreon trade, and I’m very interested in learning how you pick and trade options. Sign me up.”

GREG
“Rick – Wow what a day! I got in at the Dendreon calls at $2.25. Thanks to for your advice. I appreciate that. This company has a lock on this type of therapy and no one else in the world is close. Kind of reminds me of the type of companies that Peter Lynch and Warren Buffet suggest that investments be made in. Companies that can build a moat around their business model, that allows them to charge a premium for their product or service. In other words - a monopoly.”

KEN
“Hi Rick, Thank you so much for the Dendreon trade, I made almost $10,000 with that trade with a little over $2,000 investment. You have shown me the power of options trading. Again, thank you so much for all your inputs.”

GARETT
“Hi Rick, thanks for the encouragement to play the dendreon calls! did freaking great! Got in the first lot at $1.44 on 3-24-09, sold at $2.45, 70% not bad. Bought it back at $2.30 on 4-7-09 closed out on 4-14-09 for 454% gain! Wow! I love it when that happens. So, thanks the encouragement to get back in when others were saying sell, sell, sell. Keep up the good work.”

TERENCE
“Rick – Thanks for Dendreon – it has made all the headlines today! I missed on RIMM earlier, but I’ve been holding onto DNDN calls since 3rd week March. Of course today it all paid off today, as DNDN rocketed up.”

Archive for the ‘Yahoo / Microsoft’ Category

Market Pops Then Drops

Dow Having Trouble Holding 10,000

Wednesday’s Wake-Up Call

Weekly Wrap for 4/19/09

Blog 500!