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Wednesday, July 20th, 2011
1:05pm (EST)
The bulls got off to a good start this morning after stellar earnings from Apple (AAPL, $387.51, up $10.66) had Wall Street in a buying mood. The company reported another ridiculous 3 months as they blew by estimates for the 13th straight quarter on strong iPad and iPhone sales. And strong computer sales. And strong download sales of its applications. Well, you get the picture.
There is no need to go over their numbers because it seems like monopoly money but we have counted 7 analyst upgrades this morning with many of the knuckleheads raising their price targets above $500.
Our question is where were you yesterday?
If these so called “analysts” believed in Apple and are hiking their price targets by 25%-50%, why didn’t they say so before their earnings announcements?
Anyway, we don’t trade Apple because it’s a high triple-digit stock which usually carries high premiums. We could have looked at the Weekly options yesterday with the stock at $376 but we didn’t like thesetups. With many analysts actually negative on the stock going into the quarter, there was a chance for a 10% move either way which we figured would have put the stock at $410 or $340.
If you were bullish on Apple before the close on Tuesday, you could have bought the Apple WEEKLY July 400 calls (AAPL110722C00400000, $0.95, down $1.15) for under $2 yesterday and sold them into strength this morning when they hit a high of $2.65.
If you were bearish on Apple going into the quarter you could have purchased the Apple WEEKLY July 350 puts (AAPL110722P00350000, $0.05, down $1.45) at $1.50 but you would be down 96% today. Ouch.
As a strangle option trade, you could have bought the July 400 calls and the July 350 puts but you would still be feeling pain.
As you can see, even the WEEKLY options on Apple are super-priced and inflated which makes trading Apple a tough task unless you are SELLING options. We don’t ever recommend selling an option because it leaves you “naked” but we wanted to show you why we usually don’t trade options on stocks over $100.
Apple ended the quarter with $75 billion in cash and now sports a market cap of $360 billion. By comparison, Exxon Mobil (XOM, $83.64, up $0.01), the world’s largest company by MC, has a market cap of $412 billion but Apple is closing the gap.
Despite the bullish news, investors have been selling Apple near $400 as shares have reached a high of $398. However, if we owned the stock, which is a lot different than owning options, then we would just hold on to it.
As we head into the second half of trading, the market is trading slightly lower as it retests prior resistance levels which are now trying to form support. The Dow is down 15 points to 12,573 while the S&P 500 is lower by a point to 1,326. The Nasdaq is off by 13 points to 2,813.
As usual, we have a ton of information to cover with our ongoing trades so let’s get to it. Subscribers, check the Members Area for the updates.
Tags: AAPL, binary options, call options, futures options, high beta stocks, Hot stocks, momentum options, Momentum stocks, option market, option tips, options, options mentoring, options trading, options trading course, stock market options, weekly options, what are options
Posted in Apple, Earnings, Market Analysis, Market Commentary | Comments Off
Wednesday, July 20th, 2011
9:00am (EST)
Raise your hand if you know who or what the “Gang of Six” is.
It’s been a couple of years but the Gang of Six came back to life and helped the bulls push key resistance levels (once again) as the market finished nearly 2% higher on Tuesday.
The bulls already had some solid momentum going before the bell as sweet earnings from America’s best provided a springboard into the opening bell. The Dow surged to a triple-digit pop right off the bat and held those gains into the afternoon which is when the stampede began.
Although we couldn’t tell you the exact names of all 6 in the group, we do know that the Gang of Six is represented by 3 Republicans and 3 Democrats.
We said in our Weekly Wrap that we expected some kind of compromise between the two parties on the U.S debt crisis and evidently these Cowboys have been working behind the scenes for a few months now.
Some of you will remember the Gang from 2009 which was formed to deal with HealthCare Reform while this party was formed to deal with the U.S. debt crisis. The current group proposed $4 trillion in cuts over a decade which won-over Wall Street but will need to win votes in D.C. before anything becomes official.
Although the bears held resistance, they are now facing a possible breakout after having the bulls on the ropes on Monday. Tuesday’s turnaround only enhances what we warned you of heading into July and that was to expect increased volatility.
After our midday update yesterday, the bulls put it in second gear after hearing the President say Congress was close to raising the U.S. debt ceiling (no surprise there) and presented the backed the Gang’s ideas. With that said, the market stayed strong and the bulls went out long as the indexes closed near their highs for the day.
Believe it or not, the Dow posted its best one-day gain of the year by adding over 200 points, or 1.6%, to close at 12,587. The Blue-Chips reached a high of 12,607 which was just above the 12,600 resistance level we have been outlining for a few weeks. Next stop for the index is 12,800 with a possible shot at 13,000. Short-term support remains at 12,350.
The S&P 500 hammered out a 21 point win, or 1.6%, to finish at 1,326. The bulls did a tremendous job of holding down support at 1,300 and didn’t flinch when we dipped below this level, briefly, on Monday. The S&P closed above 1,325 and will next face tests at 1,334 and 1,350. If cleared, then 1,375-1,400 comes back into the picture but another failed rally could quickly lead us back down to 1,300, or worse.
We saved the best for last because the big story was Tech as the Nasdaq reclaimed 2,800 and 2,825. The index added over 60 points, or 2.2%, to settle at 2,826, just two points off its intraday high of 2,828.
Futures are pointing towards another beautiful open on the heels of Apple’s (AAPL, $376.85, up $3.05) booming quarter. As usual, the company smashed Wall Street’s expectations as analysts were way behind on their estimates, again.
We will go over their numbers later but shares were kissing $400 in after-hours trading last night and those gains have held this morning.
There is more good news galore but the rest is inside our Members Area. Subscribers, check for the updates. Also, we have released a new video for those of you who are trading course members! Be sure to check your email inbox for our work on charting, stocks to watch, and LEAP options. For those of you who would like to see the video, remember, you can get our option trading course, How to trade Options on Momentum Stocks, at no charge (an $899 value!) if you upgrade your membership to a 1-year subscription. Shipping is also included.
For those of you who are not members, we encourage you to subscribe to our 1-year deal because we will be yanking this offer at the end of the month.
We will be back at 1pm with our next update but we may send out Trade Alerts if we see an opportunity to take some profits or add new trades!
Here is how we’re looking: Dow futures (+53), S&P (+7), Nasdaq (+20).
Tags: AAPL, About options trading, Apple's earnings, option trading, stock and option, stock exchange, stock to buy, stock trading, trade online, trading futures, trading online, trading system, what are stock options, what is a call, what is option trading
Posted in Company Commentary, Earnings, Market Analysis | Comments Off
Tuesday, May 17th, 2011
9:05am (EST)
The bears picked up where they left off on Friday as they hit the bulls early and kept the pressure on for much of Monday’s session. There was a brief rally just before lunch as the bulls mounted a comeback but Tech was the weakest link and held back the momentum.
Commodities tried to recover from last week’s steep declines but continued to slip with oil, gold, and silver closing lower while the dollar finished flat after some early weakness.
The downside targets we mentioned in our Weekly Wrap and on Monday morning came into play but held. We also listed additional support levels if they were tested so let’s see where we are at.
The Dow fell 47 points to finish at 12,548 and touched a low of 12,530. If the 12,500 level is taken out than there is further risk down to 12,350. Resistance is now at 12,700-12,800.
The S&P gave back 8 points to settle at 1,329. The close below 1,334 brings 1,325 into play with the index touching an intraday low of 1,327. If this area is penetrated, then expect a test down to 1,300. Resistance is now at 1,345-1,350.
The Nasdaq got whacked for 46 points, or 1.6%, and closed at 2,782. The index kissed a low of 2,779 and stayed in the red for the entire session. The bears easily sliced their way through the 2,800 level and will now target 2,750. This area will be a huge battleground and could determine a change in the trend if violated. Resistance is now 2,825-2,850 over the short-term.
The continued test of resistance appears to wearing on the bulls as they struggle for a breakthrough without any clear leadership. Tech carried the market higher thru the end of April but is leading the way lower. Apple (AAPL, $333.30, down $7.20) and Google (GOOG, $518.42, down $11.13) fell 2% while Amazon.com (AMZN, $192.51, down $10.05) got shellacked for a 5% loss.
We did expect to see some selling pressure going into Monday’s session but we certainly didn’t like the close. We talked about watching for lower Friday/ Monday closes but yesterday’s selloff in the Nasdaq was pronounced and bears watching. Pun intended. Although the S&P and Dow’s losses were kept to a minimum, Tech looked awful.
One of the reasons we are using a mixture of calls and puts for our current batch of trades is because of this reason. If you will notice, many of our short-term puts are in Tech and commodities with a few bullish trades in Healthcare and Consumer Staples. They are working out well. The other bullish trades are dependent on a market breakout but because we expected weakness, we went longer out with a few trades that have August and September expiration dates.
Of course, the market could stay in its current trading range as it continues to test support and resistance, but the longer it does, the more volatile the move up or down will be.
The S&P Volatility Index (^VIX, 18.24, up 1.17) jumped 7% yesterday and we said if 20 is tested than we should see our downside targets come into play. We aren’t there, yet, but Wall Street is getting nervous. Subscribers, check the Members Area for the trade updates.
Tags: AAPL, call options, GOOG, high beta stocks, Hot stocks, momentum options, Momentum stocks, option tips, options trading course, stock market options, strangle option trades, VIX, weekly options
Posted in Market Analysis, Market Commentary | Comments Off
Thursday, April 21st, 2011
9:00am (EST)
It has been a wild and volatile shortened week for the market with today’s action leaving us on the brink of watching a good movie end. Things started off scary on Monday after the major averages got slammed by the bears on an S&P downgrade of U.S. debt. On Tuesday, the bulls battled back and recouped a portion of the losses ahead of the bombshell of scheduled earnings after the close and before Wednesday’s open.
The bulls had a tremendous session yesterday as the major indexes soared 1.5% on the heels of a number of positive earnings surprises which pushed the Dow to new 52-week highs. Although the S&P and Tech are still lagging from hitting their highs, they are close. There is a chance for a continued run higher as the earnings parade continued last night and into this morning. More on this in a minute…
The Dow soared 186 points, or 1.5%, to finish at 12,453. The index touched a high of 12,475 and came within spitting distance of reaching our near-term target of 12,500-12,600. The blue-chips touched a low of 12,093 on Monday which fell in between our downside targets of 12,200 and then 12,000. This represents a nearly 400-point swing from lows to highs this week.
The S&P 500 jumped over 17 points, or 1.4%, to end at 1,330 after reaching a high of 1,332.66. We said to watch for 1,325 (check) and 1,334 yesterday but the index once again ran into trouble at the 1,334 level. This level represents a 100% move from the March 6, 2009 low of 666.79. The S&P reached a low of 1,294 on Monday which really threw us for a loop because we felt the momentum was there for a push down to 1,275-1,250.
The Nasdaq zoomed 57 points, or 2.1%, and settled at 2,802. Repeat…2,802. After failing to close above the 2,800 level for weeks (and months), Tech reclaimed this important psychological level for the first time since mid-February after falling to 2,706 on Monday. This was just above our near-term support of 2,700-2,650 and we also felt Tech would fall through support. We have mentioned there is chance for a run up to 2,850 if support did hold Monday morning and the triple-digit gain off the lows has the index right there.
In fact, here were our thoughts on Monday morning:
“The Dow is up 20 points for April while the S&P 500 is down 6 points. Tech is down about 17 points. So far, April has not delivered the results the bulls have been hoping for as the crosswinds have slammed us back into a trading range. If we pencil in the historic 2% April average gains for the indexes then we get Dow 12,500; S&P 1,355; and Nasdaq 2,820 by month end.
Yes, we do a lot of homework and chart work but it’s pretty crazy how that last paragraph just comes together and makes a compelling argument for one last bull charge as we head into May which happen to be our upside targets. However, a 2% move the other way puts the S&P below 1,300.” (END)
Folks, the last two sentences in the last two paragraphs say it all. We got whipsawed this week.
As far as how things are looking this morning, Apple (AAPL, $342.41, up $4.55) was up $10 in after-hours last night after crushing Wall Street’s estimates. The company reported a profit of nearly $6 billion, or $6.40 a share, versus $3.1 billion, or $3.33 a share, in the year-ago quarter. Revenue came in at $24.7 billion.
Analysts were looking for earnings of $5.39 on sales of $23.4 billion.
It was another solid quarter for Apple which pretty much doubled year-ago results. That’s what happens when you sell over 18 million iPhones, 9 million iPods, 4.7 million iPads, and 3.8 million Macs in a quarter. However, two key things to points out. iPad missed expectations as Wall Street was looking for over 6 million units to be sold but in fairness to Apple, their supply chain wasn’t running at 100%. Also, iPod sales were expected to come in at nearly 10 million so they missed there as well. The company did beat on iPhone and Mac sales.
As usual, Apple sandbagged their numbers going forward and lowered guidance but all of the positives clearly outweigh any negatives. One thing we are disappointed in was the fact there was no stock-split. A 5-to-1 split would get shares under $100. Come on Stevie, give us a split or pay the shareholders a dividend with the $65 billion in cash Apple has in its coffers.
Futures are up so if we get a breakout, we will go over some of our thoughts from February in our afternoon update or Weekly Wrap which comes out on Sunday’s. As we head to press, here is what we look like: Dow futures (+27), S&P (+x5), Nasdaq 100 (+18). Subscribers, check the Members Area for the latest updates.
Tags: AAPL, call options, high beta stocks, Hot stocks, momentum options, Momentum stocks, option tips, options trading course, stock market options, strangle option trades, weekly options
Posted in Apple, Earnings, Market Commentary | Comments Off
Thursday, March 10th, 2011
9:00am (EST)
The market had a lackluster Wednesday as the bulls and bears battled to basically a draw. Both sides made advances into enemy territory but trading was tight with the bears scoring a light victory when the closing bell sounded.
The Dow slipped a point to close at 12,213 while the S&P 500 fell 2 points and settled at 1,320. The Nasdaq was off by 14 points and finished at 2,751.
Yesterday was the 2-year anniversary of the stock market lows which were caused by the financial crisis that rocked Wall Street and the world. The S&P 500 is the most widely followed index and the benchmark for fund managers has doubled from its 2009 low of 667.
The rally has been amazing to say the least and this three week pause makes since if you step back and look at the run the bulls have had. However, the flip side of that coin is that look at where the market was.
When the market is stuck in a trading range it’s hard not to be emotional because you want the trend you were in to continue. As option traders, trading ranges are the one thing that we don’t like to see because options are time sensitive. However, you can offset this by using longer-term options. In fact, you can purchase options up to 2 years out. This helps keeping your emotions in check and as long as the story doesn’t change for your positions then it is easy to sit tight.
We mentioned that we expected a dull to flat rest of the week and the action from yesterday’s session backed that theory up. We have also seen higher lows from Monday’s test of 1,300 for the S&P and to a degree, higher highs. However, we did get our first Friday-Monday consecutive down days this past week which was the first time this has happened since early January.
Although the lower closes weren’t that major, we mentioned this because it can sometimes give you clues on if a trend is changing.
The current uptrend during this 2-year bull run started in mid-September and there were a couple of times in November where the market had a lower Friday and a lower Monday, but again, the losses were small and another run to new highs followed.
March options expiration week is usually pretty bullish and we are planning for a rally but we know the headwinds will be strong. Oil will continue to move the market but we are hoping the Middle East tensions ease and the “Day of Rage” on Friday by Saudi Arabia turns out to me a minor demonstration.
Tech could rebound on Apple’s (AAPL, $352.47, down $3.29) new release of the iPad 2 and if the Financial sector can continue to show some strength then we might be working with something. However, if the turmoil worsens and oil moves near $110, and Apple iPad sales aren’t as strong, then next week could be our sign the market has peaked for a while.
Futures are lower as we head to press, Dow futures are off by 59 points to 12,115 while the S&P 500 futures are lower by 8 points to 1,307. The Nasdaq 100 futures are down 15 points to 2,295.
Tags: AAPL, call option trading, put option trading
Posted in Apple, Market Analysis | Comments Off
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Apple Up, Falls Short of $400 (for now)
Wednesday, July 20th, 2011
1:05pm (EST)
The bulls got off to a good start this morning after stellar earnings from Apple (AAPL, $387.51, up $10.66) had Wall Street in a buying mood. The company reported another ridiculous 3 months as they blew by estimates for the 13th straight quarter on strong iPad and iPhone sales. And strong computer sales. And strong download sales of its applications. Well, you get the picture.
There is no need to go over their numbers because it seems like monopoly money but we have counted 7 analyst upgrades this morning with many of the knuckleheads raising their price targets above $500.
Our question is where were you yesterday?
If these so called “analysts” believed in Apple and are hiking their price targets by 25%-50%, why didn’t they say so before their earnings announcements?
Anyway, we don’t trade Apple because it’s a high triple-digit stock which usually carries high premiums. We could have looked at the Weekly options yesterday with the stock at $376 but we didn’t like thesetups. With many analysts actually negative on the stock going into the quarter, there was a chance for a 10% move either way which we figured would have put the stock at $410 or $340.
If you were bullish on Apple before the close on Tuesday, you could have bought the Apple WEEKLY July 400 calls (AAPL110722C00400000, $0.95, down $1.15) for under $2 yesterday and sold them into strength this morning when they hit a high of $2.65.
If you were bearish on Apple going into the quarter you could have purchased the Apple WEEKLY July 350 puts (AAPL110722P00350000, $0.05, down $1.45) at $1.50 but you would be down 96% today. Ouch.
As a strangle option trade, you could have bought the July 400 calls and the July 350 puts but you would still be feeling pain.
As you can see, even the WEEKLY options on Apple are super-priced and inflated which makes trading Apple a tough task unless you are SELLING options. We don’t ever recommend selling an option because it leaves you “naked” but we wanted to show you why we usually don’t trade options on stocks over $100.
Apple ended the quarter with $75 billion in cash and now sports a market cap of $360 billion. By comparison, Exxon Mobil (XOM, $83.64, up $0.01), the world’s largest company by MC, has a market cap of $412 billion but Apple is closing the gap.
Despite the bullish news, investors have been selling Apple near $400 as shares have reached a high of $398. However, if we owned the stock, which is a lot different than owning options, then we would just hold on to it.
As we head into the second half of trading, the market is trading slightly lower as it retests prior resistance levels which are now trying to form support. The Dow is down 15 points to 12,573 while the S&P 500 is lower by a point to 1,326. The Nasdaq is off by 13 points to 2,813.
As usual, we have a ton of information to cover with our ongoing trades so let’s get to it. Subscribers, check the Members Area for the updates.
Tags: AAPL, binary options, call options, futures options, high beta stocks, Hot stocks, momentum options, Momentum stocks, option market, option tips, options, options mentoring, options trading, options trading course, stock market options, weekly options, what are options
Posted in Apple, Earnings, Market Analysis, Market Commentary | Comments Off