12:45pm (EST)
The market is has come off its morning lows but is still in negative territory for the day. The China news really put a damper on yesterday’s rally. The Chinese banks were pressured by concerns of capital-raises and some regulators want higher capital ratios.
As a result, the Dow is currently down 44 points to 10,406 and the S&P 500 is off by 3 to 1,103. The Nasdaq is lower by 11 points to 2,164.
All of the Financial stocks on our Watch List are mostly lower. These stocks have been tricky to trade which is why we are waiting for the storm to pass. We made some great returns when they bottomed in March and reported back-to-back solid quarters but we are in transition with them right now.
We haven’t shorted the Financials either although there are a few that we still think are due for major corrections…American International Group (AIG, $34.37, down $0.91) is still over-inflated and should be a single-digit stock as well as Moody’s (MCO, $23.64, up $0.67). Patience will pay-off as we feel both of these stocks are headed lower at some point in the future.
Another stock we were/ are looking at is a possible option trade in A123 Systems (AONE, $14.75, up $0.22). We did a big write-up on October 21st and we simply blew this one folks. The stock was at $24 and now stands at $14. The straddle option trade would have been a thing of beauty and we do use them every now and again. We are bullish on A123’s long-term prospects but a spat a bad news has investors bailing like rats on a ship. Here we our thoughts a month ago:
“A123 Systems (AONE, $24.63, up $0.11) is the one we want to start watching…like a hawk. Its 52-week high is $28.20.
A few things we like to see are volume and volatility and this stock has both. The average daily volume is over 5 million shares and the option pits are pretty liquid.
The company makes lithium-ion batteries and had high hopes over a year ago as they thought they were closing in on a Chevy Volt contract but eventually lost out. However, they signed a deal to supply Chrysler with batteries for its cars. And the market for these types of batteries is HUGE.
Besides cars, think smartphones and other products…every iPod, iPhone and Apple laptop has a lithium-ion battery. The “new” battery is smaller, more energy efficient, longer lasting, and are effectively replacing the previous generation of nickel metal hydride batteries.
Of course, there is competition in the space but with other car manufacturers joining the race for electric cars, and the transition over to these batteries have dramatically improved the potential market. However, many other would-be competitors have not even begun mass production yet which will play into A123’s hand once demand starts to peak.
A123 will likely play a big role for temporary energy storage for utilities and they were recently awarded a $250 million grant from the Department of Energy to build a manufacturing plant.
On the negative side, the stock could see some selling pressure once their “lock-up period” is up. Typically, when a company goes public, its insiders can’t sell their shares for a certain period of time which is usually 90 days to a year. If a company is full of smoke-and-mirrors or has some skeletons in its closet, company insiders who know about them can’t act on this “inside” knowledge until after the lock-up period has ended. They will start to sell stock before the public learns of any bad news hoping to get out at the top.
Now, I’m not saying A123 is shady or anything, I’m just explaining how the IPO market works.
A123 appears to be a boom or bust company and from the way it has been trading it has become clear there is action in the stock. The key for us will be to watch for an opportunity to get into some options. We might go long, we might go short, or we might do a straddle or strangle trade. However, we have to wait for our opportunity.
Keep this one on your Watch List and when we see a trade, we will alert our subscribers.” (END)
Well, the “hawk” left its perch and we didn’t get into a trade. Bummer.
We are excited about the possibilities of an Apple (AAPL, $204.12, down $1.76) deal in the future but the company has been hit with some bad news of late that has caused a steep drop in its shares.
Fiat recently tinkered with Chrysler’s electric car plans which included A123’s batteries and this has caused some concerns due to the uncertainty. The company also recently announced earnings and posted a $23 million loss but did see an increase in revenue.
On the bright side, electric cars are the future and there is a major push for their development. President Barack Obama’s recent China visit was a good indication that things will happen sooner rather than later. He has called for the U.S.-China Electric Vehicles Initiative to help get the snowball rolling.
We are still uncertain of the direction A123 Systems shares take from here but we would think most of the “bad” news is already priced into the stock.
Only time will tell if electric cars will turn into an avalanche for the American consumer but if you can identify the companies that have their fingers in the pie before it is main stream then there may be some opportunities down the road.
Which brings up a good point.
Most of you know we are working hard to get the “Momentum Options Trading” Playbook (or whatever we call it) ready and it is our trading manual that is aimed at teaching you how to trade options and to find your own trades. The manual will go hand-in-hand with the website and we really believe it is a must read if you really want to understand the market and to get a better “feel” for our trades.
Yes, we are an option trading service but we also want to be your mentor as well. We have repeatedly said we will limit the number of subscribers we are allowing because we don’t want our trades crowded but we also want you to LEARN how to trade options. We have a success rate of 80% on our trades and it isn’t by accident.
We hope that you seriously consider a subscription before we are full. We cover a lot of things outside of the Members Area but today we wanted to bring you a short story on A123 Systems.
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Dendreon Rumors Making Rounds Again
Monday, November 30th, 2009
1:00pm (EST)
It’s been another battle today as both bulls and bears struggle to gain momentum. The Dow opened with a slight loss and traded to a low of 10,273 before bouncing back and touching a high of 10,364. As Wall Street gets ready for the 2nd half of today’s action, the Dow is currently down 30 points to 10,280.
The market got a lift after the November Chicago PMI came in at 56.1, which was better than the 53 estimate that had been expected and is up from the 54.2 number we got last month. It looks like business activity in the U.S. Midwest is picking up.
As far as specific stocks we are following today…
Dendreon (DNDN, $27.33, up $0.09), which is frequently mentioned here at MomentumOptionsTrading.com, is getting a little bump today on rumors that AstraZeneca (AZN, $44.59, down $0.70) is looking at acquiring the company for $40 a share. We have been following this stock for nearly three years now and we have repeatedly said that we think Dendreon is a takeover candidate.
We have also mentioned the market potential of the company’s Provenge drug could be as high as $2.5 billion. The company will also host an Investor Conference on Tuesday from London. Hmmm…it’s too early to draw conclusions but the CEO himself has said they are looking to partner with someone overseas.
Other water-cooler talk we are hearing…Illumina (ILMN, $28.56, down $0.06) could be on Johnson & Johnson’s (JNJ, $62.57, down $0.32) list as an acquisition target. There are rumblings that JNJ could offer up to $38 a share for the company. Illumina has been a potential takeover target for months now and there are several firms on Wall Street who believe the same thing.
It looks like we missed the big move in American International Group (AIG, $29.30, down $4.00) this morning. We have a history with this company as well. In July, we profiled two bearish trades in AIG that made our subscribers 70% and 130%, respectively, on put options. We have been hesitant to go back to the well because of the volatility and the fact that the stock had been making new highs. In August the stock traded to a high of $55.
We had noticed the consolidation in the $35 area recently but today’s break below $30 has our attention. Today’s 12% drop in the shares have been a windfall for option traders. We think there could be further weakness and we take a look at some put options in the Members Area that are up a whopping 360% today!
Tags: American International Group, AstraZeneca, Dendreon, Illumina, momentum stock option trading, option trading online, option trading picks, options mentoring, options newsletters, options track record, support and resistance levels, triple-digit option trades
Posted in Company Commentary, Market Analysis, Trading Tips, Watch Lists | Comments Off