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Tuesday, March 29th, 2011
1:35pm (EST)
The bulls got off to a slow start as they let the bears take the early lead at the open. Futures were pointing towards a flat to slightly higher start but turned negative after our morning update. Economic news was light before the bell and some of the weakness at the start can be attributed to the S&P/CaseShiller Home Price Index which came in at 3.1% for January. The report showed home prices fell in 19 of the 20 largest U.S. cities tracked by the index.
After the open, the Consumer Confidence Index for March also came in worse-than-expected at 63.4. The suit-and-ties were looking for a print of 65. The March reading was also less than the upwardly revised 72 posting that was registered for February.
Despite the news, the market has chugged higher.
The Dow is up 67 points to 12,264 while the S&P 500 is higher by 6 points to 1,316. The Nasdaq is showing an 18 point pop and is at 2,748.
One stock we want to cover today is Apollo Group (APOL, $39.35, down $3.00) which is down 7% after reporting earnings that missed Wall Street’s expectations. The company reported a loss of $64 million, or $0.45 a share, versus a year-earlier profit of $93 million, or $0.60 a share. Excluding the write-downs and estimated litigation losses, earnings would have been $0.83 a share. Revenue fell 2% to $1.05 billion.
Analysts were looking $0.69 a share on $1.03 billion in revenue.
We have been following Apollo for years and we have been pretty brutal on the company’s past shenanigans. We have covered their boiler room atmosphere on how their “counselors” were pushing these “college loans” on anyone and everyone because they were funded by the government.
These types of “colleges” have been around for years and we are sure you have seen Apollo’s University of Phoenix ad promoting a “student” in her pajamas taking online courses. To make a long story short, many of the students are spending the “grants” elsewhere or paying bills and don’t seem too worried about paying back the money.
We profiled a strangle option trade on Monday morning for our Watch List for Apollo Group and here were our thoughts:
“ Apollo reports earnings on Tuesday. We hate the stock and would think a break below $40 is coming. However, Apollo doesn’t always trade this way despite being shady which is why we listed this as a strangle option trade. We are tempted to make it a 2-to-1 put ratio trade but we will probably stay on the sidelines altogether.” (END)
We profiled the April 41 puts (APOL110416P00041000, $2.15, up $0.65) and the April 45 call (APOL110416C00045000, $0.05, down $0.98) which were going for $1.00 and $1.25, respectively. The puts opened at $3.05 and have traded up to $3.20 today which was more than enough to make this a very profitable trade.
Although we haven’t officially released these kinds of strangle option trades for 2011, yet, we have used them in the past. Once we get into April, we are expecting these types of trades to work well during earnings season.
We have a lot to cover in our Members Area so let’s get on it. We will be back in the morning with a full update.
Tags: APOL, Apollo Group earnings, CCI, Consumer Confidence Index, NASDAQ: APOL
Posted in Earnings, Market Commentary | Comments Off
Monday, January 10th, 2011
12:35pm (EST)
The market opened lower on the negative headlines from overseas, which we covered this morning, and the momentum to the downside was strong as the Dow headed towards a triple digit loss shortly after the bell. The index has traded to a low of 11,573 so it didn’t quite hit triple-figures.
We have bounced off the lows but some investors seem to be taking profits ahead of the earnings season which kicks off tonight. Alcoa’s (AA, $16.48, up $0.06) earnings report after the close today will “officially” be the start of 4Q earnings season and Wall Street is looking for a profit of $0.19 a share on revenue of $5.7 billion, on average. The consensus range is for Alcoa to earn $0.16-$0.30 on $5.5-$6.1 billion for revenue so there is a chance the company surprises or disappoints.
Alcoa has posted better-than-expected results for the past two quarters, beating both earnings and revenue estimates. The 52-week high is $17.60 and shares were strong all last week heading into today’s report. We pointed out in our latest video that the company would be announcing today and a call option trade would have worked well last week. For our trading manual, How to Trade Options on Momentum Stocks, we show you how to play earnings but we will probably sit Alcoa’s out. With a recent 20+% pop in the stock, we feel the easy money has already been made.
One group having a rough day is the Educational sector which is getting hammered after Strayer Education (STRA, $118.17, down $35.07) said winter enrollment is off by 20%. We have been warning you to stay away from this sector for years (unless you are shorting it), especially Apollo Group (APOL, $35.89, down $2.09) because of the shady shenanigans they use to enroll people. The entire sector is a joke and the hammer is about to fall as the sector’s debt begins to swell on unpaid student loans.
As we head to press, the Dow is down 44 points to 11,630 and we are looking for 11,600 to hold. There is further support at 11,500 but we doubt things get that crazy today.
The S&P 500 is off by 4 points to 1,267 and has traded to a low of 1,262. After breaking out past 1,250-1,260 last week, this zone should act as support.
The Nasdaq is showing a decline of 5 points to 2,698 and has dipped below 2,700. There is further support at 2,650 but Tech still looks strong.
We have a ton of information to cover this afternoon in our Members Area as one of our trades was stopped out. We had already closed half of the recommendation to protect profits but the other half continued to surge before falling back today. Still, we can’t complain. Our subscribers banked over 180% on the trade.
We will be back Tuesday morning with a full update.
Tags: AA, APOL, call options, momentum options, Momentum stocks, NASDAQ: APOL, NASDAQ: STRA, STRA
Posted in Earnings, Hot Stocks, Market Analysis | Comments Off
Thursday, October 14th, 2010
9:00am (EST)
Good earnings, China, and the Fed’s backing are a powerful recipe…
On Wednesday, the Dow gained 76 points, or 0.7%, to close at 11,096. The index traded to a high of 11,155 and we said 11,150 would come into play on a push towards 11,200 if the rally continued. Two of the Dow’s declining stocks, JPMorgan (JPM, $39.84, down $0.56) and Intel (INTC, $19.24, down $0.53), had great earnings reports but failed to hold onto their gains.
The S&P 500 broke MAJOR resistance and we said we were looking for a break above 1,170-1,175 as the index added 8 points to settle at 1,178. If the momentum continues, the index is easily on track to break the 1,200 level and traded to a high of 1,184.
The Nasdaq once again led the way as it popped 23 points, or 1%, to finish at 2,441. Tech traded to a high of 2,452 which was right on cue with our target of 2,450-2,500.
Since we are on the subject…
The all-time high for the Nasdaq is 5,132 which was hit on March 10, 2000 and closed at 5,046 and 5,048 on consecutive days at the peak. Talk about a quick “double top”. It was all downhill from there of course and here we are 10 years later.
The most amazing thing about the Tom Petty freefall was the fact the index fell a stunning 80% over the next 2 years. Yep, after its peak, the Nasdaq tanked to a low of 1,109 on October 8, 2002 and 1,108 two days later. Talk about a fast “double bottom”.
History is often a good indicator in a lot of forecasts along with charts and if we had to make a prediction, it looks like Tech (Nasdaq) could test 2,600 before another ferocious battle takes place – - if the bulls continue to blow off more steam a decade later.
At any rate, at least you got a free history lesson today on the highs and lows of the Nasdaq.
There are a number of economic reports hitting the wire as we go to press and we will update the economic news in our 1pm update.
Keep an eye on Apollo Group (APOL, $49.50, down $0.48) this morning. The company reported earnings after the bell last night and many of our long-term subscribers know we have been calling for a massive breakdown in this stock.
We have chronicled the company’s shady business practices over the past few years and have traded this one in the past. All of our option trades on Apollo have been put options and we wished we would have bought some cheap, “out-of-the-money” October or November put options on this one before the market closed yesterday.
The company beat Wall Street’s expectations but did not offer guidance going forward as its “predatory” lending practices could be curbed by new regulations. Finally, the company is started to come clean.
As we head to press, Dow futures are higher by 10 points to 11,054; the S&P 500 futures are up 2 points to 1,176; and the Nasdaq 100 futures are showing a gain of 3 points to 2,059.
Subscribers, check the Members Area for the latest trade updates.
Tags: APOL, Nasdaq Approaching Halfway Level of All-Time Highs
Posted in Hot Stocks, Market Commentary | Comments Off
Tuesday, August 17th, 2010
9:00am (EST)
The market ended mixed on Monday as the bulls and bears battled to a draw on what was the second-lightest volume day of the year. The bears held an early advantage as the major indexes dropped nearly 1% after the open but the bulls managed a steady comeback the rest of the day.
As we enter the dog days of summer, we expected volume to dry up, but yesterday’s action wasn’t a good sign if you are bullish. Trading has been light in recent weeks but the bulls will need volume to pick up if they expect to have a sustained rally.
The Dow traded to a low of 10,209 before finishing the day down 1 point at 10,302. We have been mentioning that 10,200 would act as the first layer of support with a possible test of 10,000 should a break below this level occurs. Overhead resistance is at 10,400.
The S&P 500 was up fractionally and settled right where it started the day at which was 1,079. The index traded down to our 1,070 target, making a low of 1,069, which could clear the way for a test of 1,050 again. Short-term resistance remains at 1,100 for the bulls.
The Nasdaq continues to be the most volatile of the major indexes and has been making the bigger moves of late. The index added 8 points to close at 2,181 but touched a low of 2,155. Our near-term targets are 2,150 and then a possible test to 2,050. Tech traded to a high of 2,193 but continues to have trouble with the 2,200 region.
One sector on the move yesterday were the Education stocks which got slammed over regulatory uncertainty. There are concerns the government will impose tighter controls on student loans and Wall Street has been downgrading these stocks in a hurry.
Corinthian Colleges (COCO, $5.22, down $1.44) tanked over 20% and traded 40 million shares, or 10x normal daily volume. The August 7.50 put options (COCO100821P0007500, $2.45, up $.135) zoomed 120% as the stock made a fresh 52-week low.
Strayer Education (STRA, $163.26, down $36.75) got slammed for an 18% loss but the August 155 puts (STRA100821P00155000, $1.75, up $1.20) soared nearly 220%.
Capella Education (CPLA, $60.94, down $9.26) fell 13% but touched a low of $56.44 before rebounding. Now you know why we trade options…
We have been mentioning the Education stocks, specifically, Apollo Group (APOL, $40.98, up $2.04) which bucked the trend yesterday, and their shady business practices for nearly two years now and this bubble is finally popping.
We tried playing options on Apollo back in May and lost 16% after shutting the trade down due to volatility. At the time, shares were at $55 and we knew the stock was setting up to test 52-week lows. We were just a little early at the time but the chart said it all.
The good news is that we took another look at Apollo over the weekend and the selling pressure might not be over. If shares break below $38, we could quickly see a run to the lower $30’s. Currently, the 52-week low is $38.39 and some support should come in at $35, but over the next month or two this stock could lose another 25%.
Futures are pointing towards a slightly higher open despite some less-than-stellar economic news which we will go over this afternoon. Dow futures are higher by 63 points to 10,336 while the S&P 500 futures are up 10 points to 1,087. The Nasdaq 100 futures are showing a 12 point pop and are at 1,832.
Tags: APOL, COCO, CPLA, option picks, stock options trading, STRA
Posted in Company Commentary, Market Analysis, Sectors | Comments Off
Thursday, August 5th, 2010
1:05pm (EST)
We finally got a confession.
After years of whistle-blowing, countless articles, and a few options trades here and there, Apollo Group (APOL, $43.04, down $1.72) finally came clean to us and Wall Street that it doesn’t run a tight ship. We have been on this story for a few years and have been telling you something is fishy with the Educational stocks, especially Apollo, and the cat is out the bag.
The United States Government Accountability Office (GAO) held a show-and-tell meeting for the boys on the Hill about the deceptive recruiting practices at many of the “for-profit” colleges and named names.
Congress is trying to pass new legislation to curb these practices by the end of the year or early 2011. Here were some of our thoughts from our Editor-in-Chief on March 6th, 2009 (quotes from that day):
(START) “Obama’s budget means that most of the nation’s nearly $90 billion in student lending will run through the direct-loan program run by the U.S. Education Department. Stocks of “non-profit” and “for-profit” education providers slipped on the news. Many of these stocks have fallen dramatically since the news but some have held up better than others.
For instance, Sallie Mae (SLM, $3.38, down $0.60) which is a “non-profit” entity has dropped over 50% in less than two weeks, falling from a high of $8.89 to nearly $3. The one stock I am targeting is Apollo Group (APOL, $66.79, up $0.28) which is a “for-profit” business and runs numerous educational programs and services at high school, college, and graduate levels. Perhaps you have heard of The University of Phoenix, Inc.?
What has been interesting with Apollo’s stock is that it held up pretty well until yesterday when shares broke below $70. That is when my “Watch List” alerted me of the stock. I’m not sure if the “for-profit” stocks are supposed to benefit from the package at the expense of the “non-profit” businesses but what really got me interested in shorting Apollo were the shady business practices and lawsuits I have been reading about. Type in “Apollo Group Lawsuits” in a search engine and you will find some interesting stories.
Student lenders were embarrassed by a scandal in 2007 that revealed some had given money and gifts to college financial aid officers to A-B-C (Always Be Closing…) business and these stocks were punished back then. As for Apollo, there are allegations of misconduct and “Boiler Room” practices which are locked up in lawsuits.
In fact, there was a lawsuit that was re-filed back in January that portrays this unmistakable boiler room work environment. The former employee claims that he was harassed because he would not commit “unlawful acts” in recruiting students. The suit also confirms that his salary was based on enrollment goals. Apollo Group has said they do not pay their enrollment counselors incentive compensation for performance.
What is really a red flag is the amount of insider selling that Apollo’s management has dumped over the past 3 years. Sales are in the hundreds of millions of dollars while at the same time, the company continues to delay the inevitable court cases that are on its agenda. This could get messy.
The U.S. Education Department is set to assess the value of $2.5 billion of government guaranteed student loans being funneled through Apollo and that could also get interesting. Given the current crackdown environment that the government has bestowed on Wall Street, this could really get interesting if some of the company’s officers are found guilty of engaging in unethical practices.
I could go on and on but after doing some chart work, I’m convinced that Apollo Group could be headed for a major sell-off. The stock recently broke through its 100-day moving average and is poised to bust below its 200-day. Where there is smoke, there is usually fire and I’m getting that feeling with Apollo.” (END)
Sometimes you just know a rat when you see one.
As far as the market today, the bears have held the bulls at bay, but the losses have been contained although the S&P 500 and Nasdaq have slipped back below key technical levels.
As we head to press, the Dow is lower by 37 points to 10,643 and has touched a low of 10,612. The S&P is off by 5 points and is at 1,122 while the Nasdaq is down 13 points to 2,290. The S&P has slipped below 1,125 and the Nasdaq has dipped below 2,300 which are the levels the bulls want to hold as they try to push 1,150 and 2,350, respectively.
Tomorrow is supposed to be a “big day” as Wall Street braces for the unemployment numbers. We say that lightly because it may end up being a non-event. We think there is a chance the unemployment rate comes in at 9.6% which is slightly higher than the current 9.5% rate and we will know before the market opens how traders take the news.
Be sure to check back with us at 9am, Friday morning, for the latest and greatest.
We have updated our Members Area and our Watch List is showing a lot of movement. We are this close to pulling the trigger on a new trade.
Tags: APOL, Apollo Group, call options, how to trade options, momentum options trading, Momentum stocks, option picks, option stock picks, options alerts, options newsletter, options track record, put options, stock options trading, volatile options
Posted in Company Commentary, Market Analysis, Market Commentary | Comments Off
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Houston, Apollo (APOL) Has a Problem
Tuesday, March 29th, 2011
1:35pm (EST)
The bulls got off to a slow start as they let the bears take the early lead at the open. Futures were pointing towards a flat to slightly higher start but turned negative after our morning update. Economic news was light before the bell and some of the weakness at the start can be attributed to the S&P/CaseShiller Home Price Index which came in at 3.1% for January. The report showed home prices fell in 19 of the 20 largest U.S. cities tracked by the index.
After the open, the Consumer Confidence Index for March also came in worse-than-expected at 63.4. The suit-and-ties were looking for a print of 65. The March reading was also less than the upwardly revised 72 posting that was registered for February.
Despite the news, the market has chugged higher.
The Dow is up 67 points to 12,264 while the S&P 500 is higher by 6 points to 1,316. The Nasdaq is showing an 18 point pop and is at 2,748.
One stock we want to cover today is Apollo Group (APOL, $39.35, down $3.00) which is down 7% after reporting earnings that missed Wall Street’s expectations. The company reported a loss of $64 million, or $0.45 a share, versus a year-earlier profit of $93 million, or $0.60 a share. Excluding the write-downs and estimated litigation losses, earnings would have been $0.83 a share. Revenue fell 2% to $1.05 billion.
Analysts were looking $0.69 a share on $1.03 billion in revenue.
We have been following Apollo for years and we have been pretty brutal on the company’s past shenanigans. We have covered their boiler room atmosphere on how their “counselors” were pushing these “college loans” on anyone and everyone because they were funded by the government.
These types of “colleges” have been around for years and we are sure you have seen Apollo’s University of Phoenix ad promoting a “student” in her pajamas taking online courses. To make a long story short, many of the students are spending the “grants” elsewhere or paying bills and don’t seem too worried about paying back the money.
We profiled a strangle option trade on Monday morning for our Watch List for Apollo Group and here were our thoughts:
“ Apollo reports earnings on Tuesday. We hate the stock and would think a break below $40 is coming. However, Apollo doesn’t always trade this way despite being shady which is why we listed this as a strangle option trade. We are tempted to make it a 2-to-1 put ratio trade but we will probably stay on the sidelines altogether.” (END)
We profiled the April 41 puts (APOL110416P00041000, $2.15, up $0.65) and the April 45 call (APOL110416C00045000, $0.05, down $0.98) which were going for $1.00 and $1.25, respectively. The puts opened at $3.05 and have traded up to $3.20 today which was more than enough to make this a very profitable trade.
Although we haven’t officially released these kinds of strangle option trades for 2011, yet, we have used them in the past. Once we get into April, we are expecting these types of trades to work well during earnings season.
We have a lot to cover in our Members Area so let’s get on it. We will be back in the morning with a full update.
Tags: APOL, Apollo Group earnings, CCI, Consumer Confidence Index, NASDAQ: APOL
Posted in Earnings, Market Commentary | Comments Off