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Monday, November 14th, 2011
1:15pm (EST)
Trading has been sloppy and choppy this morning as the bears are doing their best to hold the bulls back from advancing the market further following Friday’s nice pop. Futures were pointing towards a higher start for the US markets when the European markets opened but gradually faded as we headed towards the open.
There are a few stocks making some noise today which has kept the Dow from falling further while Tech has shown some strength.
International Business Machines (IBM, $188.07, up $0.69) is fractionally higher after Warren Buffett revealed he has been building a $10 billion stake in the company since March. We’ve liked IBM since $125 a few years ago and have played options on the stock in the past but the premiums have become more expensive because of the higher strike prices. We would but like to see a 4-for-1 split, or at least a 2-for-1 to get shares back under $100 but some companies have been reluctant to split their shares in recent years, or in some cases, a decade or more.
The last time IBM did a split was back in 1999 when they split the shares 2-for-1. In 1997 they did a 2-for-1 and in 1979 IBM split 4-for-1.
Caterpillar (CAT, $96.63, up $0.50) is trading higher after getting an upgrade from Goldman Sachs (GS, $98.75, down $2.91) this morning. Shares were added to Goldman’s Conviction Buy List with a price target of $118. The company seems to be clicking on all cylinders and is gearing up plants here at home which is a good, positive sign.
Caterpillar is still a stock we like to trade options on because shares are under $100. To a stock investor, stock-splits are really meaningless because you still have the same dollar amount invested. However, when stocks trade for $200 or $300 or in some cases $500 a share, the premiums to trade call or put options can be really expensive, especially if the options are “in-the-money” which is why we like to see stock-splits on higher priced shares.
For example, if an option is at $5, you are risking 5 times more money to than playing a $1 option up or down. A 5% move in the stock might not be enough for you to make money. A 10 contract trade would cost you nearly $5,000 for an option priced at $5.
With lower priced options that trade for a $1 or less, a 5% move in the stock usually means a 100% return for the option depending on how fast it comes. A 10 contract trade on a $1 option will cost you $1,000 but you could do 4 more trades instead of risking much more on the $5 option.
So, when you hear us call for a stock-split, this is what it means to us as far as trading options. Caterpillar doesn’t need to do a split any time soon and in fact, we currently have the stock on our Watch List along with some call options we may recommend. Goldman seems to be following our lead. In case you are wondering, Caterpillar did a 2-for-1 split back in July 2005 and before that, a 2-for-1 back in July 1997.
As we head to press, The Dow is down 87 points to 12,066 while the S&P is lower by 13 points to 1,250. The Nasdaq is off by 21 points to 2,657. Subscribers, check the Members Area for the latest updates and we will be back in the morning with a fresh outlook.
Tags: CAT, GS, IBM
Posted in Market Analysis, Market Commentary | Comments Off
Friday, July 22nd, 2011
1:20pm (EST)
Futures were pointing towards a sluggish start this morning and we kind of had a feeling the market would trade flat today following this week’s big push up to resistance. Company earnings have come in mixed today with disappointing numbers from some while others have shined.
Caterpillar (CAT, $105.58, down $6.02) has let the Blue-Chips down and is weighing on the Dow after missing estimates while continued concerns over the U.S. debt ceiling have resurfaced which is holding the bulls back as well.
As usual, nothing in Washington can go smooth. The Republicans are playing hardball as the knuckleheads in D.C. failed to pass the “Cut, Cap, and Balance Act” which leaves the rest of America and Wall Street in limbo and wondering if a resolution to the debt will come down to the wire. Of course, our leaders have said they are going to work overtime this weekend and they should for the $172,000-a-year salaries they get. Hopefully, after spending 48 hours behind closed doors, the zombies can come up with a game plan by Monday morning.
As far as good earnings news, Rambus (RMBS, $15.65, up $0.70) is having a robust day, up 4%, after confessing their results to Wall Street after Thursday’s closing bell. Shares were up near $16 in after-hours last night which carried over into today’s trading as the stock has also broke through serious resistance levels.
Although Rambus reported a loss for the quarter, the company appears to be turning the corner towards profitability and could be due for a big payday here shortly.
The computer memory giant reported a 2Q loss of $10.6 million, or $0.10 a share, which was better than last year’s quarterly loss of $12.5 million, or $0.11 cents a share. There aren’t too many Wall Street who cover this stock but the ones that do had penciled in a loss of 12 cents a share for the company.
Revenue zoomed to $66 million, up from $39 million in the year earlier period. However, Rambus made jaws drop when they said current revenue for 3Q would come in at a range of $91-$96 million, which was 50% higher than the forecast for $60 million.
The real story with Rambus though is this. Wall Street has lost interest in the stock and analysts have been like rats on a sinking ship after jumping off due to ongoing litigation concerns.
Well, to make a long story short, this is the type of story we look for when we are trading options.
Wall Street left Rambus for dead. We are glad there is little analyst coverage and we are surprised there haven’t been a few “upgrades” on the stock. Not to worry, the less they know the better but we have a feeling they will be following the Rambus story shortly.
Our subscribers know exactly what we are talking about as we have been discussing this name inside our Members Area since mid-June. We have followed the company for over a decade and “We’re your Captain…yeah, yeah, yeah…yeah.”
As we head to press and an anxiously awaited weekend, here is how we look.
The S&P is up 2 points to 1,345 while the Nasdaq higher by a double-deuce, or 22 points, to 2,856. The Dow is lower by 28 points to 12,696 with Caterpillar accounting for 45 points to the red. If it weren’t for CAT, the Dow would be up.
We will be back Sunday night with our Weekly Wrap and until then, have a sweet weekend!
Tags: binary options, call options, CAT, futures options, high beta stocks, Hot stocks, momentum options, Momentum stocks, option market, option tips, options, options mentoring, options trading, options trading course, RMBS, stock market options, weekly options, what are options
Posted in Earnings, Market Commentary | Comments Off
Tuesday, June 14th, 2011
9:00am (EST)
We didn’t expect much from Monday’s action as economic news was light and earnings are winding down to a trickle ahead of July’s big 2Q announcements. As such, the market ended flat for the session but we expect the action will pick up starting this morning as we have a number of headlines to report.
The Dow traded to a high of 12,011 but could only manage a 1 point gain and finished at 11,953. It was the Blue-Chips second-straight finish below 12,000 which has now become short-term resistance ahead of 12,200. Caterpillar (CAT, $95.44, down $1.35) and Hewlett-Packard (HPQ, $34.65, down $0.48) weighed on the index and accounted for 14 negative points. Short-term support remains 11,800-11,750.
We profiled Caterpillar last Monday inside our Members Area when shares were at $101 and said a test to $95 was coming, quickly. The July 95 puts (CAT110716P00095000, $3.20, up $0.45) were at $1.90 when we profiled the upcoming drop and the stock was at $101. Although it wasn’t an “official trade” the puts are up nearly 70% in a week which is where we would have taken profits.
As far as Hewlett-Packard, it looks like a falling knife we aren’t about to catch after hitting a fresh 52-week low of $34.60. We will have to check the chart but if further weakness is in store, we might have to add some put options to our Watch List.
The S&P 500 also added a point and settled at 1,271 after reaching a high of 1,277. The bulls were looking to hold 1,275 but still face pressure down to 1,250. Resistance is at 1,300 and then 1,325.
The Nasdaq slipped 4 points and closed at 2,639 after trading to an intraday low of 2,629. Short-term support is at 2,600-2,550 while resistance will come into play at 2,675-2,700.
Futures are soaring on a number of better-than-expected economic reports this morning and Best Buy (BBY, $28.82, up $0.39) is looking to open higher after beating Wall Street’s with their latest quarterly results. We will cover these stories in our afternoon update.
Dow futures are up 100 points to 11,985 while the S&P futures are showing are advancing by 14 points to 1,280. The Nasdaq futures are up 20 points to 2,240. We have a couple of MONSTER trades we are on the verge of closing which are up over 150% and 200%, respectively. We also have a few other option trades that we are also expecting to do well this week.
If you haven’t signed up with us yet or are nervous due to the current market volatility then don’t be. Remember, you can make just as much with put options in a lower trending market as you can with call options in a higher trending market so don’t be scared. Come get some action!
Subscribers, check the Members Area for the updates.
Tags: BBY, call options, CAT, high beta stocks, Hot stocks, HPQ, momentum options, Momentum stocks, option tips, options, options mentoring, options trading course, stock market options, weekly options
Posted in Market Analysis, Strategies, Trade Update | Comments Off
Friday, April 29th, 2011
1:15pm (EST)
The bulls are putting an explanation point on a strong month as they have once again pushed the major indexes to new 52-week highs. Earnings and economic news continue to drive the headlines which have been pretty positive today.
Caterpillar (CAT, $115.29, up $2.65) is trading at fresh highs after plowing through Wall Street’s estimates. The company reported a 425% increase in its first quarter profit which came in at $1.2 billion or $1.84 a share. Last year at this time, CAT earned $233 million, or $0.36 a share. Revenue jumped nearly 60% to $12.9 billion, up from $8.2 billion last year, and well ahead of analysts expectations for earnings of $1.31 a share on revenue of $11.7 billion.
The huge, 53 cent earnings beat has accounted for 20 of the Dow’s current 68 point gain which has pushed the index to 12,831. The S&P is up by 3 points to 1,363 while the Nasdaq is higher by 2 points to 2,874.
We also like the strong move shares of Skyworks Solutions (SWKS, $31.49, up $3.98) are making today, up 14%, after crushing the suit-and-ties on their estimates as well. We first profiled this stock for you 6 months ago in the mid-$20’s before it hit a 52-week high of nearly $38 back in February. Since then, shares have slipped but have rebounded sharply today. We love this stock going forward and our price target then was $40. Still is. At current levels, Skyworks is a steal.
We said on Tuesday if resistance were broken that there could be some chasers of the rally which is what we have seen this week. We have a lot to cover in our Members Area, including a NEW TRADE for today, so we have to cut it a little short but remember to watch our near-term targets from this morning. We will be back Sunday night with the Weekly Wrap which will be packed with some good information and what to watch for in May.
If you want a head start and would like to get Sunday’s Weekly Wrap or today’s NEW TRADE, click here. The Weekly publication is 9-for-9 in trade recommendations which are averaging double-digit returns and we will be looking to add our next winner soon.
Have a great weekend everyone!
Tags: call options, CAT, CAT earnings, high beta stocks, Hot stocks, momentum options, Momentum stocks, option tips, options trading course, Skyworks Solutions, stock market options, strangle option trades, SWKS, SWKS earnings, weekly options
Posted in Market Analysis, Market Commentary | Comments Off
Monday, September 27th, 2010
8:55am (EST)
The market was at a pivot point on Friday and the bulls used the opportunity to push the market to its April highs. They are also threatening to push the bears into hibernation after Friday’s surge and it is clear the market is building momentum for a possible test of new highs for the year.
Although the recent run-up has come on lighter-than-normal volume, 3Q earnings start in October and it will likely bring a lot of action to the table. There are still earnings trickling in from companies that announce later in the 2Q cycle and the recent results have been encouraging. On the other hand, there have been some companies that have lowered the bar going into forward.
The November elections may be playing a small part in the lack of volume as uncertainty about the outcome can keep investors on the sideline. However, the longer traders sit out and the higher the market goes, they will want to get back in and there could be a rush of buying if there is a continued breakout.
The talk of a double-dip recession has faded (for now) but the economy is still fragile and a lot of companies aren’t rolling out the red carpets to hire workers back. Many companies are building up their coffers but we have also seen a flurry of merger and acquisition activity over the past few weeks which is also a positive catalyst for the bulls.
As a result, the Dow added nearly 200 points, or 1.9%, on Friday to close at 10,860 as all 30 of the Dow blue chips finished the day in the green. Caterpillar (CAT, $79.73, up $3.47) set another 52-week high and led the charge after nearly breaking $80. The Dow easily powered past our 10,800 top and will now focus on the the 11,000 level. For the week, the index added 250 points, or 2.4%, and is up 8.4% in September.
The S&P 500 Index jumped 24 points, or 2.1%, to settle at 1,148 and just shy of our 1,150 target. If this level is broken, then the index could see a quick run to 1,160-1,165 as it targets 1,200. For the week, the S&P 500 gained 23 points, or 2.1%, with all of the pop coming on Friday.
The Nasdaq remained the most explosive as it advanced 54 points, or 2.3%, to finish at 2,381. The index easily blew right past our 2,350 target with Friday’s jump and added 65 points, or 2.8%, for the week. It looks crystal clear that the index will challenge the 2,400 level and a shot at 2,500 could be in the cards by year-end if the rally holds.
The bears, meanwhile, are rolling over and are doing a great job of playing dead or they are waiting for every single bull to jump on the bandwagon before they ambush. The bears like to strike when they can hurt the most people at just the right moment so October is setting up to be explosive either way.
As far as this week, the economic news will be slow for the first few days but we are targeting Thursday and Friday to be a busy days for the market.
Today, the market will get a look at regional manufacturing activity for Chicago and Texas; on Tuesday – Richmond, Virginia; and Thursday for New York, Chicago and Kansas City.
The S&P/Case Shiller index comes out Tuesday and will give us a snapshot of July home prices in 20 major cities. The Consumer Confidence index report is also due out.
Thursday will be a crucial as second-quarter gross domestic product (GDP) numbers hit the Street and Federal Reserve Chairman, Ben Bernanke, will be testifying about the new financial regulation law before the Senate Banking Committee.
August personal income and spending numbers are will be released as well as August construction spending on Friday. Auto makers will report September sales figures and the final reading on the Reuters/University of Michigan’s September consumer sentiment index is due out. And if that weren’t enough, the Institute for Supply Management’s September manufacturing index will hit the trading floor.
As we head to press, Dow futures are higher by 13 points to 10,797 while the S&P 500 futures are up by 2 points to 1,145. The Nasdaq 100 futures are showing a gain of 4 points and are at 2,022. Subscribers, check the Members Area for the updates.
Tags: CAT, how to trade stock options, options trading alerts
Posted in Economic News, Market Analysis, Market Commentary | Comments Off
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Dow Lower Despite IBM, Caterpillar (CAT) Strength
Monday, November 14th, 2011
1:15pm (EST)
Trading has been sloppy and choppy this morning as the bears are doing their best to hold the bulls back from advancing the market further following Friday’s nice pop. Futures were pointing towards a higher start for the US markets when the European markets opened but gradually faded as we headed towards the open.
There are a few stocks making some noise today which has kept the Dow from falling further while Tech has shown some strength.
International Business Machines (IBM, $188.07, up $0.69) is fractionally higher after Warren Buffett revealed he has been building a $10 billion stake in the company since March. We’ve liked IBM since $125 a few years ago and have played options on the stock in the past but the premiums have become more expensive because of the higher strike prices. We would but like to see a 4-for-1 split, or at least a 2-for-1 to get shares back under $100 but some companies have been reluctant to split their shares in recent years, or in some cases, a decade or more.
The last time IBM did a split was back in 1999 when they split the shares 2-for-1. In 1997 they did a 2-for-1 and in 1979 IBM split 4-for-1.
Caterpillar (CAT, $96.63, up $0.50) is trading higher after getting an upgrade from Goldman Sachs (GS, $98.75, down $2.91) this morning. Shares were added to Goldman’s Conviction Buy List with a price target of $118. The company seems to be clicking on all cylinders and is gearing up plants here at home which is a good, positive sign.
Caterpillar is still a stock we like to trade options on because shares are under $100. To a stock investor, stock-splits are really meaningless because you still have the same dollar amount invested. However, when stocks trade for $200 or $300 or in some cases $500 a share, the premiums to trade call or put options can be really expensive, especially if the options are “in-the-money” which is why we like to see stock-splits on higher priced shares.
For example, if an option is at $5, you are risking 5 times more money to than playing a $1 option up or down. A 5% move in the stock might not be enough for you to make money. A 10 contract trade would cost you nearly $5,000 for an option priced at $5.
With lower priced options that trade for a $1 or less, a 5% move in the stock usually means a 100% return for the option depending on how fast it comes. A 10 contract trade on a $1 option will cost you $1,000 but you could do 4 more trades instead of risking much more on the $5 option.
So, when you hear us call for a stock-split, this is what it means to us as far as trading options. Caterpillar doesn’t need to do a split any time soon and in fact, we currently have the stock on our Watch List along with some call options we may recommend. Goldman seems to be following our lead. In case you are wondering, Caterpillar did a 2-for-1 split back in July 2005 and before that, a 2-for-1 back in July 1997.
As we head to press, The Dow is down 87 points to 12,066 while the S&P is lower by 13 points to 1,250. The Nasdaq is off by 21 points to 2,657. Subscribers, check the Members Area for the latest updates and we will be back in the morning with a fresh outlook.
Tags: CAT, GS, IBM
Posted in Market Analysis, Market Commentary | Comments Off