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Wednesday, May 5th, 2010
9:10am (EST)
Folks, this is the most exciting market we’ve seen in quite some time and the dramatic increase in day-to-day volatility is unfolding just like we thought it would.
The market’s moves are reminiscent of the huge price swings in late 2008 and early 2009 when everybody panicked over how bad the recession would get. When we said the market is getting ready for a big move…we weren’t kidding.
Tuesday’s sell-off was the fifth time in six trading sessions that the Dow has hit triple digit swings and we will likely experience this for the rest of the week, if not longer.
Greece was the word that dominated the headlines yesterday as talk heated up on if the debt crisis would spread to other countries. If so, then Europe would have an even tougher time putting together an aid package if a larger country such as Spain or Portugal were to get in trouble. We mentioned yesterday that Spain said it didn’t need a bailout but once the snowball started rolling it turned into an avalanche. And there is mayhem in Greece this morning as protestors take to the streets…
As a result, the Dow fell a whopping 225 points yesterday, or 2%, to finish at 10,926 and well below the 11,000 mark.
Alcoa (AA, $12.58, down $0.57), a Dow component, continued it three session slide as it fell another 4% while another blue-chipper, Caterpillar (CAT, $66.70, down $3.24) dropped nearly 5%.
Drug stocks were a safety net for some investors as they pushed shares of Merck (MRK, $35.81, up $0.54) and Pfizer (PFE, $17.26, up $0.35) higher for the day. Both stocks are members of the Dow.
The S&P 500 gave up 28 points, or 2.4%, to close at 1,173 while the Nasdaq broke down like a rented mule. The index suffered the worst beating, dropping 75 points, or 3%, and finished at 2,424.
The good news is that the market is still in our trading ranges we have mapped out for the past few weeks. In Sunday’s Weekly Wrap we said to watch for a near-term support at 10,800 for the Dow; 1,150 for the S&P 500; and 2,400 for the Nasdaq.
Little did we know we would test the top of the ranges on Monday and on Tuesday we would be talking about key support levels. That’s how volatile we have been in 48 hours.
The bad news, if you are a bull, is that futures are pointing towards a lower open despite a decent ADP report. The (ADP) Employment Change report, which measure jobs in the service sector, showed a gain of 32,000 jobs versus the expected increase of 30,000. Didn’t matter.
As we head to press, Dow futures are down 80 points to 10,812 while the S&P 500 futures are off by 12 to 1,160. The Nasdaq 100 futures are in the red by 20 points and are at 1,948 as we head to press.
We mentioned the good, the bad, and now all you are missing is the BEST news. And we have some for you.
Garmin (GRMN, $37.48, down $1.50) is down to $32 in early trading after reporting earnings this morning. We have been preparing for a pullback and we have been profiling a lot of put options in our Members Area. Garmin happened to be one.
We have also profiled TWO New Trades this morning so let’s get to it. Don’t be scared…we are loving this market!
Tags: AA, CAT, Caterpillar, Garmin, GRMN earnings, mrk, option picks, option signals, options alerts, pfe, stock options trading
Posted in Earnings, Market Analysis, Market Commentary | Comments Off
Wednesday, March 24th, 2010
9:05am (EST)
“Buy when you are scared to death; sell when you are tickled to death.” - Market Maxim
That was our exact feeling in February after the market stalled in mid-January and was trending lower. From our February 25th, 9am update:
“We continue to feel the current volatility is pointing towards a big move for the market and Greece’s debt is not NEW news. It’s hard to imagine the bulls giving up here and today’s open will be nasty. However, we think there is one more move higher before the Dow fades, and it will be interesting to see how well the bulls battle back this morning.” (END)
At the time, the Dow was at 10,374 and its futures were down 87 points going into the open. By our afternoon update, the index was down 150 points and Wall Street analysts were calling for a break below 10,000. So what did we do? We started looking for call options as a bullish way to play the market.
It was hard for us to believe the rally was really over and first quarter earnings were stellar. However, we knew coming off the “Santa Claus” rally that the bulls might rest which is why we went longer out on some of our option trades in January. We weren’t ready to start buying put options because we didn’t think the Dow would fall below 10,000.
That day, the Dow fell to a low of 10,155. That was 700 points and nearly a month ago. We have been talking about Dow 10,800 and how we could power higher if we got through this level…mission accomplished.
The Dow finished Tuesday with a triple-digit gain, adding 102 points, to close at 10,888. The index hit a high of 10,893 today as 28 of its 30 components ended higher.
Caterpillar (CAT, $62.41, up $2.46), which we had on our Watch List in the Members Area, exploded 4% higher and added some fluff to the Dow’s final outcome.
The S&P 500 closed 1 point under our 1,175 target after adding 8 points, or 0.7%, to settle at 1,174. Next stop…1,200. if all goes well.
The Nasdaq, which has been teasing us by kissing our 2,400 target, finally closed above this level and finished at 2,415, up 20 points, or 0.8%. Tech continues to shine and could be on its way to 2,500.
Of course, that was yesterday and this morning the market has a new set of problems to deal with. Futures were slightly lower but got worse after Fitch Ratings slashed Portugal’s debt rating. Don’t forget Ireland, Greece, and Spain.
There are worries this morning that the economic recovery will be slower than other countries that use the euro, hurting Portugal’s ability to repay its debt. Debt problems in Europe have been one of the few events that spook this market so we will see how much of a role this plays in today’s action.
The market got some good news when the Durable Goods figures were released but futures are still pointing towards a slightly lower open. As we head to press, Dow futures are down 34 to 10,794 while the S&P futures are off 5 points to 1,165. Nasdaq 100 futures are lower 6 by to 1,956.
We have a lot to cover in our Members Area so let’s get to it.
Tags: CAT, Caterpillar, DJIA, option picks, options trading
Posted in Market Analysis, Market Commentary | Comments Off
Tuesday, October 20th, 2009
1:00pm (EST)
The bears took advantage of a weak housing report today and have crashed the earnings party the bulls were ready to have. The Commerce Department said applications for home building permits, a measure of future construction, fell in September by the largest amount in five months. Not a good sign for the housing industry which has been struggling to recover this year.
We mentioned Apple’s (AAPL, $199.00, up $9.14) earnings this morning and we knew $200 would be the new battle ground for the stock. Shares are now trading at a ”premium” according to some analysts and could fall over the near-term now that all of the hoopla is out. And that could be the case but we tend to shy away from buying Apple put options because it is such a strong company. It looks ripe for a short at these levels but I don’t think I’d sleep easy betting against Apple no matter how high shares have run.
I was sure hoping the company would announce a stock-split but that didn’t happen. A 3-for-1 split would put shares at $67 and make it affordable for the retail investor to purchase the stock again. The smartphone market will get even more intense over the next several quarters but Apple is head and shoulders above the competition. And Mac sales are set to EXPLODE.
Caterpillar (CAT, $59.00, up $1.15) also came in with a great report as the company posted earnings of $0.64 a share, blowing-out Wall Street’s estimate of just $0.06 a share. Shares have traded to a high of $61 and the outperformance was attributed to the foreign exchange, lower tax rates and accounting. Revenues came in at $7.3 billion, versus estimates of $7.5 billion but Caterpillar believes the worst is behind us. Quote…the company’s CEO now sees “encouraging signs that indicate a recovery may be underway.”
Yahoo (YHOO, $16.95, down $0.26) reports after the bell and Wall Street is looking for earnings of $0.07 a share on revenue of $1.1 billion. For the second quarter, Yahoo did 16 cents a share and easily doubled 8 cents the Street was looking for. The November 17 calls (YHQKR, $0.85, down $0.10) have traded over 7,000 contracts compared with 3,500 contracts of the November 17 puts (YHQWR, $0.90, up $0.20). That is a 2-to-1 ratio for the bulls and the action is suggesting an 8%-10% move up or down on Wednesday. We’d love to play this one but we are going to sit on the sidelines.
As we head to press, the Dow is down 87 points to 10,005, the S&P 500 is off by 10 to 1,087 while the Nasdaq is lower by 21 points and is trading at 2,155. We have profiled a new trade today and it is in the retail sector. If you are a current subscriber, please check the Members Area NOW for the 1pm Update.
Tags: Apple, Caterpillar, Momentum stocks, option trade picks, options mentoring, options trade picks, Yahoo
Posted in Company Commentary, Earnings, Market Analysis, Market Commentary, Option Trades | Comments Off
Tuesday, January 6th, 2009
Imax (IMAX, $4.95, up $0.42) is up another 10% today as we head into the final hour of trading. The stock has been in a steady uptrend since an update from December 3. At the time, I had listed several Movie/ Entertainment stocks to keep an eye on but liked Imax the most. Here were my thoughts:
“The one player I do like in the sector is Imax (IMAX, $2.73, down $0.08) and I have mentioned this stock before at much higher levels. I do not trust the stock enough to by any longer-term options but Imax could be a force in the movie industry down the road.”
There is no significant news that is pushing the stock higher although the company is giving an update at the Citi Global Entertainment, Media & Telecommunications Conference in Phoenix later this afternoon. If you got in below $3, set stops at $4-$4.50.
Elsewhere, Apple (AAPL, $93.68, down $0.89) is retreating after cutting prices on its iTunes. The stock had hit a high of $97 before the news was announced and quickly sold off. The January 95 calls (QAAAS, $3.05, down $0.85) hit a high of $5.10. Here is a classic case of buy the rumor, sell the news and I had mentioned that positions needed to be closed quickly.
The Caterpillar (CAT, $46.40, up $0.32) trade was officially closed this morning as the January 40 calls (CXJAN, $6.40, up $0.30) hit our stop of $6.05.
Potash (POT, $84.89, up $2.27) traded to a low of $80.69 this morning but it wasn’t enough to enter the February 90 calls (PYPBR, $6.80, up $0.60). We were trying to get in this position at $5 but the options only traded as low as $5.31.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Apple, Caterpillar, Imax, Potash
Posted in Option Trades | No Comments »
Monday, January 5th, 2009
Alcoa (AA, $11.86, down $0.25) opened lower and struggled all day to stay in positive territory. The company will report earnings next Monday, January 12. The Alcoa January 10 calls (AAAB, $2.23, down $0.09) had a stop of $2 which was hit today. These calls could have been entered on 12/9/08 at $1.20 for a return of over 100% as they did hit a high of $2.50 for the day. Of course, this was after our stop was hit but the trade still should have netted most of you 60% or better.
Caterpillar (CAT, $46.08, down $0.83) had a lousy day as well and spent most of the day in the red as the dollar rallied. A stronger dollar usually sends Caterpillar down and today was one of those days. The Caterpillar January 40 calls (CXJAN, $6.25, down $0.75) came close to hitting our stop of $6.05 but didn’t. This position could have also been entered on 12/9/08 at $4.80 and the position is still up 30%. If the stop is hit on Tuesday, the calls will return 25%.
Schlumberger (SLB, $46.82, up $1.20) continues to work well for us as the stock made a run to $49 today. I mentioned Sunday night the stock was at its 50-day moving average and if that was taken out then we could get a run to $50. Bingo. The Schlumberger February 45 calls (SLBBI, $6.05, up $1.50) were profiled for $2.00 on 12/30/08 and now have a 200% gain. The calls closed right at our target of $6 and traded as high as $6.20. If you didn’t sell the calls today, set stops at $5.75 but they should have been sold when they traded at $6.
Toll Brothers (TOL, $22.18, up $0.59) was profiled last night and we were looking to enter the February 20 calls (TEPBD, $3.40, up $0.30) for $3.00 or better. The stock opened lower from Friday’s close and the calls opened at $2.95. Toll Brothers bucked the market and traded mostly higher after the lower open and managed to trade as high as $22.58. The calls traded as high as $3.70 before giving back a little bit. I’m still not a big fan of the trade but it’s working. Set stops as $3.25.
Apple (AAPL, $94.58, up $3.83) stayed strong after the open and hit a high of $96.18 for the day. The news of Steve Jobs staying on as CEO while getting treatment was a springboard for the stock. The January 95 calls (QAAAS, $3.95, up $1.75) were profiled at $3.10 and we were targeting a run to the $4 or $5 area. The calls traded as high as $4.50 where they could have been closed for a 45% profit. Set stops at $3.50 which gives you over a 10% gain if you didn’t make this a one day trade.
There are several other stocks that are on fire right now and they include DryShips (DRYS, $13.85, up $1.36), First Solar (FSLR, $157.80, up $6.30) and Potash (POT, $82.62, up $5.27). These stocks are no stranger to the blog and they remain some of my favorite stocks to trade options on.
If the Caterpillar trade hits our stop then we may add a couple of Potash February 90 calls (PYPBR, $6.20, up $2.10) to the portfolio if we can get them at $5. Potash could make a run at $90 but there is strong resistance at $94 so we are due for some profit taking.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Alcoa, Apple, Caterpillar, DryShips, First Solar, Potash, Schlumberger, Toll Brothers
Posted in Option Trades | No Comments »
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Bears Gaining Momentum
Wednesday, May 5th, 2010
9:10am (EST)
Folks, this is the most exciting market we’ve seen in quite some time and the dramatic increase in day-to-day volatility is unfolding just like we thought it would.
The market’s moves are reminiscent of the huge price swings in late 2008 and early 2009 when everybody panicked over how bad the recession would get. When we said the market is getting ready for a big move…we weren’t kidding.
Tuesday’s sell-off was the fifth time in six trading sessions that the Dow has hit triple digit swings and we will likely experience this for the rest of the week, if not longer.
Greece was the word that dominated the headlines yesterday as talk heated up on if the debt crisis would spread to other countries. If so, then Europe would have an even tougher time putting together an aid package if a larger country such as Spain or Portugal were to get in trouble. We mentioned yesterday that Spain said it didn’t need a bailout but once the snowball started rolling it turned into an avalanche. And there is mayhem in Greece this morning as protestors take to the streets…
As a result, the Dow fell a whopping 225 points yesterday, or 2%, to finish at 10,926 and well below the 11,000 mark.
Alcoa (AA, $12.58, down $0.57), a Dow component, continued it three session slide as it fell another 4% while another blue-chipper, Caterpillar (CAT, $66.70, down $3.24) dropped nearly 5%.
Drug stocks were a safety net for some investors as they pushed shares of Merck (MRK, $35.81, up $0.54) and Pfizer (PFE, $17.26, up $0.35) higher for the day. Both stocks are members of the Dow.
The S&P 500 gave up 28 points, or 2.4%, to close at 1,173 while the Nasdaq broke down like a rented mule. The index suffered the worst beating, dropping 75 points, or 3%, and finished at 2,424.
The good news is that the market is still in our trading ranges we have mapped out for the past few weeks. In Sunday’s Weekly Wrap we said to watch for a near-term support at 10,800 for the Dow; 1,150 for the S&P 500; and 2,400 for the Nasdaq.
Little did we know we would test the top of the ranges on Monday and on Tuesday we would be talking about key support levels. That’s how volatile we have been in 48 hours.
The bad news, if you are a bull, is that futures are pointing towards a lower open despite a decent ADP report. The (ADP) Employment Change report, which measure jobs in the service sector, showed a gain of 32,000 jobs versus the expected increase of 30,000. Didn’t matter.
As we head to press, Dow futures are down 80 points to 10,812 while the S&P 500 futures are off by 12 to 1,160. The Nasdaq 100 futures are in the red by 20 points and are at 1,948 as we head to press.
We mentioned the good, the bad, and now all you are missing is the BEST news. And we have some for you.
Garmin (GRMN, $37.48, down $1.50) is down to $32 in early trading after reporting earnings this morning. We have been preparing for a pullback and we have been profiling a lot of put options in our Members Area. Garmin happened to be one.
We have also profiled TWO New Trades this morning so let’s get to it. Don’t be scared…we are loving this market!
Tags: AA, CAT, Caterpillar, Garmin, GRMN earnings, mrk, option picks, option signals, options alerts, pfe, stock options trading
Posted in Earnings, Market Analysis, Market Commentary | Comments Off