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Tuesday, December 27th, 2011
1:30pm (EST)
The bulls got off to a good start on the official first day of the Santa Claus rally as they pushed the market higher at the open. Although we have backed off the highs, the major indexes are showing slight gains ahead of tomorrow’s potential market moving event. We mentioned this morning that Italy will be offering a ton of debt over the next few days and Wall Street is a little worried over the yield on the 10-year notes which could fetch 7% or more when they go to auction.
This will be a short week with the Christmas holiday but it is funny how none of the talking heads are mentioning the start of the Santa rally which consists of the last 5 trading days of the year and the first 2 days of the New Year. We also mentioned that if there is no Santa rally that a bear market typically follows in January so tomorrow’s Italian debt offering WILL BE the catalyst that takes the market higher or lower thru yearend.
One stock that will probably not participate in a possible rally is Sears Holdings (SHLD, $34.98, down $10.87) which is down 24% today. Shares are getting spanked after the company said it will be closing 120 stores following weak holiday sales. We aren’t sure of the mix but there will be fewer Sears and Kmart stores for the world to worry about.
We have been following Sears for years but we are a little disappointed we didn’t get in on the put options. The January 40 puts (SHLD120121P00040000, $7.00, up $5.25) are up nearly 300% on the news.
Elsewhere, Apple (AAPL, $407.06, up $3.73) is trading higher on rumors the iPad 3 will be out in late February. The news isn’t too surprising considering the company released the iPad 2 around the same time last year. In any event, the news has helped Tech which is been the weakest link of late.
We have a lot to cover with our current trades but we wanted to give everyone a quick update on what to expect before the bell on Wednesday. Our hope is things go well with Italy but we are taking half profits in a trade or two to lock in profits just in case.
As we head to press, the Dow is up 15 points to 12,309 while the S&P 500 is higher by 2 points to 1,267. The Nasdaq is showing a gain of 9 points to 2,628.
Tags: blue-chip stocks, chicken option trade, chicken trade, momentum, momentum options, option mentoring, stock options trading advisors, straddle option trade
Posted in Market Analysis, Market Commentary | Comments Off
Tuesday, December 20th, 2011
12:30pm (EST)
No profession requires more hard work, intelligence, patience, and mental discipline than successful speculation – Robert Rhea, Economist
If you are a fulltime option trader, you will appreciate today’s quote because you know where we are coming from. After 4-weeks of back testing support and hearing about Europe’s woes, the bulls have finally had enough, maybe, as they look to break several layers of resistance following a strong open.
There has been good news galore this morning which started with Spain’s debt offering. It seems the “risk-on” trade was back in vogue after Spain’s borrowing costs were more than halved as banks rushed to buy debt following cut-rate loans from the ECB (European Central Bank).
Better-than-expected U.S. economic numbers have also helped the bulls rebound as Housing Starts and Building permits surged to 15 and 20-month highs. Housing Starts jumped 9.3% last month to 685,000 with multi-family units leading the way. Building permits rose 5.7% to 681,000, its highest rate since March 2010.
We said yesterday that the market wasn’t giving the ECB enough credit and that we were still seeing bullish signs elsewhere that could help the bulls hold support. However, it remains to be seen if this rally will be sold which has been the theme of late.
The Dow is up 287 points to 12,053 while the S&P is higher by 31 points to 1,236. The Nasdaq is showing a 73 point pop and is at 2,596.
We mentioned this morning we had two new trades we are releasing today and that is still the plan although it isn’t the ones we were targeting. Instead of an earnings trade, we are going with stability on stock that has shown strength and will only get stronger if this rally sticks. Subscribers, check the Members Area for the NEW TRADES, now!
Tags: blue-chip stocks, chicken option trade, chicken trade, momentum, momentum options, option mentoring, stock options trading advisors, straddle option trade
Posted in Market Analysis, Market Commentary, Trade Update | Comments Off
Tuesday, December 20th, 2011
9:00am (EST)
Europe’s failure to find a comprehensive solution to their debt crisis continues to weigh on Wall Street as the bears started the week off with another win. Although the market has been stuck in a trading range, the bears are now pushing the lower end which is getting us closer to a rebound or breakdown.
The bulls tried to recover from last week’s 3% shellacking but the gains they had at the start of yesterday’s open quickly evaporated by lunchtime. The early momentum faded once the Financial stocks started selling off which left the bulls defending support. They did a good job of holding for the most part but the Dow broke below 11,800 and the S&P Volatility Index (VIX, 24.92, up 0.63) gained 3%.
Volume was light again and we told you last week that many of the “pros” are packing it in, which, believe it or not is a good thing. Although we have traded light, we looked at our track record to see when we opened new positions last December and we weren’t surprised to see we were busy. We opened 6 new trades around this time last year, 4 during the final week, that did very well and were closed earlier this year while Wall Street was napping.
Our point is we feel many traders will be caught “off guard” as we head into the final 8 trading days for 2011 and we want to be positioned if the rebound or breakdown that is forthcoming. With yesterday’s slide, we are getting close to getting the some type of move.
The Dow fell 100 points, or 0.8%, to settle at 11,766. The blue-chips traded to a low of 11,735 after falling through the 11,800 level. We have mentioned the line in the sand at 11,600 so we will be watching this area closely. Of course, we wouldn’t be surprised to see the bulls reclaim 11,800 which would only confirm the current trading range following the pop to 11,925 at the open yesterday.
The S&P dropped 14 points, or 1.2%, to close at 1,205. The index traded down to 1,202 but held the crucial 1,200 level into the close. If the bears can take out this level then expect a quick dip to 1,175 and possibly 1,150. If the bulls do hold fort and can reclaim 1,215 then there is still a chance for a test back to 1,225.
The Nasdaq declined 32 points, or 1.3%, to end at 2,523. Tech kissed a low of 2,518 and was able to keep 2,500 behind it but there is still risk down to 2,450 if busted. The bulls will try to retake 2,550 but resistance at 2,600 will be hard to clear without a catalyst.
Please note: There are two option trades on our Watch list that may become official recommendations today. We may wait until our afternoon update to release them or they may come out before 11am. Both trades will be short in nature. One will only be open for a day or two as it is an earnings play while the other may last up to yearend.
Our portfolio is showing strong gains for the year so we feel like taking a little risk on a couple of trades that could do well. We may also close a trade that is showing a profit if it starts to slip and they are a few others we are making adjustments to as we wind out the year. Subscribers, check the Members Area for the details and stay locked-and-loaded.
Tags: blue-chip stocks, chicken option trade, chicken trade, momentum, momentum options, option mentoring, stock options trading advisors, straddle option trade
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Monday, December 19th, 2011
9:00am (EST)
The bears got back in the win column last week following a strong start on Monday which lasted through Wednesday. Thursday was a rebound day and Friday was a draw despite good economic news throughout the week. The bulls were fighting a daily uphill battle after holding support as they bears used the ratings agencies — Moody’s, Fitch, and Standard & Poor’s – to try and break the bulls backs.
Friday’s quadruple-witching failed to produce any excitement as the major indexes ended mixed to remain in a contained trading range, for now.
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Tags: chicken option trade, chicken trade, momentum, momentum options, option mentoring, stock options trading advisors, straddle option trade
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Friday, December 16th, 2011
9:00am (EST)
There have been numerous times this year we have seen the market move into a trading range and they are the hardest times to trade. After a big rally or a huge decline, trading ranges are common so it is important to recognize them but you still have to make small bets on a breakout or breakdown. At the beginning of November, we said the market may have peaked and there could be a pullback but it was a little more severe than we had anticipated. Instead of falling to the middle of the current trading range, the market fell to the bottom of it which has people making bets for a further decline.
Some of the recent headlines support the bears (Europe) while others make a strong case for the bulls (US economic data). However, the global picture is still mixed with new worries over China popping up and a divided White House here at home. The outlook for 4Q earnings is worsening the longer Europe stands by and does nothing but with yesterday’s bounce, there were signs the market is trying to disconnect itself from Europe’s woes.
The good news with the current range is that we were able to recognize this so we weren’t too surprised to see the bulls hold support – just like the bears have held resistance at the top of the trading range. With big bets being made at both ends of the spectrum, the bulls betting on a breakout at the top while the bears are looking for a breakdown at the bottom, it appears the market is ignoring both sides.
The Dow added 45 points, or 0.4%, to finish at 11,868 while the S&P added 4 points, or 0.3%, to close at 1,215. The Nasdaq gained a couple of points to settle at 2,541.
The S&P Volatility Index (VIX, 25.11, down 0.93) dropped another 3.5% and is at a 3-month low. Although most of the pros will tell you the VIX is a useless indicator, we have used it to make amazing market calls all year long and the index has also helped us identify the current trading range. We have been mentioning the VIX a lot of the past few weeks and we have said since October when the VIX was in the high 30’s it would come down to 22.5 according to the charts.
The problem is there hasn’t been a market “rally” which usually happens with a declining VIX, thus the trading range.
The other interesting tidbit we noticed yesterday were the gains the Russell 2000 made. The small-cap index jumped 7 points, or 1%, to close at 716. There is a mountain of support at current levels but a drop below 700 could easily lead to 650. This would equate to a 7% selloff so it was vital the bulls hold this area.
We stayed pat all week as far as opening new positions but we expect next week to be different. Although we aren’t expecting a breakout, we do feel the market can make a run back to the top of the current trading range. It may take a more than a week though because we aren’t betting on Santa but a yearend into January rally instead – as long as support holds. We have covered the downside targets as well so everyone should be aware that if a rally does fade or support flops, we will be ready to buy put options.
We do have one of our covered call trades that will likely be “called-away” today for a 14% gain and we have 3 NEW TRADES we will be releasing shortly after the open for our Weekly Wrap subscribers. One of the trades may be a carry-over play while the other is a stock we played a few months ago. If we are able to close the one position today, it will run our track record to 16-0 for closed trades for the 2011 Weekly Wrap portfolio.
For those of you who are not subscribers to the Weekly Wrap, we told you we would be running some Holiday deals this month. Our first surprise is a 1-year membership to our Weekly Wrap for just $299. For current subscribers, you can upgrade your membership. This publication is normally priced at $599 so it represents a savings of 50%.
You can use the coupon code 5F181DD20D thru the end of this month to join and please make sure you choose the 1-yr subscription model. If you sign up this morning, you will have access to the 3 new trades we are releasing today.
Tags: chicken option trade, chicken trade, momentum, momentum options, option mentoring, stock options trading advisors, straddle option trade
Posted in Market Analysis, Market Commentary | Comments Off
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Sears Sinks, Bulls Welcome Santa
Tuesday, December 27th, 2011
1:30pm (EST)
The bulls got off to a good start on the official first day of the Santa Claus rally as they pushed the market higher at the open. Although we have backed off the highs, the major indexes are showing slight gains ahead of tomorrow’s potential market moving event. We mentioned this morning that Italy will be offering a ton of debt over the next few days and Wall Street is a little worried over the yield on the 10-year notes which could fetch 7% or more when they go to auction.
This will be a short week with the Christmas holiday but it is funny how none of the talking heads are mentioning the start of the Santa rally which consists of the last 5 trading days of the year and the first 2 days of the New Year. We also mentioned that if there is no Santa rally that a bear market typically follows in January so tomorrow’s Italian debt offering WILL BE the catalyst that takes the market higher or lower thru yearend.
One stock that will probably not participate in a possible rally is Sears Holdings (SHLD, $34.98, down $10.87) which is down 24% today. Shares are getting spanked after the company said it will be closing 120 stores following weak holiday sales. We aren’t sure of the mix but there will be fewer Sears and Kmart stores for the world to worry about.
We have been following Sears for years but we are a little disappointed we didn’t get in on the put options. The January 40 puts (SHLD120121P00040000, $7.00, up $5.25) are up nearly 300% on the news.
Elsewhere, Apple (AAPL, $407.06, up $3.73) is trading higher on rumors the iPad 3 will be out in late February. The news isn’t too surprising considering the company released the iPad 2 around the same time last year. In any event, the news has helped Tech which is been the weakest link of late.
We have a lot to cover with our current trades but we wanted to give everyone a quick update on what to expect before the bell on Wednesday. Our hope is things go well with Italy but we are taking half profits in a trade or two to lock in profits just in case.
As we head to press, the Dow is up 15 points to 12,309 while the S&P 500 is higher by 2 points to 1,267. The Nasdaq is showing a gain of 9 points to 2,628.
Tags: blue-chip stocks, chicken option trade, chicken trade, momentum, momentum options, option mentoring, stock options trading advisors, straddle option trade
Posted in Market Analysis, Market Commentary | Comments Off