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Thursday, April 14th, 2011
9:00am (EST)
The bulls got some green numbers on Wednesday although the market’s gains were limited. After a nice open, the bears come out at lunch and had a quick nibble but left after feasting for two days. There was plenty of uninspiring news but it was good to see the bulls battle back despite unflattering results from corporate America and sour economic headlines.
The Dow managed a 7 point win and closed at 12,270 but ran into trouble at prior support which was at 12,350 and now resistance. The index reached 12,335 but we are starting to see lower highs and lower lows for the blue-chips which is not a good sign.
The S&P 500 added a quarter of a point and finished flat at 1,314. The bulls were hoping to get to 1,325 but could only manage a run up to 1,321. The low was 1,309 and a break below 1,300 will cause some panic.
The Nasdaq stayed in positive territory for the entire session and gained 16 points to settle at 2,761. We liked the close above 2,750 and the index kissed 2,772 but the 2,800 level remains a brick wall. There is further risk down to 2,700-2,650 and some of the high beta stocks are still struggling.
The technical charts are still telling us this market could go either way but our fundamental analysis is calling for a pullback. A few things we are seeing: a breech of the 50-day moving averages, a lower close on a Friday and Monday which has only happened twice this year, and the other aforementioned issues we have mentioned. Plus, the one group the bulls have been counting on, the Financial stocks, have done nothing this week.
We all know bull markets can climb a wall of worry but we are starting to see a lot of bearish option trades work which is telling us we could be setting up for a short-term trend to the downside.
Okay, let’s forget about the market for a minute. For those who have been with us for a few years, check out today’s chart on Dendreon (DNDN, $38.78, up $0.21) inside our Members Area which has been pushing resistance recently. We said when shares were under $5 three years ago that their drug, Provenge, could be a huge blockbuster and we were the first newsletter (to our knowledge) to put a $50 price target on the stock. We even went head-to-head with Cramer when he was telling everyone “don’t buy, don’t buy” ahead of the FDA announcements.
Shot of the day…the President called for $4 trillion in cuts and asked for our help. Geez, the average government worker makes $80,000-$90,000 a year while the private worker makes on average $60,000. The cuts need to start on the White House (and State) payrolls not the American taxpayers. Wanna trim some fat? Start there or take some “essential” pay cuts.
Futures are pointing towards a weak open…Dow futures are lower by 45 points to 12,154 while S&P 500 futures are off by 7 points to 1,302. The Nasdaq 100 futures are down 13 points to 2,295.
Tags: call option trades, chicken trades, Dendreon options, dndn, Jim Cramer, momentum options, Momentum stocks, NASDAQ: DNDN, options trading course, put options, stock market options, stocks that trade weekly options, strangle option trades, weekly options
Posted in Earnings, Market Analysis | Comments Off
Wednesday, April 13th, 2011
12:50pm (EST)
After a strong open, the bulls once again find themselves giving up ground. Futures were pointing towards a beautiful start to today’s trading but the bulls retreated after testing Monday’s lows which isn’t a good sign.
Let’s start with the boring stuff first. In economic news, Business Inventories for February increased by 0.5% versus expectations for a 0.8% increase. Retail Sales for March increased 0.4%, but fell short of the 0.5% that had been penciled in. However, if we dummy it down further, less autos, retail sales rose 0.8% which was better-than-expected by 0.1%. And finally, MBA purchase applications for the week fell 4.7%.
The Financial stocks have shown no leadership despite JPMorgan (JPM, $46.27, down $0.37) reporting solid 1Q earnings as Wall Street found something wrong with it. The company netted profits of $5.6 billion, or $1.28 a share, versus $3.3 billion, or $0.74 a share, in the year ago period. Revenue came in at $25.8 billion.
The suit-and-ties were looking for earnings of $1.16 a share on revenue of $25.5 billion. Although JP’s profits surged 67%, shares are trading lower after a run up to $47.37.
We were hoping for a bigger pop in the stock at the open because the company is still one of the top ten banks in the world and their numbers were good on the surface. The bulls were hoping the company’s recent announcement of a dividend boost to 25 cents from 5 cents and the fact that they authorized a $15 billion share buyback would be enough for shares to make a run at its 52-week high of $48.36.
The one concern analysts’ shared was that the bank’s retail services business which took a $1 billion hit after its mortgage unit reported negative revenue and wrote-off what it could.
We have talked until we are blue in the face that the Financial stocks would need to participate in the market’s next leg up but there is no confidence in this sector right now. In time, there will be, but we have said that the bulls would need their help and when you can’t count on JP for backup, who else is there?
Next up will be Bank of America (BAC, $13.34, down $0.13) which reports earnings before the bell on Friday.
The market was up as we started our afternoon update but is mixed as we go to press as the bears are once again in control.
The Dow is down 33 points to 12,230 while the S&P is lower by 5 points to 1,309. The Nasdaq, however, is up 2 points to 2,747.
We have a ton to talk about and some interesting plays on our Watch List. As the market continues to gyrate, one this is for certain. This is truly becoming a “stock picker’s” market. Subscribers, check the Members Area for the important updates.
Tags: call option trades, chicken trades, JPM, momentum options, Momentum stocks, options trading course, put options, stock market options, stocks that trade weekly options, strangle option trades, weekly options
Posted in Earnings, Financial Stocks, Market Commentary | Comments Off
Wednesday, April 13th, 2011
8:55am (EST)
The bears took another step towards cracking major support levels as they spent all of Tuesday pounding the bulls into a corner. In round 2-out-of-5 this week, the bears scored their second consecutive win, but more important, they did some serious technical damage as both the Nasdaq and S&P 500 dipped below their 50-day moving averages.
The Dow dropped triple-digits, or 117 points, to settle at 12,263 but traded to a low of 12,233. This was slightly above our 12,200 downside target and another breakdown could lead to 12,000.
The S&P 500 fell 10 points, or 0.8%, to close at 1,314. The index never had a shot of retaking the 1,325 level yesterday and we said to watch for a test down to 1,300. The index dipped to an intraday low of 1,309 but we didn’t see any “panic selling” and we were looking for 1,310 to hold.
The Nasdaq tanked 27 points, or 1%, and is folding like a cheap lawn chair. We mentioned yesterday that the “high beta” stocks are taking a lashing and yesterday’s 1% drop put the Nasdaq at 2,744. We were looking for the 2,750 level to hold but the index tumbled to a low of 2,737.
We have talked about the possibility of the market testing its February highs as it was waiting for earnings season to begin but we now know some companies are going to have an uphill battle. We have spent a lot of time trying to explain the current market conditions because the charts are giving us mixed signals.
We said yesterday things feel bearish but our hope was to have one more test to the top and some fluff that could take out February’s highs. Either way, this market is still gyrating and we expect wilder price swings until another clear trend is established.
In earnings news, JPMorgan (JPM, $46.64, down $0.22) came in with good numbers which we will cover in our afternoon update. Futures are up strong - Dow (+89), S&P 500 (+10), Nasdaq 100 (+19) – as we head to press.
Subscribers, check the Members Area for the trade updates.
Tags: call option trades, chicken trades, JPM, JPM earnings, momentum options, Momentum stocks, options trading course, put options, stock market options, stocks that trade weekly options, strangle option trades, weekly options
Posted in Earnings, Market Commentary | Comments Off
Tuesday, April 12th, 2011
12:50pm (EST)
After weeks of testing resistance, are the bulls ready to throw in the towel?
Although one day doesn’t make a trend, we knew at some point the bullish trend would come to an end. After spending all of last week pushing resistance, the bulls’ find themselves on the defensive as they try to hold back a bear attack that has become pretty brutal.
We knew last night when Alcoa (AA, $16.68, down $1.09) came up a little short that it could set the tone for trading today. Futures were weak all night and the overseas markets were trading lower when we woke up this morning. Most of the headlines were negative and there was nothing on today’s economic docket that we could look forward to for a turnaround.
We have been mentioning near-term resistance and the possibility of a run higher but the closer we get to the end of April, the closer we knew the rally would be fading. For those of you who have been following us for a while, many of you remember when we said back in October 2010 that the bulls were ready to rally after spending months in a trading range.
We also mentioned there was a possibility of a sustained run up until April which is where we are at now. At the time of our bullish call, the Dow was trading near 11,000 while the S&P was hovering around the 1,175 level. In January 2011, we said to continue to expect a bullish run and in February we called for a “pullback” during options expiration week.
After a bottom in mid-March, we got another leg up which pushed the market back towards its February highs last week. Looking back at all of these events, then one would know that we would be turning bearish at some point in April, but when?
That is the hardest question to answer, folks.
While our heart tells us this is the end of the rally, our gut is telling us that the market could stay choppy for another week or two. What we are seeing is a breakdown in Tech and some of the high beta names but strength in other sectors. Oil has come off its highs and is down $3 a barrel today but that hasn’t helped matters.
We have traded light over the past month as we knew coming into April that we would be winding down bullish trades while at the same time looking for bearish trades as we enter May and June. We know many of you are anxious for new trades but this isn’t the best environment to trade right now.
The good news is that there are some sectors breaking down which we will take advantage of by using put options but we remain open to at least one more test of the highs. While the market continues to gyrate, it’s best we wait for trades instead of pushing the action.
We also have some great news on our Hershey (HSY, $56.45, up $0.35) call option trade which is up 50% in 3 weeks. We took half profits last week and will be closing the other half today as the April calls expire this Friday. Shares have hit a high of $56.61 today and out near-term target has been $57-$58. Close enough for a cigar…
As we head to press, the Dow is down 120 points to 12,260 while the S&P is off by 12 points to 1,312. The Nasdaq is lower by 26 points to 2,745. Subscribers, check the Members Area for the updates.
Tags: call option trades, chicken trades, Hershey, HSY, momentum options, Momentum stocks, options trading course, put options, stock market options, stocks that trade weekly options, strangle option trades, weekly options
Posted in Earnings, Trade Update | Comments Off
Tuesday, April 12th, 2011
9:05am (EST)
Monday’s action followed last week’s script where the bulls started the session pushing resistance only to fade by the end of the day. The bears have slowly chipped away at support and yesterday’s action favored their camp, but they too, are lacking momentum despite having the headlines in their favor.
There was nervousness and excitement ahead of the start of earnings season as trading was choppy on reports Japan would have to raise their nuclear warning and on news that the International Monetary Fund (IMF) cut their estimates for U.S. economic growth.
The IMF waited until gas was nearly $4 a gallon but said that higher gas prices could slow the pace of the U.S. economy. Wall Street has been worried about the effects of higher oil and food costs on corporate profits so we expected to see a “sell the news” event once word got out.
The Dow did manage a 1 point gain to settle at 12,381 but traded to a high of 12,444. The blue-chips touched a low of 12,352 which has been solid support but a break below this level could lead to a test back down to 12,200-12,000 for the bears. Near-term resistance has been hard to clear at 12,500-12,600 for the bulls.
The S&P 500 slipped 4 points and closed at 1,324 which was slightly below our 1,325 downside target. There could be further weakness down to 1,300 while the bulls focus on getting back to 1,334 and above.
The Nasdaq fell 9 points to finish at 2,771 after falling to 2,760 in late day trading. Tech held 2,750 but we will be watching this level going forward. There is further risk down to 2,650 if broken while 2,800 remains near-term resistance.
Yesterday’s technical breakdown pushed both the S&P and Nasdaq below their respective 10-day moving averages. This was the first time since mid-March that both indexes failed their 10-day MA’s and bears watching.
Of course, the big news after the bell was Alcoa’s (AA, $17.77, down $0.15) first-quarter earnings which came in mixed. After an initial pop to $18-and change in after-hours trading, shares fell 3% after the company reported sales that came in below expectations.
The company earned $308 million, or $0.28 a share, versus a loss of $201 million, or $0.20 a share in the year ago quarter. Revenue rose over 20%, to $5.96 billion from $4.89 billion, helped by a 7% pop in aluminum prices.
Analysts were expecting profits of $0.27 a share on revenue of $6.08 billion.
Shares of Alcoa are trading at $16.98 in pre-market action, down 79 cents, or 4%.
As far as futures, they are pointing towards a lower open; Dow (-51) S&P 500 (-7), Nasdaq 100 (-10). Subscribers, check the Members Area for the updates.
Tags: AA, Alcoa's earnings, call option trades, chicken trades, momentum options, Momentum stocks, options trading course, put options, stock market options, stocks that trade weekly options, strangle option trades, weekly options
Posted in Earnings, Market Analysis | Comments Off
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JPMorgan (JPM) Beats, Shares Slide
Wednesday, April 13th, 2011
12:50pm (EST)
After a strong open, the bulls once again find themselves giving up ground. Futures were pointing towards a beautiful start to today’s trading but the bulls retreated after testing Monday’s lows which isn’t a good sign.
Let’s start with the boring stuff first. In economic news, Business Inventories for February increased by 0.5% versus expectations for a 0.8% increase. Retail Sales for March increased 0.4%, but fell short of the 0.5% that had been penciled in. However, if we dummy it down further, less autos, retail sales rose 0.8% which was better-than-expected by 0.1%. And finally, MBA purchase applications for the week fell 4.7%.
The Financial stocks have shown no leadership despite JPMorgan (JPM, $46.27, down $0.37) reporting solid 1Q earnings as Wall Street found something wrong with it. The company netted profits of $5.6 billion, or $1.28 a share, versus $3.3 billion, or $0.74 a share, in the year ago period. Revenue came in at $25.8 billion.
The suit-and-ties were looking for earnings of $1.16 a share on revenue of $25.5 billion. Although JP’s profits surged 67%, shares are trading lower after a run up to $47.37.
We were hoping for a bigger pop in the stock at the open because the company is still one of the top ten banks in the world and their numbers were good on the surface. The bulls were hoping the company’s recent announcement of a dividend boost to 25 cents from 5 cents and the fact that they authorized a $15 billion share buyback would be enough for shares to make a run at its 52-week high of $48.36.
The one concern analysts’ shared was that the bank’s retail services business which took a $1 billion hit after its mortgage unit reported negative revenue and wrote-off what it could.
We have talked until we are blue in the face that the Financial stocks would need to participate in the market’s next leg up but there is no confidence in this sector right now. In time, there will be, but we have said that the bulls would need their help and when you can’t count on JP for backup, who else is there?
Next up will be Bank of America (BAC, $13.34, down $0.13) which reports earnings before the bell on Friday.
The market was up as we started our afternoon update but is mixed as we go to press as the bears are once again in control.
The Dow is down 33 points to 12,230 while the S&P is lower by 5 points to 1,309. The Nasdaq, however, is up 2 points to 2,747.
We have a ton to talk about and some interesting plays on our Watch List. As the market continues to gyrate, one this is for certain. This is truly becoming a “stock picker’s” market. Subscribers, check the Members Area for the important updates.
Tags: call option trades, chicken trades, JPM, momentum options, Momentum stocks, options trading course, put options, stock market options, stocks that trade weekly options, strangle option trades, weekly options
Posted in Earnings, Financial Stocks, Market Commentary | Comments Off