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Thursday, November 10th, 2011
12:55pm (EST)
Futures were pointing towards a nice pop at the open as some of the Tech names reported better-than-expected earnings while jobless claims came in under 400,000 again. However, despite the strong start, the momentum has failed to hold as the indexes gave back all of their gains with the S&P and Nasdaq briefly falling into negative territory.
Cisco Systems (CSCO, $18.72, up $1.11) has been in a solid uptrend since bottoming in August at $13.30 on its intraday low. The company reported a profit of 43 cents a share on revenue of $11.3 billion versus expectations for 39 cents/ $11 billion. More impressive is the fact gross margins came in at 61% in a sector that is full of competition – and they raised guidance for the quarter.
John Chambers, Cisco’s CEO, has been at the helm for nearly two decades and we figured the company would beat the lowered expectations after he promised a turnaround. Cisco has a history of beating the Street by a penny so his aggressiveness to right the ship is paying off.
Although we didn’t play a directional trade on Cisco Systems for our Daily publication, we did recommend the stock as a covered call for our Weekly Wrap. If shares hold up, we should get “called-away” at $17 next week when the November options expire. In fact, we have 3 trades which should get called away next week with gains of 23%, 17% and 10%. This will run our track record to a perfect 15-0 for 2011.
It looks as though trading could stay choppy for the rest of the week but we are expecting more bullish action, especially next week and into Thanksgiving. However, we could experience a little bit more of a pullback before the bulls break past the upper layers of resistance we have been outlining for the past few months.
The Dow is currently up 92 points to 11,873. The index is off its highs for the day and the low has been 11,779. We have been saying we expect 11,800 to hold (with backup at 11,600) but it would be a bonus if the bulls can close above 12,000 today. With the European markets now closed, hopefully we can get there.
The S&P is higher by 8 points to 1,237. The index traded down to 1,227 and we have penciled-in 1,225 as the low. If this level were penetrated, the 1,200 level would be crucial in holding or the bulls risk a trend change. Of course, the bulls are pushing for a close above 1,250.
The Nasdaq is down a point to 2,621. Tech has traded to a low of 2,601 and came within spitting distance of breaking under our 2,600 downside target. Backup is at 2,550 but we are hoping for a close above 2,650 today.
We have a lot to cover with our current trades so we will be back in the morning with the latest and greatest. Subscribers, check the Members Area for the updates.
Tags: CSCO, CSCO earnings, option alerts, option trading, option trading services, options momentum trading, options on stock, options trading, options trading service, stock option trade, trade in options, weekly options trading
Posted in Market Analysis, Market Commentary | Comments Off
Thursday, August 11th, 2011
1:30pm (EST)
The bulls are holding their gains and are pushing the market higher as we head into the second half of trading. Better-than-expected earnings from Tech and an in-line jobs report have helped fuel today’s bounce.
Initial Claims came in at 395,000 versus estimates for 405,000 and below the critically watched 400,000 level. Continuing claims were slightly below expectations at 3.69 million. Elsewhere, the Commerce Department reported the U.S. Trade Balance showed a deficit of $53 billion, versus a forecast for $48 billion.
Cisco Systems (CSCO, $15.97, up $2.24) is trading higher and is up 16% after announcing earnings last night. The company reported a profit of $1.97 billion, or 40 cents a share, versus $1.9 billion, or 33 cents a share, in the year ago period. Revenue came in at $11.2 billion, up from $10.8 billion.
The suit-and-ties were looking for 38 cents on sales of $11 billion.
Shares were up nearly a buck in after-hours trading last night and with shares up today, it looks like a good quarter. But was it? Cisco did a lot of cost cutting but gross margins were lower. Cisco said sales are expected to grow 1%-4% for the quarter versus last year numbers but that equates to just $10.86-$11.18 billion which is BELOW the just reported quarter.
We still like the stock because we believe Cisco will be at $20 again. It might take a 6months to a year or two but that is a small wait to make 40%-50%. Cisco is also a great stock to write covered calls with and has been a current recommendation in our Weekly Wrap Portfolio since March.
As we head to press, the Dow is up 351 points to 11,071 while the S&P is higher by 41 points to 1,161. The Nasdaq is sporting a gain of 88 points and is at 2,469.
Subscribers, check the Members Area for the updates.
Tags: CSCO, CSCO earnings, option alerts, option trading, option trading services, options momentum trading, options on stock, options trading, options trading service, stock option trade, trade in options, weekly options trading
Posted in Earnings, Market Analysis, Market Commentary | Comments Off
Thursday, May 12th, 2011
8:45am (EST)
The bears bounced back on Wednesday as they got an early jump at the start of trading and kept the bulls under water all session. There were two main factors (and maybe a third) driving the market lower and they were a higher dollar and lower commodity prices. And perhaps, the conviction of hedge fund manager Raj Rajaratnam who was found guilty on all counts of insider trading yesterday and gave Wall Street another black eye.
There was a slight rebound off the lows going into the closing bell as traders looked for a good round of earnings in after-hours trading. However, they were disappointed as the market still closed with a 1% loss and after Cisco Systems (CSCO, $17.78, down $0.01) offered a less-than-rosy forecast. More on this story in a minute.
Oil fell over 5% and closed at $98-and change (a barrel) on the rise in the dollar, higher inventories, and other factors. Gold and silver were also down, finishing at $1,500 and $35 an ounce, respectively.
As a result, the Dow fell 130 points to finish at 12,630 after touching a low of 12,577. Short-term support is at 12,500 which we mentioned on Monday morning, then 12,350.
The S&P dropped 15 points to settle at 1,342. The index traded to a low of 1,336 and finished below 1,350 which favors the bears. There is further downside risk to 1,325 and a crack below this level brings 1,300 back into the picture.
The Nasdaq tanked 27 points and closed at 2,845. Tech fell below our 2,850 make-or-break target and touched a low of 2,829. The bears will target the 2,800 level today while the bulls try to hold the fort down. A break below 2,800 could spark panic.
Futures are pointing towards a weak opening after Cisco Systems beat estimates but disappointed on its outlook for the current quarter. The stock surged 4% in after-hours when traders learned the company beat estimates by 4 cents but fell over 3% after they guided lower.
Cisco gave 4Q guidance of $0.38 a share versus estimates for $0.42. Additionally, Cisco admitted it was getting its lunch eaten and said revenue would be up 2%, at best, when the kids on Wall Street had penciled in an increase of 5%.
We thought Cisco had a shot at beating earnings by a penny which they have been famous for in the past because the bar had already been lowered. Cisco needed to wow Wall Street with something positive but admitted “they had work to do”.
Cisco is at $16.95, down $0.83, in early action this morning so we will have to see how much this was baked into the cake. Shares touched $18+ in after-hours last night but could be headed back towards their 52-week low of $16.52 if the bears eat the whole pie this morning.
Dow futures are down 52 points to 12,545; S&P futures are off 6 points to 1,332; Nasdaq futures are slipping 14 points to 2,379.
Tags: call options, CSCO, high beta stocks, Hot stocks, momentum options, Momentum stocks, option tips, options trading course, stock market options, strangle option trades, weekly options
Posted in Market Commentary | Comments Off
Thursday, November 11th, 2010
12:20pm (EST)
The bears took their best shot at breaking support this morning but the bulls have met the challenge and have held key levels on the major indexes.
The Dow is currently down 91 points to 11,265 after trading to a low of 11,231. We were looking to hold the 11,200 level and we would love to see a close above 11,250.
The S&P is lower by 9 points to 1,209 and has touched a low of 1,204 while the Nasdaq is off by 33 points to 2,545. Both indexes have also held support at 1,200 and 2,500, respectively.
Today’s news is all about Cisco Systems (CSCO, $20.58, down $3.91) which is getting a 16% haircut after giving weak guidance. We have followed the company since the early 1990’s and this is the biggest sell-off we have ever seen in the stock.
We were expecting a 5% move in shares either way after the company reported earnings but we didn’t think shares would move enough to play a straddle or strangle option trade. Man, were we wrong.
These types of option trades are ways to play a stock if you are uncertain which way shares are going to move after an earnings announcement. However, you need a big move in the stock to make the trade profitable, usually 10% or more if you are playing both call and put options.
We started introducing these trades a few months ago because they can easily make you a triple-digit return or at least 10% if the stock moves enough. Earnings announcements move stocks and we talk about this in our trading manual, How to Trade Options on Momentum Stocks. We also show you how to use strangle and straddle option trades, how to figure out your breakeven points, and what your returns could be.
The flavor of choice for Cisco would have been the November options because it is a one-day trade (usually) and there were a couple of ways we could have played this. Cisco was near $25 going into yesterday’s closing bell…
To do a strangle option trade, you could have purchased the Cisco November 23 puts (CSCO101120P00023000, $2.30, up $2.10) for about 20 cents yesterday, or 10 contracts would have cost you $200. These options are worth $2,300 right now as they are up over 1,050%!
The Cisco November 27 calls (CSCO101120C00027000, $0.01, down $0.08) could have been picked up for 10 cents yesterday which means it would have cost you $100 to buy 10 contracts. The options will probably expire worthless. No big deal.
Your total investment would have been $300 and if you closed the puts right now you would have $2,300 in your account. You would let the calls expire worthless because it is unlikely the stock will rebound and jump back to new highs by next Friday. You total return would on this trade would have been 675%. Not bad for less than 24 hours of work.
Although we didn’t take this trade, we think there is another stock that could move 10% or more on Friday. We take a look at it on our Watch List but we will probably stay on the sidelines as we already have enough action with our current trades.
We like the fact the market has held support and has bounced off the lows of the day. We still feel we can go higher and we are targeting the next move up in the market by Thanksgiving which means we may consolidate at these levels for a little bit.
Despite today’s downdraft, our trades are holding up well. Subscribers, check the Members Area for the important updates. We are also selling another option today for our covered call position.
Tags: bear market, binary options, bull market, call option, CSCO, how to trade options, Momentum stocks, option investments, option picks, option trading, options mentoring, options trading service, put option, stock market, stock market options
Posted in Company Commentary, Earnings, strangle option trades | Comments Off
Thursday, November 11th, 2010
9:00am (EST)
I got a bad feeling on this one all right? I mean, I got a bad feeling! – Sgt. Barnes, Platoon
The bulls finally made it back into the green on Wednesday after two days of selling pressure but it appears it will be short-lived. From the opening headline to today’s quote of the day, you can tell the market isn’t looking good for the bulls this morning.
The Dow spent much of Wednesday in the red before managing to finish with a 10 point gain to close at 11,357. Boeing (BA, $67.07, down $2.18) weighed heavy on the index as the blue-chip fell 3% after halting test flights of its 787 Dreamliner. This was in response to an incident that happened on Tuesday after an electrical fire on one of its test planes forced an emergency landing. Although it’s too early to tell if the incident will affect the plane’s delivery schedule, which is already 3 years behind schedule, and just another setback Boeing didn’t need. The 3% drop accounted for -17 Dow points.
The S&P 500 managed a 5 point pop and settled at 1,218 while the Nasdaq added 16 points, to finish at 2,578.
We expect Tech to take a beating today after Cisco Systems (CSCO, $24.49, up $0.14) pulled up lame with its quarterly earnings.
The company reported a profit of $1.9 billion, or $0.42 a share, versus $1.8 billion, or $0.30 a share, in the year earlier period. Revenue was up nearly 20% to $10.8 billion. Wall Street was looking for $0.40 a share with a revenue forecast just shy of Cisco’s beat.
Where Cisco blew it was their guidance for the current quarter in which they said they expect sales in between $10.1-$10.3 billion. The suit-and-ties were looking for sales of $11.1 billion.
We told you yesterday the company would at least beat estimates by a penny but we were a little worried about guidance (just like our buddy Barnes was). This is a huge disappointment…and a buying opportunity. Shares plunged in after-hours trading last night, falling over $3, or nearly 13%, to $21-and change. This morning, the stock is at $20.30, down $4.19.
We may use the sell-off to establish a covered call position but we would need to buy the stock first. For those of you unfamiliar with this strategy, you write (or sell call options) on stocks that you own in order to bring in income and to lower your share cost. For every 100 shares of a stock you own, you can sell a call option; collect the premium, and do it over and over until eventually the stock pays for itself.
Of course, a lot of factors are involved in making a return on a covered call investment as the stock could get “called away” from you if the price is above the strike price you sold. However, they are GREAT strategies on stocks you own or would like to own which you can also do by selling put options. But that’s another story…
Bottom line. Cisco is going on sale today, folks.
As we head to press, Dow futures are lower by 56 points to 11,246 while the S&P 500 futures are off by 8 points to 1,206. The Nasdaq 100 futures are down 21 to 2,153. It appears the bears will have the early edge and we will be looking for the Dow to hold 11,200 while the 1,200 level will come into play for the S&P. After a 15% rally from the August lows, the market was due for a pullback but we would like to see support hold today. Subscribers, check the Members Area for the updates.
Tags: bear market, binary options, bull market, call option, CSCO, how to trade options, Momentum stocks, Nasdaq: CSCO, option investments, option picks, option trading, options mentoring, options trading service, put option, stock market, stock market options
Posted in Earnings, Market Analysis, Strategies | Comments Off
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Cisco Systems (CSCO) Turning the Corner
Thursday, November 10th, 2011
12:55pm (EST)
Futures were pointing towards a nice pop at the open as some of the Tech names reported better-than-expected earnings while jobless claims came in under 400,000 again. However, despite the strong start, the momentum has failed to hold as the indexes gave back all of their gains with the S&P and Nasdaq briefly falling into negative territory.
Cisco Systems (CSCO, $18.72, up $1.11) has been in a solid uptrend since bottoming in August at $13.30 on its intraday low. The company reported a profit of 43 cents a share on revenue of $11.3 billion versus expectations for 39 cents/ $11 billion. More impressive is the fact gross margins came in at 61% in a sector that is full of competition – and they raised guidance for the quarter.
John Chambers, Cisco’s CEO, has been at the helm for nearly two decades and we figured the company would beat the lowered expectations after he promised a turnaround. Cisco has a history of beating the Street by a penny so his aggressiveness to right the ship is paying off.
Although we didn’t play a directional trade on Cisco Systems for our Daily publication, we did recommend the stock as a covered call for our Weekly Wrap. If shares hold up, we should get “called-away” at $17 next week when the November options expire. In fact, we have 3 trades which should get called away next week with gains of 23%, 17% and 10%. This will run our track record to a perfect 15-0 for 2011.
It looks as though trading could stay choppy for the rest of the week but we are expecting more bullish action, especially next week and into Thanksgiving. However, we could experience a little bit more of a pullback before the bulls break past the upper layers of resistance we have been outlining for the past few months.
The Dow is currently up 92 points to 11,873. The index is off its highs for the day and the low has been 11,779. We have been saying we expect 11,800 to hold (with backup at 11,600) but it would be a bonus if the bulls can close above 12,000 today. With the European markets now closed, hopefully we can get there.
The S&P is higher by 8 points to 1,237. The index traded down to 1,227 and we have penciled-in 1,225 as the low. If this level were penetrated, the 1,200 level would be crucial in holding or the bulls risk a trend change. Of course, the bulls are pushing for a close above 1,250.
The Nasdaq is down a point to 2,621. Tech has traded to a low of 2,601 and came within spitting distance of breaking under our 2,600 downside target. Backup is at 2,550 but we are hoping for a close above 2,650 today.
We have a lot to cover with our current trades so we will be back in the morning with the latest and greatest. Subscribers, check the Members Area for the updates.
Tags: CSCO, CSCO earnings, option alerts, option trading, option trading services, options momentum trading, options on stock, options trading, options trading service, stock option trade, trade in options, weekly options trading
Posted in Market Analysis, Market Commentary | Comments Off