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Thursday, May 5th, 2011
8:50am (EST)
We knew before the market opened on Wednesday it was headed lower. Although futures were holding up, the atmosphere felt bearish and the lack of follow through following Monday’s big pop at the open has been apparent all week. Economic news has come in below the belt and tomorrow’s nonfarm payrolls report and unemployment numbers have Wall Street nervous. Earnings have been coming in mixed and are winding down which leaves few catalysts for the bulls to break resistance as we head into the heart of May.
The Dow was down triple-digits, or 135 points, by midday and touched a low of 12,673. The index danced between our 12,600-12,700 support areas before finishing with a loss of 84 points, or 0.7%, at 12,723.
Caterpillar (CAT, $110.77, down $2.50), Chevron (CVX, $104.68, down $1.49) and International Business Machines (IBM, $170.62, down $2.25) accounted for over half of the Dow’s losses (-47 Dow points) as Energy and Tech stocks continue to struggle.
The S&P 500 fell nearly 10 points, or 0.7%, and settled at 1,347. The index closed below our 1,350 support target and its 10-day moving average after touching a low of 1,341.
The Nasdaq dropped 13 points, or 0.5%, and closed at 2,828. Tech traded to a low of 2,808 and we said to watch the 2,800 level for support. However, there is still pressure down to 2,750 over the near-term and the chart gets uglier on a break below these levels.
The Intel (INTC, $23.50, up $0.45) news at lunchtime did help the Tech sector recover somewhat after the company introduced a new 3D chip to help keep pace with the rapidly growing mobile device market. Shares set a new 52-week high of $23.56 in the process and seem to be rejuvenated after buyers rushed in.
In earnings news, Electronic Arts (ERTS, $19.92, down $0.24) reported their numbers after the close last night and they were impressive. The company said profits were $83 million, or $0.25 a share, versus $30 million, or $0.09 a share, in the year ago period.
Revenue was up to $1.1 billion from $979 million. EA said its digital revenue business grew over 70%, to nearly $270 million, up from $144 million a year earlier. We have been telling you about this story for a few quarters now and EA is starting to put the pieces towards a rock-solid, high margin business.
As far as Wall Street’s expectations, they had the company earning $0.22 a share on revenue of $923 million.
The stock went on a roller-coaster ride in extended trading as investors fretted their outlook. Electronic Arts said it expects current quarter revenue of $460-$500 million which was below analysts’ forecast of $518 million, on average. Also, EA expects revenue for the full fiscal year to come in at $3.75-$3.95 billion, versus estimates for $3.94 billion. In other words, they sandbagged their numbers.
Shares were down 10% to under $19 shortly after the closing bell but recovered when the smart buyers rushed in to grab the discount. The stock finished last night at $20.25 after reaching nearly $21 and is at $20.60+ this morning.
EA’s core titles are still doing well but their strength going forward is their switch to online gaming which is cheaper. Here is what their CEO said about their digital revenue business:
“I’m particularly proud of EA’s rapid growth and scale in digital, and the growth rate almost doubled that of the digital sector overall. We did it in a way no other competitor can.”
That last sentence in bold is powerful, folks.
We have been a big fan of this stock since last November at $15 and our 12-month price target has been $30. Electronic Arts will be “the” dominate online gaming company as we move into the mobile future and although shares will be volatile, we think they are attractive at current levels.
Futures are showing a lower this morning. Dow futures are down 63 points to 12,609 while the S&P futures are lower by 8 points to 1,335. Nasdaq 100 futures are off 12 points to 2,371. Subscribers, check the Members Area for the updates.
Tags: call options, ERTS, high beta stocks, Hot stocks, INTC, momentum options, Momentum stocks, option tips, options trading course, stock market options, strangle option trades, weekly options
Posted in Earnings, Market Commentary | Comments Off
Wednesday, February 16th, 2011
12:10pm (EST)
“I’ve been walking these streets at night
Just trying to get it right (need some patience yeah)
It’s hard to see with so many around
You know I don’t like being stuck in a crowd”
These Guns and Roses lyrics are ringing true today as we have finally been rewarded for our patience.
For those of you who have followed us for a few years, you know we don’t follow the crowd and we usually try to get things right when it comes to our option recommendations. Most of the times they work (we have nearly a 75% win ratio) and sometimes our trades don’t.
The key to making money in options over time is to try and hit a few homerun trades while at the same time keeping your batting average up. But what makes options so fun and lucrative is that you can speculate on where a stock is headed and use options at a fraction of the cost to make returns of 100%, 200% and even 500%. No kidding.
These numbers may sound crazy but it is true and it is not hype. Did you know you can CONTROL 1,000 shares of stock for as little as $200? If an option is at 20 cents and you buy 1 option contract it would cost you $20. If you buy 10 contracts, your cost is $200. Each option controls 100 shares of stock so in theory you would control 1,000 shares of a stock by owning 10 call (or put) options.
If a stock is at $20 and you wanted to buy 1,000 shares it would cost you $20,000. See the difference?
Now here is the kicker.
If a stock is at $15 and you think it is headed to $20 over the next 6 months you could buy the stock or use options to prepare for the move. The big difference is that while it may cost more money to buy the stock, you own it and you can hold onto it for as long as you wish. With options, you can’t because they expire at some point. The key is figuring how long it might take for the stock or story to play out like you want it to. If shares don’t make $20 you could lose your entire investment.
Additionally, if a stock is at $15 and it moves to $20 your return is 33%. If you purchased 1,000 shares your $15,000 is now worth $20,000. Good job.
Now, let’s look at the options. If a call option is at 22 cents, a 10 contract trade would cost $220, or a 100 contract trade would cost $2,200. So what happens to the options if the stock moves from $15 to $20 before the options expire?
They can move from 22 cents to 85 cents and your return is now 286%. In other words, you $220 is now worth $850 or you $2,200 is now worth $8,500.
For those of you who believed in our Electronic Arts (ERTS, $19.73, up $1.20) trade back in November 2010, this is where we are at.
On a trade that is up nearly 300% it would be prudent to take half off the table and we might but EA looks like it wants to breakout to even higher levels. We have a few other open trades we hope plays out this way, especially the one from earlier today, but the key is look for trades that others don’t see.
We have been following Electronic Arts for years so we now their story. We thought shares were “cheap” back at Thanksgiving when they were under $15 and we said the company was poised to capture a significant part of the growing online gaming business. Today’s news that Monopoly will be available on Facebook must be the mojo behind today’s 6% stock pop. However, the options we recommended are up over 225% today.
As we head to press, the Dow is up 48 points to 12,275 while the S&P 500 is higher by 6 points to 1,334. The Nasdaq is showing a gain of 16 points to 2,821.
Subscribers, check the Members Area for the important updates.
Tags: best option trader, best trading signals, call options, chicken trade, Covered Calls, ERTS, financial options advice, learn option trading, momentum options, Momentum stocks, NASDAQ: ERTS, option mentoring, option signals, option trading, options broker, options newsletter, put options, stock broker, strangle option trade, winning option trades
Posted in Hot Stocks, Market Commentary | Comments Off
Tuesday, February 9th, 2010
9:00am (EST)
The bulls could not follow through with Friday’s last hour comeback as the bears seemed ready to stop any momentum they thought they had. We mentioned how trading was choppy in our midday update but things got worse from there.
The Dow finished with a 103 point loss and settled at 9,908. It was the first close below 10,000 in 3 months for the index. The Nasdaq ended with a 15 point loss and stands at 2,126 while the S&P fell 9 points to 1,056.
The hits keep coming for Toyota Motor (TM, $72.85, down $1.86) as the company is now recalling nearly a half-million of its Prius hybrid cars for brake issues. The stock has been volatile of late and last night shares were up $1.70, to $74.55 in after-hours. This morning, shares are over $75 in pre-market trading.
We have missed a couple of good earnings plays on option trades that we should have pulled the trigger on. Last Friday we talked about our channel checks for Hasbro (HAS, $34.71, up $3.91) and said we thought the company would beat Wall Street estimates.
The problem is we didn’t want to go long over the weekend and a lot of companies have gotten shelled despite reporting solid earnings. However, now that we have gotten through the “bulk” of earnings, some of these trades are now working as they are under the earnings radar.
We have talked about the enormous returns (and risks) on options that have less than two weeks before they expire. The February options expire on the 19 but we should have shot the ball on Hasbro trading higher…
The Hasbro February 32.50 calls (HAS100220C00032500, $2.40, up $2.10) soared 700% yesterday and were trading at 30 cents last Friday…
We also mentioned in our midday update yesterday that Electronic Arts (ERTS, $17.49, up $0.23) would be reporting after the close. We haven’t really talked about the company’s recent problems but it is a stock we have followed in the past. We knew there was a good chance shares were heading lower no matter what they said about their earnings. Sure enough, EA gave a weak outlook and the stock tanked in after-hours to $16.04, down $1.45.
At 3:30pm yesterday we took a peak at the February 17 puts (EZQ100220P00017000, $0.47, down $0.15) and thought seriously about sending out a trade.
Then we wanted to figure out the returns if we made it a strangle trade by adding the February 19 calls (EZQ100220C00019000, $0.26, up $0.12). We also knew we needed a move of 10% for the stock but we wanted to do some quick research and math. By the time we finished we didn’t think we could push the trade out to our subscribers with five minutes left before the closing bell sounded so we passed.
If shares open at $16 or lower the put options will be worth at least $1 which would have been a double straight-up on the put options or a 25% return if you had played a strangle by using the calls and puts.
There are a few other notable companies reporting earnings this week starting with Baidu (BIDU, $443.23, down $5.57) and Walt Disney (DIS, $29.48, down $0.06) after the close today.
On Wednesday, Wall Street will hear from Allstate (ALL, $28.36, down $0.55).
Thursday earnings include: Blue Nile (NILE, $49.49, up $0.25), Buffalo Wild Wings (BWLD, $46.48, up $0.11), Chipotle Mexican grill (CMG, $99.92, up $4.72), Las Vegas Sands (LVS, $15,54, down $0.17), Pepsi (PEP, $58.96, down $0.55), Philip Morris (PM, $45.53, down $0.13), Panera Bread (PNRA, $70.96, up $0.36) and Viacom (VIA, $29.70, down $0.46).
Despite yesterday’s sell-off, futures are pointing towards a strong open as the Dow futures are up 78 points to 9,973. This should translate easily into a triple-digit open for the index and put us back over 10,000. The S&P 500 futures are up 10 to 1,066. Meanwhile, the Nasdaq 100 futures are higher by 19 points to 1,753.
Tags: Electronic Arts, ERTS, option picks, option signals, options alerts, stock options trading, Toyota Motor
Posted in Earnings, Market Analysis, Market Commentary, Option Trades | Comments Off
Monday, February 8th, 2010
1:15pm (EST)
It has been another choppy session for the market today although the trend has been lower. The Dow opened on the downside and dropped 78 points to a low of 9,934 before reaching a high of 10,028. We are currently right at 10,004, down 8 points.
The Nasdaq and S&P 500 are showing slight gains. The Nasdaq is up 9 to 2,150 while the S&P is higher by 3 points to 1,069.
Google’s (GOOG, $538.79, up $7.50) had a powerful yet simple commercial last night in the Superbowl. I case you haven’t heard, hell froze over as its CEO said they would never do a commercial during the biggest football game of the year.
The real story behind today’s pop in the stock could be news that Google is working on some kind of translation software that could be used in their phones. In other words, Google is working on technology that could be capable of understanding a caller’s voice and translating it into a foreign language.
Companies that will be reporting earnings after the bell include Electronic Arts (ERTS, $17.81, down $0.58), Evergreen Solar (ESLR, $1.37, down $0.04), Lincare Holdings (LNCR, $38.13, up $0.40) and Vulcan Materials Company (VMC, $43.74, up $0.08).
We expect volatility will pick up by the end of the day but so far it feels like we have been watching paint dry. We do have a couple of stocks on the move in our Members Area and have updated the trades.
Tags: ERTS, ESLR, GOOG, LNCR, option picks, option signals, options alerts, stock options trading
Posted in Earnings | Comments Off
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Intel (INTC) Hits 52-Week Highs, EA (ERTS) Reports Earnings
Thursday, May 5th, 2011
8:50am (EST)
We knew before the market opened on Wednesday it was headed lower. Although futures were holding up, the atmosphere felt bearish and the lack of follow through following Monday’s big pop at the open has been apparent all week. Economic news has come in below the belt and tomorrow’s nonfarm payrolls report and unemployment numbers have Wall Street nervous. Earnings have been coming in mixed and are winding down which leaves few catalysts for the bulls to break resistance as we head into the heart of May.
The Dow was down triple-digits, or 135 points, by midday and touched a low of 12,673. The index danced between our 12,600-12,700 support areas before finishing with a loss of 84 points, or 0.7%, at 12,723.
Caterpillar (CAT, $110.77, down $2.50), Chevron (CVX, $104.68, down $1.49) and International Business Machines (IBM, $170.62, down $2.25) accounted for over half of the Dow’s losses (-47 Dow points) as Energy and Tech stocks continue to struggle.
The S&P 500 fell nearly 10 points, or 0.7%, and settled at 1,347. The index closed below our 1,350 support target and its 10-day moving average after touching a low of 1,341.
The Nasdaq dropped 13 points, or 0.5%, and closed at 2,828. Tech traded to a low of 2,808 and we said to watch the 2,800 level for support. However, there is still pressure down to 2,750 over the near-term and the chart gets uglier on a break below these levels.
The Intel (INTC, $23.50, up $0.45) news at lunchtime did help the Tech sector recover somewhat after the company introduced a new 3D chip to help keep pace with the rapidly growing mobile device market. Shares set a new 52-week high of $23.56 in the process and seem to be rejuvenated after buyers rushed in.
In earnings news, Electronic Arts (ERTS, $19.92, down $0.24) reported their numbers after the close last night and they were impressive. The company said profits were $83 million, or $0.25 a share, versus $30 million, or $0.09 a share, in the year ago period.
Revenue was up to $1.1 billion from $979 million. EA said its digital revenue business grew over 70%, to nearly $270 million, up from $144 million a year earlier. We have been telling you about this story for a few quarters now and EA is starting to put the pieces towards a rock-solid, high margin business.
As far as Wall Street’s expectations, they had the company earning $0.22 a share on revenue of $923 million.
The stock went on a roller-coaster ride in extended trading as investors fretted their outlook. Electronic Arts said it expects current quarter revenue of $460-$500 million which was below analysts’ forecast of $518 million, on average. Also, EA expects revenue for the full fiscal year to come in at $3.75-$3.95 billion, versus estimates for $3.94 billion. In other words, they sandbagged their numbers.
Shares were down 10% to under $19 shortly after the closing bell but recovered when the smart buyers rushed in to grab the discount. The stock finished last night at $20.25 after reaching nearly $21 and is at $20.60+ this morning.
EA’s core titles are still doing well but their strength going forward is their switch to online gaming which is cheaper. Here is what their CEO said about their digital revenue business:
“I’m particularly proud of EA’s rapid growth and scale in digital, and the growth rate almost doubled that of the digital sector overall. We did it in a way no other competitor can.”
That last sentence in bold is powerful, folks.
We have been a big fan of this stock since last November at $15 and our 12-month price target has been $30. Electronic Arts will be “the” dominate online gaming company as we move into the mobile future and although shares will be volatile, we think they are attractive at current levels.
Futures are showing a lower this morning. Dow futures are down 63 points to 12,609 while the S&P futures are lower by 8 points to 1,335. Nasdaq 100 futures are off 12 points to 2,371. Subscribers, check the Members Area for the updates.
Tags: call options, ERTS, high beta stocks, Hot stocks, INTC, momentum options, Momentum stocks, option tips, options trading course, stock market options, strangle option trades, weekly options
Posted in Earnings, Market Commentary | Comments Off