The bulls are gaining a little traction today despite the slick weather here on the East Coast and Wall Street after getting some encouraging economic data this morning. The gains have been limited as the major averages once again try to break resistance but things are looking sweet.
The first bit of “good news” was from housing starts for November which came in at 555,000 and above estimates for 550,000. Jobless claims were flat at 420,000 and in-line with expectations while the Philadelphia Fed for December printed 24.3 versus estimates for a reading of 16 even.
FedEx (FDX, $94.26, up $1.87) reported a profit of $283 million, or $0.89 a share, compared to $345 million, or $1.10 a share, in the year earlier period. Excluding charges, earnings were $1.16 a share, but missed analyst’s expectations by 15 cents. Back in September, FedEx told us they would earn $1.15-$1.35 a share.
Although revenue jumped 12% to $9.6 billion, expectations were for $9.7 billion.
We thought there was a chance FedEx would beat earnings but much of the momentum they are seeing right now won’t hit until their next update. The quarter was dragged down by higher cost associated with bringing more planes and trucks on board to meet demand. These one-time expenses are just that and only mean good things going forward.
The company now projects earnings of $0.95-$1.15 a share for the current quarter and $5.00-$5.30 a share for fiscal year 2011, up from previous estimates of $4.80-$5.25 a share.
FedEx fell at the opening bell but bullish investors started buying at the low which was $91.28 and are now up 2% for the day. We have said we expect the stock to make a run to $100 by mid-January and now that earnings are out of the way, that bet is still on.
After the closing bell today, Research In Motion (RIMM, $59.63, up $0.45) is expected to post a profit of $1.65 a share on revenue of $5.4 billion. Last year, RIMM reported earnings of $1.10 a share and has beat Wall Street’s numbers in 3-out-of-4 past quarters.
The December 60 straddle is pricing an 8% move in shares and this one could go either way. The December 60 calls (RIMM101218C00060000, $1.85, up $0.10) and the December 60 puts (RIMM101218C00060000, $2.25, down $0.35) are going for $4.10, together, which gives us the expected move. If you add or subtract the $4.10 from the current stock price, this is how you calculate the “expected” percentage move.
We think there is a chance shares could move 15% on some really, really good news – or – tank on a really bad earnings miss. Then again, the reaction could be muted and the stock stays flat. Either way, we are staying on the sidelines with this one as we don’t need to take any added risks after two months of incredible gains. We have been on a roll, folks, and you can check out our updated 2010 portfolio to see the latest results.
Currently, we are going to end the year with a 65% win rate on our trades which is incredible when you consider the environment we were in for much of the year. We normally like to average a 75%-80% win rate on our trades but this year the market was in a trading range for months. One minute, the market was on the verge of breaking down like a rented mule (May Flash Crash lows), then the next, the market looked poised to break key resistance levels.
Trading ranges are tough and all you can do is try to stay even when things are choppy. During these times, we try to use a mixture of both calls and puts and we may use longer-term trades to ride out the storm. When a stock or the market is in a range for an extended period of time, the breakout or breakdown is usually rather significant and this is what we have been telling you all year.
As trend traders, we thrive on direction which is when we make bank. Yes, we will have flat and negative months, and we apologize for that, we really do, but trading is for the long haul and we have proven that with our track records.
In 2008, the market went straight down as the financial crisis came to a head and we recommended mainly put options to our subscribers. We told our subscribers Lehman Brothers, Fannie Mae, Freddie Mac and Merrill Lynch were in trouble. We profiled trades that made 215%, 109%, and 94% on Lehman’s downfall, 140% and 150% on Fannie and Freddie, and 867% on AIG put options.
In 2009, the market was poised for a rebound as the selling pressure was overdone to a degree. Bank of America was near $7, the Casino stocks were in the single-digits and everything went up in 2009. We recommended two trades on BAC that returned our subscribers 567% and 433% in a month.
This year, after the sell-off and then the huge rebound, the market naturally went into a trading range as both the bulls and bears regrouped. Then, in September, the bulls finally made their move out of this trading range, and the market has been rolling ever since. We saw this opportunity and we have been long and strong ever since. Our win rate on our option trades are over 80% with quite a few triple-digit winners over this period.
The good news is that we see a continued trend BUT, we also know things are going to get rocky again sometime in 2011. We also started using more strangle trades, which was a strategy we rarely used because many subscribers simply don’t understand them. However, with the release of our trading manual, How to Trade Options on Momentum Stocks, we have bridged the gap and have made them easy to understand. We are also doing ongoing videos that cover trade ideas which is included with the course. A new video will be coming out this weekend or next.
We anticipate using more of these in 2011.
Our point is we think 2011 will be an incredible year to trade options and we want you on board. We have quite a few special announcements coming over the next few weeks, including an update on our auto-trading programs and the release of our Weekly Wrap which will include option trades. Remember, we are still in beta testing so anyone who orders a trading manual NOW will get a FREE 1-year membership to the Weekly Wrap which is priced at $599 for the year.
In others words, if you order our manual today, or over the next week or two, you get a 2-for-1 deal. In January, we will no longer offer this package so we want you to take advantage of the offer before we go live.
We know of no other option website that updates their option picks TWICE a day and shows you a yearly track record. Why, because they don’t want you to see their results. Seriously, take a look around and you won’t find too many “gurus” who post their recommendations. Something to think about…
As we head to press, the Dow is up 54 points to 11,511 while the S&P 500 is higher by 8 points to 1,243. The Nasdaq is showing a double-deuce pop (22 points) and is at 2,639.
Subscribers, check the Members Area for the updates.