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Monday, April 18th, 2011
8:45am (EST)
Although the bears won last week’s battle to make it two-in-a-row, you could tell by the bulls’ efforts that they aren’t going down without a fight. The real action occurred in one day, on Tuesday, which is when the bears roared loudest. Friday’s gains helped cut the week’s losses to less than half but the major averages still finished lower for the week.
The Dow started the week at 12,380 and gained 57 points on Friday to finish at 12,341. The index traded to a high of 12,369 but fell 0.3% for the week after touching a low of 12,137 on Thursday. Our upside targets have been 12,500-12,600 for the blue-chips but the Dow will need a close above 12,350 to challenge these levels. Near-term support remains at 12,200 and then 12,000.
The S&P was at 1,328 at the beginning of Monday’s session and added 5 points to settle at 1,319. The index closed below 1,325 on Monday and reached a low of 1,302 during the week. The bulls were looking to make a run to the 1,350 level but tested both near-term support targets of 1,325 and 1,300.
The Nasdaq began the week at 2,780 but quickly closed below 2,750 on Tuesday. On Friday, the index gained over 4 points and ended the week at 2,764 after testing a low of 2,733 on Thursday. The index had trouble with the 2,800 level the prior week which still represents near-term resistance. Support remains at 2,700-2,650 going forward.
Oil pushed back to nearly $110 a barrel while Gold surged to record highs and closed at $1,486 for the week. Silver is at 31-year highs and finished at $42+, up another 5% for the week. On the other hand, Copper fell over 5% in five days, to $4.26, after closing at $4.50 the week before.
The Dow is up 20 points for April while the S&P 500 is down 6 points. Tech is down about 17 points. So far, April has not delivered the results the bulls have been hoping for as the crosswinds have slammed us back into a trading range. If we pencil in the historic 2% April average gains for the indexes then we get Dow 12,500; S&P 1,355; and Nasdaq 2,820 by month end.
Yes, we do a lot of homework and chart work but it’s pretty crazy how that last paragraph just comes together and makes a compelling argument for one last bull charge as we head into May which happen to be our upside targets. However, a 2% move the other way puts the S&P below 1,300.
Earnings get thicker this week and we spent the weekend licking our chops as we get ready for the action this week. The current crosswinds have given mixed signals as to which way the market is going to break. The bulls averted disaster following Google’s (GOOG, $530.70, down $47.81) 8% plunge on Friday. We predicted a 5% move but we were a little surprised to see a drop of nearly $50.
The April options expired Friday but we wanted to show you how expensive options are on stocks that trade over $300, $500 or more.
Google was at $578 going into Thursday’s close and a $25 pop got the stock to over $600 or near $550 which was our prediction. We weren’t too bullish on the company beating expectations but we weren’t going to bet against the company either.
Well, the first choice would have been the April 550 puts (GOOG110416P00550000, $20.70, up $17.40) which closed at $3.30 on Thursday. The 500% return would have been beautiful on Friday but a 10 contract trade would have cost $3,300. If Google would have soared on better-than-expected numbers, then the puts would have expired worthless.
The Google April 600 calls (GOOG110416C00600000, $0.00, down $4.90) were near $5 and did expire worthless.
This would have been the PERFECT strangle option trade, of course, because you still would have doubled your money if you had taken both trades and paid $8.20. The problem is that if shares would have stayed between $600 and $550 or moved less than 5% then both options would have expired worthless.
We actually looked at this trade but we don’t like paying more than $2 for an option contract. Of course, we do recommend options from time-to-time that are in the $1.50-$2.00 range but we usually go 6-12 months out to give the trade plenty of time to develop.
We wanted to show the power of strangle trades because we do believe going forward that these types of plays offer a little more safety in a choppy and range bound market. We know we got side tracked but we wanted to show you how to buy some protection in case there isn’t one last run by the bulls.
Futures were down 0.2% for much of early morning hours and have gotten worse as we head towards the opening bell. Futures are down 0.5%.
Dow futures are lower by 66 points to 12,237 while the S&P 500 futures are down 8 points to 1,311. Nasdaq 100 futures are off 11 points to 2,299.
We have 12 charts we are showing today inside our Members Area that cover our current trades and ones that are on our Watch List. These charts make the technical picture a little easier to understand and you will know exactly what we are to expect if a stock breaks below or above resistance.
Tags: call option trades, chicken trades, GOOG, Google, momentum options, Momentum stocks, options trading course, put options, stock market options, stocks that trade weekly options, strangle option trades, weekly options
Posted in Market Analysis, Market Commentary | Comments Off
Friday, July 16th, 2010
9:00am (EST)
We’ve got a long way to go and a short time to get there…
There is so much news to cover this morning we feel like Smokey and the Bandit. We have a number of interesting tidbits to go over and the opening bell rings in 30 minutes…but we will get you there in time and tell you what to watch for today.
The Dow fell 7 points on Thursday to close at 10,359 while the Nasdaq slipped a point to settle at 2,249. Bye, bye seven-session winning streaks. The S&P 500, however, squeezed out a point to settle at 1,096.
The market ended flat after being down for much of the session. There were a number of events shaping up nicely for the bears but by the end of the day they couldn’t gain any momentum to hold the market at its lows. The main reason were the rumors surrounding Goldman Sachs (GS, $145.22, up $6.16) which hit the market late in the day. With about 30 minutes left in trading, the indexes made a nice reversal after the market caught wind of the company reaching a possible settlement with the SEC.
Sure enough, after the bell sounded, Goldman announced that it would pay $550 million to settle civil charges after saying they didn’t have their clients’ best interests by selling mortgage securities that were shaky. These CDO’s were “secretly” put together by a hedge-fund to take advantage of the housing market’s collapse and Goldman was betting against those securities. It was the largest fine ever paid by Wall Street but it gets a big monkey off Goldman’s back.
Also, after the close, Google (GOOG, $494.02, up $2.68) reported earnings that fell short of Wall Street’s bar causing shares to drop $20 in extended-trading last night. The company reported a profit of $1.8 billion, or $5.71 a share, versus $1.5 billion, or $4.66 a share in the year ago period. Google took some write-offs due to acquisitions but actually earned $6.45 a share. Analysts were looking for $6.52 so they missed by 7 cents.
As we head to press, Google shares are down $19, to $475.
Turning to Biotech, Vivus (VVUS, $12.11, flat) was halted all of yesterday as it awaited word on a panel’s recommendation concerning its drug Qnexa. The news wasn’t good.
The FDA’s advisory panel board voted 10-6 to reject the company’s obesity drug on safety concerns. This was a bit of a shock to most experts because the drug does work. However, the risks of depression, memory-loss and potential birth defects outweighed the rewards of getting people down to size.
This was tough for us to watch because we sat this one out although we are glad we did. We brought you coverage on this stock at the beginning of 2009 when shares were around $5 and we have slowly watched them double for 18 months now. We have also played call options on Vivus in the past but we decided to hang on the sidelines for this event due to the expensive nature of the options.
The news concerning Qnexa isn’t an official slam-dunk “no” because the FDA will still decide the drug’s fate sometime in October. Vivus also said it expects to have more data from a longer study that could help its case for getting Qnexa approved but they are now probably losing the weight-loss race as two other companies also have obesity drugs waiting approval.
The talk was that Qnexa would gain approval but that there would be some negative votes. In fact, one FDA official said he was surprised by the outcome. Either way, shares are getting walloped as they are down $6.76, or 56%, to $5.35, in early action.
We also got some earnings news from Bank of America (BAC, $15.39, down $0.28) and Citigroup (C, $4.16, down $0.05) this morning. We will touch base on those two companies in our afternoon update. Both stocks are lower before the bell.
Don’t forget today is July option expiration day. If you have any call or put options that are “in-the-money” make sure you close them out. Of course, if they are “out-of-the-money” then you can let them expire worthless.
As we get ready for the open, futures are showing a mixed open. Dow futures are down 23 points, S&P 500 futures are off by 2 and the Nasdaq 100 futures are showing a 3 point pop.
Tags: call options, GOOG, Google, how to trade options, momentum options trading, Momentum stocks, option picks, option stock picks, options alerts, options newsletter, options track record, put options, stock options trading, Vivus, volatile options, VVUS
Posted in BioTech, Earnings, Market Analysis | Comments Off
Wednesday, October 21st, 2009
9:15am (EST)
Futures are pointing towards a lower opening on Wall Street this morning as 3Q earnings reports once again set the market’s mood. There are quite a few companies that continue to post better-than-expected results but one thing that is worrisome is that the market is not making HUGE moves. One thing we haven’t seen is the big 300 and 400 point moves the Dow is capable of making and earnings have been super.
Our near-term targets remain 2,275 on the Nasdaq and 1,175 for the S&P 500 and 10,400 for the Dow. However, we are getting a little choppy up here and 3Q earnings have been coming in better-than expected. Perhaps the market has already priced in these super earnings but one thing for certain is that we are entering a crucial phase for the market over the next few weeks.
Yahoo (YHOO, $17.17), Morgan Stanley (MS, $32.52) and Wells Fargo (WFC, $30.46) all reported better-than-expected earnings yet futures are pointing towards a lower open? Apple (AAPL, $198.76), Google (GOOG, $551.72) and Intel (INTC, $20.18) reported monster quarters but we are not seeing the sizzle from their solid earnings reports.
As we head to press, Dow futures are lower by 38, to 9,962. S&P 500 500 futures are off by 4 to 1,083, while the Nasdaq 100 futures are off 7, to 1,751. Subscribers can check the Members Area for the current trade updates…
Tags: Google, mentoring stocks, momentum options, momentum plays, Morgan Stanley, option trade picks, options mentoring, options track record, options trading blog, Wells Fargo, Yahoo
Posted in Earnings, Financial Stocks, Market Commentary, Option Trades | Comments Off
Wednesday, October 14th, 2009
12:40pm (EST)
Is it me or does it feel like we are watching paint dry? In what should have been an easy grand-slam today, the Dow is having trouble punching through that 10,000 point brick wall. We got a strong pop and then lost some of the fizz shortly after the market opened but the bulls seem to be gathering more strength as we head into the afternoon. Currently, the Dow is up 113 points to 9,984 and has traded as high as 9,991 but we have yet to “break on through to the other side”…
One thing that worries me is that everyone expects all of this “new money” to come into the market, which it very well could, but I want to talk about the emotions of investors and the market in general. First off, where were all these people when the March lows were around and why didn’t they buy back then? When the Dow bottomed at 6,440 six months ago, I suggested buying longer-term call options to play the bounce as I knew we were in for a turnaround.
Our trading rules are simple. You buy call options during bull markets and you buy put options in bear markets. There are times when we are looking for direction which can cause some losing trades but overall, you want to stay AHEAD of the trend.
People were calling for a pullback in September and we said to stay focused on Dow 10,000. And we are almost there. Look, we don’t care about market direction. We want big moves. If the Dow does break 10K and we zoom higher, we will keep playing the upside with call options. If the market stalls from here and we have a sell-off, we will start buying put options.
The reason I say this is because we are still in a trader’s market and the market tends to hurt the most people at the most inopportune time. I’m not saying we are setting up for a correction but the Dow needs to break 10,000 today and hold.
There are a number of heavy hitters set to report earnings the rest of the week. International Business Machines (IBM, $127.21, up $0.19), Google (GOOG, $533.68, up $7.47), Goldman Sachs (GS, $193.01, up $5.78) and Bank of Amercia (BAC, $18.37, up $0.56) are on deck over the next few days.
Intel (INTC, $21.05, up $0.56) has treated us well today and our current subscribers easily cashed out for triple-digit returns. We have updated the trade in the Members Area so make sure you login in get our current comments.
Tags: Bank of America, Goldman Sachs, Google, International Business Machines, options blog, options trading strategies, Stock Market Blog
Posted in Company Commentary, Earnings, Market Analysis, Market Commentary, Option Trades | Comments Off
Thursday, July 16th, 2009
8:00am (EST)
Two words for today. IBM (IBM, $107.22) and Google (GOOG, $438.17). But before we get to that I’m going to take you through the woods.
Being an option trader is THE best job in the world folks and I got interested in the stock market when I was 16. Three decades ago. So remember, learning the market is a long, hard road and becoming a successful option trader is even tougher. However, if you study sectors and pick up tips, you WILL get there. I wanted to get that off my chest because “if you do the time your money will shine”.
If you follow this blog for a year, then I can almost bet you will see some of the same things I do. The first thing I want to talk about this morning is something I said and wrote on May 29th, 2008. For those of you who have been following me for a year I’m humbled that you have put up with me for this long…seriously, that day I did a blog and posted a note on my computer to remind myself of the troubles the Financial sector was going through. Click here to go back in time but here is the paragraph that had the most importance that day. Quotes are from that day as well:
“I still don’t trust Financial sector and there will be a time when these stocks will appear to be dirt cheap. Maybe they are right now but I would wait for two consecutive quarters of good earnings before even thinking about buying a bank stock right now. I will be keeping an eye on the Financial Select Sector (XLF, $24.64, down $0.14) for any signs of a turnaround. This exchange traded fund is a safer way to play the Financial’s instead of finding a true bottom for a particular stock.”
That day Wachovia was at $23 and hit $5 by November before being swallowed. The XLF is currently at $12.16 which is half of where it was over a year ago.
Now, the key from that paragraph was “wait for two consecutive quarters of good earnings before even thinking about buying a bank stock right now”. Well folks, Goldman Sachs (GS, $155.26) proved this theory right on Tuesday and now you can see my reasons for taking the Bank of America (BAC, $13.42) in early June. Many of you got frustrated but by going out to the November 15 calls (BYOKO, $1.40), I protected us from the sideways pattern we were experiencing.
As we headed into earnings season I said “hold tight”. Oh, before I forget, those Goldman Sachs July 160 calls (GPYGL) are now at 33 cents after closing at 11 cents on Tuesday. We were out at $1.00 BEFORE earnings hit but I told you when they were at a dime and Goldman hits $160 by Friday they would be worth a buck again…or 900%. We made our money but this is part of that cheap out-of-the-money explosions these types of trades can provide.
This week has been overly bullish and there’s a chance we break new highs. Then again, we were on the verge of breaking down after that famous “head-and-shoulders” pattern that the talking heads were preaching. Which is why I tell everyone who asks me where I think the market is headed…I say, “I don’t care”.
From that May 2008 article, the signs were all over the place that the Financials were going to take a dive and I put you guys in a ton of great trades. I only bring this up because I want you to learn how to “trade outside the box”, not think, but trade.
I got beat up for taking the BofA trade early but now you see the method to my madness. Folks, nothing comes easy and you have to dedicate some time to studying and setting up Watch Lists. These are key.
Now that I got that off my chest…
Google will be interesting and it has been a stock I have watched since they became a public company. I don’t do too many Google trades anymore because it’s a $400 stock but it is still a god stock to daytrade options with if you wanted because of the moves it can make.
IBM, of course, holds the keys. Watch Fairchild Semiconductor (FCS, $8.69) this morning and the August 10 calls (FCSHB, $0.35). I would list the July 10’s but no way. The August calls are much safer if this stock makes a run at $10. Jobless Claims in 30 minutes. Futures are slightly lower but have been positive.
Tags: Bank of America, Fairchild Semiconductor, Google, IBM
Posted in Earnings, Option Trades, Strategies, Trading Tips, Watch Lists | No Comments »
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Bears Looking to Keep Slight Momentum
Monday, April 18th, 2011
8:45am (EST)
Although the bears won last week’s battle to make it two-in-a-row, you could tell by the bulls’ efforts that they aren’t going down without a fight. The real action occurred in one day, on Tuesday, which is when the bears roared loudest. Friday’s gains helped cut the week’s losses to less than half but the major averages still finished lower for the week.
The Dow started the week at 12,380 and gained 57 points on Friday to finish at 12,341. The index traded to a high of 12,369 but fell 0.3% for the week after touching a low of 12,137 on Thursday. Our upside targets have been 12,500-12,600 for the blue-chips but the Dow will need a close above 12,350 to challenge these levels. Near-term support remains at 12,200 and then 12,000.
The S&P was at 1,328 at the beginning of Monday’s session and added 5 points to settle at 1,319. The index closed below 1,325 on Monday and reached a low of 1,302 during the week. The bulls were looking to make a run to the 1,350 level but tested both near-term support targets of 1,325 and 1,300.
The Nasdaq began the week at 2,780 but quickly closed below 2,750 on Tuesday. On Friday, the index gained over 4 points and ended the week at 2,764 after testing a low of 2,733 on Thursday. The index had trouble with the 2,800 level the prior week which still represents near-term resistance. Support remains at 2,700-2,650 going forward.
Oil pushed back to nearly $110 a barrel while Gold surged to record highs and closed at $1,486 for the week. Silver is at 31-year highs and finished at $42+, up another 5% for the week. On the other hand, Copper fell over 5% in five days, to $4.26, after closing at $4.50 the week before.
The Dow is up 20 points for April while the S&P 500 is down 6 points. Tech is down about 17 points. So far, April has not delivered the results the bulls have been hoping for as the crosswinds have slammed us back into a trading range. If we pencil in the historic 2% April average gains for the indexes then we get Dow 12,500; S&P 1,355; and Nasdaq 2,820 by month end.
Yes, we do a lot of homework and chart work but it’s pretty crazy how that last paragraph just comes together and makes a compelling argument for one last bull charge as we head into May which happen to be our upside targets. However, a 2% move the other way puts the S&P below 1,300.
Earnings get thicker this week and we spent the weekend licking our chops as we get ready for the action this week. The current crosswinds have given mixed signals as to which way the market is going to break. The bulls averted disaster following Google’s (GOOG, $530.70, down $47.81) 8% plunge on Friday. We predicted a 5% move but we were a little surprised to see a drop of nearly $50.
The April options expired Friday but we wanted to show you how expensive options are on stocks that trade over $300, $500 or more.
Google was at $578 going into Thursday’s close and a $25 pop got the stock to over $600 or near $550 which was our prediction. We weren’t too bullish on the company beating expectations but we weren’t going to bet against the company either.
Well, the first choice would have been the April 550 puts (GOOG110416P00550000, $20.70, up $17.40) which closed at $3.30 on Thursday. The 500% return would have been beautiful on Friday but a 10 contract trade would have cost $3,300. If Google would have soared on better-than-expected numbers, then the puts would have expired worthless.
The Google April 600 calls (GOOG110416C00600000, $0.00, down $4.90) were near $5 and did expire worthless.
This would have been the PERFECT strangle option trade, of course, because you still would have doubled your money if you had taken both trades and paid $8.20. The problem is that if shares would have stayed between $600 and $550 or moved less than 5% then both options would have expired worthless.
We actually looked at this trade but we don’t like paying more than $2 for an option contract. Of course, we do recommend options from time-to-time that are in the $1.50-$2.00 range but we usually go 6-12 months out to give the trade plenty of time to develop.
We wanted to show the power of strangle trades because we do believe going forward that these types of plays offer a little more safety in a choppy and range bound market. We know we got side tracked but we wanted to show you how to buy some protection in case there isn’t one last run by the bulls.
Futures were down 0.2% for much of early morning hours and have gotten worse as we head towards the opening bell. Futures are down 0.5%.
Dow futures are lower by 66 points to 12,237 while the S&P 500 futures are down 8 points to 1,311. Nasdaq 100 futures are off 11 points to 2,299.
We have 12 charts we are showing today inside our Members Area that cover our current trades and ones that are on our Watch List. These charts make the technical picture a little easier to understand and you will know exactly what we are to expect if a stock breaks below or above resistance.
Tags: call option trades, chicken trades, GOOG, Google, momentum options, Momentum stocks, options trading course, put options, stock market options, stocks that trade weekly options, strangle option trades, weekly options
Posted in Market Analysis, Market Commentary | Comments Off