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Monday, November 14th, 2011
1:15pm (EST)
Trading has been sloppy and choppy this morning as the bears are doing their best to hold the bulls back from advancing the market further following Friday’s nice pop. Futures were pointing towards a higher start for the US markets when the European markets opened but gradually faded as we headed towards the open.
There are a few stocks making some noise today which has kept the Dow from falling further while Tech has shown some strength.
International Business Machines (IBM, $188.07, up $0.69) is fractionally higher after Warren Buffett revealed he has been building a $10 billion stake in the company since March. We’ve liked IBM since $125 a few years ago and have played options on the stock in the past but the premiums have become more expensive because of the higher strike prices. We would but like to see a 4-for-1 split, or at least a 2-for-1 to get shares back under $100 but some companies have been reluctant to split their shares in recent years, or in some cases, a decade or more.
The last time IBM did a split was back in 1999 when they split the shares 2-for-1. In 1997 they did a 2-for-1 and in 1979 IBM split 4-for-1.
Caterpillar (CAT, $96.63, up $0.50) is trading higher after getting an upgrade from Goldman Sachs (GS, $98.75, down $2.91) this morning. Shares were added to Goldman’s Conviction Buy List with a price target of $118. The company seems to be clicking on all cylinders and is gearing up plants here at home which is a good, positive sign.
Caterpillar is still a stock we like to trade options on because shares are under $100. To a stock investor, stock-splits are really meaningless because you still have the same dollar amount invested. However, when stocks trade for $200 or $300 or in some cases $500 a share, the premiums to trade call or put options can be really expensive, especially if the options are “in-the-money” which is why we like to see stock-splits on higher priced shares.
For example, if an option is at $5, you are risking 5 times more money to than playing a $1 option up or down. A 5% move in the stock might not be enough for you to make money. A 10 contract trade would cost you nearly $5,000 for an option priced at $5.
With lower priced options that trade for a $1 or less, a 5% move in the stock usually means a 100% return for the option depending on how fast it comes. A 10 contract trade on a $1 option will cost you $1,000 but you could do 4 more trades instead of risking much more on the $5 option.
So, when you hear us call for a stock-split, this is what it means to us as far as trading options. Caterpillar doesn’t need to do a split any time soon and in fact, we currently have the stock on our Watch List along with some call options we may recommend. Goldman seems to be following our lead. In case you are wondering, Caterpillar did a 2-for-1 split back in July 2005 and before that, a 2-for-1 back in July 1997.
As we head to press, The Dow is down 87 points to 12,066 while the S&P is lower by 13 points to 1,250. The Nasdaq is off by 21 points to 2,657. Subscribers, check the Members Area for the latest updates and we will be back in the morning with a fresh outlook.
Tags: CAT, GS, IBM
Posted in Market Analysis, Market Commentary | Comments Off
Thursday, January 20th, 2011
9:00am (EST)
The bears weren’t too rough on the Dow yesterday but the S&P 500 and Nasdaq suffered 1% drops following weak Financial earnings and some terrible Tech numbers. Economic news didn’t help matters but the good news is that we have planned for a pullback.
The Dow fell 12 points to close at 11,825 but managed to trade to a two-year high of 11,861, thanks in part to IBM (IBM, $155.69, up $5.04) which got rewarded for its earnings report.
The S&P 500 dropped 13 unlucky points and finished at 1,281. The index traded to a low of 1,278 and we are watching for a possible break below 1,275 which could lead to 1,250 which is where we are looking to get back into some Tech plays, possibly.
The Nasdaq got punished for a 40 point loss and settled at 2,725.
Shares of F5 Networks (FFIV, $138.78, down $3.00) are doing their best Tom Petty this morning after the company came up a little short on its quarterly earnings. The stock is down another $29, to $110 in pre-market action. The company beat their earnings per share number but missed on revenue and offered a lower forecast for 2Q.
There could be an opportunity here…
As far as futures, they are pointing towards a slightly lower start: Dow (-11); S&P 500 (-1); Nasdaq 100 (flat). We will be back in the afternoon but stay close to your computer. We may send out a new trade this morning.
Tags: call options, IBM, momentum options, Momentum stocks, NYSE: FFIV, NYSE: IBM, option signals
Posted in Earnings, Hot Stocks | Comments Off
Tuesday, October 19th, 2010
8:50am (EST)
You can’t always get what you want…
The bulls finally got some good news from the Financial sector as Bank stocks helped push the market higher on Monday. We talked about Citigroup’s (C, $4.17, up $0.22) numbers yesterday as the company reported a better-than-expected quarter and also said it is seeing less credit provisions. Strength among this group, which has been battered and bruised over foreclosure issues, helped push the Financial sector to a 2.3% gain for the day.
As far as the major indexes, the Dow added 81 points, or 0.7%, to finish at 11,143. The index trade to a high of 11,159 and right into our 11,150-11,200 zone but could not close inside this area. Although the Dow was able to settle atop the 11,100 level for the first time since early May, we knew these hurdles would be hard to clear as the bulls push towards the April highs.
The S&P 500 banged out a 9 point gain, or 0.7%, and ended at 1,184. We have been watching for the 1,170-1,175 area to hold and the index trade to a low of 1,174 before rebounding on a possible push towards 1,200.
The Nasdaq added 12 points, or 0.5%, to finish at 2,480 after trading in the red for much of yesterday’s session. The index traded to a low of 2,462 which is in our 2,450-2,500 zone and went out on its high for the day. However, all of our resistant targets will have to wait as futures are pointing towards a nasty open this morning.
Apple (AAPL, $318.00, up $3.26) posted better-than-expected results for their latest quarter after the bell on Monday, but got spanked despite strong sales of its iPhone. The problem was with the company’s iPad, which sold extremely well, but fell short of Wall Street’s projections.
Specifically, Apple sold 9 million iPod’s during the quarter, 14 million iPhones, 4.2 million iPads, and 3.9 million Macs. The iPad number was well short of the 4.8 million units that were baked into the cake but Apple simply couldn’t make them fast enough as there was a backlog for some components that make up the device.
Although profits came in at $4.3 billion, or $4.64 a share, it wasn’t enough to offset the high expectations that investors were looking for. Revenue jumped nearly 70% to over $20 billion.
These numbers were higher than the $4.06 a share on revenue of $19 billion analysts had penciled in but gross margins (36.9%) slipped and the company offered a weaker guidance going forward. Apple said it sees current quarter earnings at $4.80 a share, versus $5.04 a share, on sales of $23 billion, versus estimates of $22 billion.
Shares of Apple are down $14.45, or 5%, to $303.55 in early action.
Elsewhere, International Business Machines (IBM, $142.83, up $1.77) posted better-than-expected results after the bell as well. Nothing new here, as the company also raised earnings guidance for the full year.
“Big Blue” reported a profit of $2.82 a share, on revenue of $24.3 billion. The knuckleheads were looking for $2.75 a share on sales of $24.1 billion. Looking forward, IBM raised its 2010 earnings forecast to $11.40 a share from a previous estimate of $11.25 a share. Analysts are currently looking for $11.29 a share.
Shares of IBM are down $4.78 to $138.05 in pre-market trading.
Apple and IBM are heavily weighted on the major indexes so we can expect a lower open as futures are looking ugly.
Dow futures are lower by 38 points to 11,007 while the S&P 500 futures are off by 7 points to 1,171. The Nasdaq 100 futures are down 23 points to 2,071. Subscribers, check the Members Area for the updates.
Tags: Apple (AAPL), IBM, option trading picks
Posted in Apple, Earnings | Comments Off
Friday, August 13th, 2010
9:00am (EST)
It’s Friday, the 13th…
The bears continued their winning ways as they handed the bulls their third straight defeat on a day that could have been worse. Futures were already pointing towards a precipitous open but the major indexes found near-term support which held for much of the session.
The Dow fell nearly 60 points, or 0.6%, to settle at 10,319 but traded to a low of 10,268. We have outlined 10,200 and 10,000 as the first wave of support with 10,400 now becoming slight resistance. Cisco Systems (CSCO, $21.36, down $2.37) accounted for 17 Dow points and IBM (IBM, $128.30, down $1.53), 11 points.
The S&P 500 slipped 6 points, or 0.5%, and closed at 1,083 after touching a low of 1,076. The index has support right here at 1,070 but a break below will lead to 1,050.
The Nasdaq took one for the team again, dropping 18 points, or 0.8%, to finish at 2,190. The close below the 2,200 level clears the way for test of 2,150 and Tech seems to be getting weaker by the minute.
In economic news this morning, retail sales showed a 0.4% increase which was slightly lower than the 0.5% increase that had been widely expected. Also, the July Consumer Price Index recorded a 0.3% monthly increase, which was slightly better than the 0.2% increase that had been widely expected.
Futures weakened after the reports and were in negative territory but have come off their lows. As we head to press, Dow futures are down 2 points to 10,267 while the S&P 500 futures are down a little over a point to 1,078. The Nasdaq 100 futures are off by 3 points to 1,823.
We have a lot to cover in our Members Area this morning so let’s get to it.
Tags: CSCO, IBM, July CPI, option picks, stock options trading
Posted in Economic News, Market Analysis, Market Commentary | Comments Off
Wednesday, July 21st, 2010
9:00am (EST)
Yesterday started off good for the bears but ended better for bulls as they overcame a huge drop at the open and managed to turn the tables by the end of the day. The market fell 1% at the opening bell, but the losses were capped at the support levels we have been mentioning for weeks now.
The top-line misses on revenue numbers have been a target of the bears but some of the “brand names” that got trounced started to rebound which lift the entire market in general.
International Business Machines (IBM, $126.55, down $3.24) traded to a low of $123-ish and had accounted for over 50 points of the initial loss on the Dow but the impact on the index was sliced in half by the close. Goldman Sachs (GS, $148.91, up $3.23), which had previously closed around $145, traded to a low of $141.55 and nearly kissed $150 before ending the day 2% higher.
The market also overcame another weak housing report which showed a worse-than-expected decline in housing starts last month. The 5% decline took starts to an annualized rate of 549,000 units, which was below the rate of 575,000 units that had been forecast.
Despite all of the gloom and doom, the bulls pulled themselves off the canvas and came out smelling like a rose. The Dow finished Tuesday’s session with a 75 point gain, or 0.7%, to finish at 10,229 while the S&P 500 added 12 points, or 1.1%, and settled at 1,083. The Nasdaq ended with a pop of 24 points, or 1.1%, and closed at 2,222.
Futures are pointing towards a higher open this morning, thanks in part to Apple (AAPL, $251.89, up $6.31) which stole the limelight after the close yesterday. The company reported a profit of $3.3 billion, or $3.51 a share, versus $1.8 billion, or $2.01 a share, in the year earlier period. Analysts were looking for $3.11 a share. Revenue of $15.7 billion topped expectations for $14.8 billion.
So, just how many toys did Apple sell for the quarter? The numbers are staggering. When one of the company’s big-wigs says: “Let me be very clear on this. We’re selling every unit we can make”…well, you kind of have to believe they had a sick quarter.
Demand for the iPad and iPhone 4 has been off the charts as 3.3 million iPads were scooped up while 8.4 million smartphones were sold in the quarter. Better yet, Apple saw a huge jump in Mac sales, selling 3.5 million versus expectations for 3.2 million.
It was an incredible quarter for Apple, who, doesn’t seem to miss a beat. Shares are up $10, to $262, in early action. Naturally, futures got a lift on the news last night and have been strong ever since.
As we head to press this morning, Dow futures are up 44 points to 10,221 while the S&P 500 futures are higher by 7 points to 1,086. The Nasdaq futures are up 18 points to 1,857. Subscribers, check for the updates in the Members Area.
Tags: AAPL, Apple's earnings, call options, dndn, how to trade options, IBM, momentum options trading, Momentum stocks, option picks, option stock picks, options alerts, options newsletter, options track record, put options, stock options trading, volatile options
Posted in Apple, Company Commentary, Earnings | Comments Off
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Dow Lower Despite IBM, Caterpillar (CAT) Strength
Monday, November 14th, 2011
1:15pm (EST)
Trading has been sloppy and choppy this morning as the bears are doing their best to hold the bulls back from advancing the market further following Friday’s nice pop. Futures were pointing towards a higher start for the US markets when the European markets opened but gradually faded as we headed towards the open.
There are a few stocks making some noise today which has kept the Dow from falling further while Tech has shown some strength.
International Business Machines (IBM, $188.07, up $0.69) is fractionally higher after Warren Buffett revealed he has been building a $10 billion stake in the company since March. We’ve liked IBM since $125 a few years ago and have played options on the stock in the past but the premiums have become more expensive because of the higher strike prices. We would but like to see a 4-for-1 split, or at least a 2-for-1 to get shares back under $100 but some companies have been reluctant to split their shares in recent years, or in some cases, a decade or more.
The last time IBM did a split was back in 1999 when they split the shares 2-for-1. In 1997 they did a 2-for-1 and in 1979 IBM split 4-for-1.
Caterpillar (CAT, $96.63, up $0.50) is trading higher after getting an upgrade from Goldman Sachs (GS, $98.75, down $2.91) this morning. Shares were added to Goldman’s Conviction Buy List with a price target of $118. The company seems to be clicking on all cylinders and is gearing up plants here at home which is a good, positive sign.
Caterpillar is still a stock we like to trade options on because shares are under $100. To a stock investor, stock-splits are really meaningless because you still have the same dollar amount invested. However, when stocks trade for $200 or $300 or in some cases $500 a share, the premiums to trade call or put options can be really expensive, especially if the options are “in-the-money” which is why we like to see stock-splits on higher priced shares.
For example, if an option is at $5, you are risking 5 times more money to than playing a $1 option up or down. A 5% move in the stock might not be enough for you to make money. A 10 contract trade would cost you nearly $5,000 for an option priced at $5.
With lower priced options that trade for a $1 or less, a 5% move in the stock usually means a 100% return for the option depending on how fast it comes. A 10 contract trade on a $1 option will cost you $1,000 but you could do 4 more trades instead of risking much more on the $5 option.
So, when you hear us call for a stock-split, this is what it means to us as far as trading options. Caterpillar doesn’t need to do a split any time soon and in fact, we currently have the stock on our Watch List along with some call options we may recommend. Goldman seems to be following our lead. In case you are wondering, Caterpillar did a 2-for-1 split back in July 2005 and before that, a 2-for-1 back in July 1997.
As we head to press, The Dow is down 87 points to 12,066 while the S&P is lower by 13 points to 1,250. The Nasdaq is off by 21 points to 2,657. Subscribers, check the Members Area for the latest updates and we will be back in the morning with a fresh outlook.
Tags: CAT, GS, IBM
Posted in Market Analysis, Market Commentary | Comments Off