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Thursday, May 6th, 2010
9:05am (EST)
The volatility continued on Wednesday as debt worries from overseas continued to be the market’s main focal point. Things really looked ugly before the open as futures were down significantly and the wave of riots in Greece were being shown on every news channel.
No need to rehash the drama that is going on over there because we always like to look at the brighter picture. However, it could get worse if sketchy ratings agency Moody’s (MCO, $24.58, up $0.12) downgrades Portugal’s government bonds.
It was amazing to see the bulls hold the support levels that we have outlined for the past few weeks and we mentioned how we are bouncing around in this trading range. What is different about this range though is the volatility.
Once again, the Dow experienced a triple-digit move to the downside but fought back to slightly positive before ending the day lower.
The Dow traded to a low of 10,814 (-122) and to a high of 10,946 before finishing the day at 10,866, down 60 points, or 0.6%. We said to look for 10,800 to hold and the bulls did.
The S&P 500 fell 7 points, or 0.7%, and closed at 1,165. The index fell to a low of 1,158 but held the 1,150 level. Meanwhile, the Nasdaq fell a double deuce (22 points, or 0.9%) and was last seen stumbling at 2,402.
The one thing that worried us was the Nasdaq not holding the 2,400 level and the fact that it was unable to find green. The index stayed in the red all day and fell below its 50-day MA (moving average).
We think the big reason that support held was the fact that the bulls got some good employment data ahead of Friday’s nonfarm payrolls report. We have been telling you this report from the Labor Department will be a game changer and that is why the volatility is picking up.
If we could paint a picture, just imagine the bulls and bears playing chicken but their cars are getting closer. One of them has to get out of the way or they hit head on. It’s much like a Hollywood ending where we know one side is going to get out of the way but the end result is going to hurt someone.
As we prepare for this event, it’s really is hard to say where the market goes but we do feel the Dow could move 400 or 500 points over the next few weeks. For the S&P 500 it could mean a 50 point move. And if Tech falls apart (which we cannot see) then that index could also move several hundred points.
The bulls got a clue yesterday after the ADP Employment Report for April showed a slightly greater-than-expected 32,000 private payroll additions. As far as other economic news, the April ISM Service Index came in at 55.4, which was just below the 56.0 number that had been expected by the Street.
We haven’t talked much about the oil spill down in the Gulf but we are watching the developments closely. What a mess.
BP (BP, $50.99, up $0.63) has taken responsibility for the disaster and said that it has stopped the flow of oil from one of the three existing leaks on the damaged well.
Predictions are easily calling for a $10 billion cleanup bill and BP leased the rig from Transocean (RIG, $72.76, up $0.02).
We aren’t sure who pays what but it’s a major reminder on why we need to switch to cleaner fuels.
As we head to press, Dow futures are down 52 points to 10,782 while the S&P 500 futures are down 7 to 1,157. The Nasdaq 100 futures are off by 14 points and are at 1,945.
Tags: BP, MCO, Moody's, option picks, option signals, options alerts, RIG, stock options trading, Transocean
Posted in Company Commentary, Market Commentary | Comments Off
Monday, March 15th, 2010
1:20pm (EST)
The bears have started the week off by tugging on Superman’s cape, but they have done little damage up to this point. The are numerous headwinds the bulls are facing today, but it seems they are taking their time digesting all of the news just like we are.
The Dow is currently down 25 points to 10,599 while the S&P 500 is lower by 6 points to 1,144. The Nasdaq is down 17 to 2,350.
Moody’s (MDO, $28.22, down $0.04) said the risks are growing for some of the world’s largest triple-A-rated countries: Germany, France, the U.K. and the U.S.
And…?
Moody’s has gotten everything wrong, and we honestly don’t know why anyone would care what the firm has to say. They missed so many calls during the subprime and financial crisis that it’s hard to believe the company is still in business. Even harder to believe is the fact shares are trading near $30…
The Financial stocks are taking a hit as Washington pushes ahead this week on legislation to overhaul the our financial system. The bill is expected to ”curb” Wall Street’s influence over the Federal Reserve Bank of New York. It looks like Obama wants to have the final say on who runs the show in NY instead of the current board that includes representatives of member banks.
As far as economic news, the Federal Reserve Bank of New York’s Empire Manufacturing Survey came in at 22.86 this month from 24.91 in February. Wall Street had expected a reading of 24 for the month. Although manufacturing output was down the report said it is continuing to improve at a steady pace in March, including a rise in new orders and improvement in the labor markets.
Amylin Pharmaceuticals (AMLN, $22.89,up $2.63) is up over 13% after the FDA said it didn’t need more clinical data on its diabetes drug, Bydureon. However, the FDA did say they would like changes made to clarify the product labeling and asked questions about the drug’s manufacturing process.
We were more interested in shares of Alkermes (ALKS, $13.79, up $1.58) which is the company that enables the slow delivery of the drug. The stock has jumped 13% but the March 12.50 calls (QAL100320C00012500, $1.15, up $0.30) are up 35%. They have traded to a high of $1.75 which is where they opened.
If Amylin hadn’t blown its inspection on Friday, we may have swung the bat…
We think there is a chance the bulls wake up today as the market has come off its lows and overall we are still expecting a higher March. We have update the Members Area so let’s get to it…
Tags: Alkermes, ALKS, AMLN, Amylin Pharmaceuticals, MDO, Moody's, option picks, option signals, options alerts, stock options trading
Posted in Company Commentary, Market Commentary | Comments Off
Tuesday, November 24th, 2009
12:45pm (EST)
The market is has come off its morning lows but is still in negative territory for the day. The China news really put a damper on yesterday’s rally. The Chinese banks were pressured by concerns of capital-raises and some regulators want higher capital ratios.
As a result, the Dow is currently down 44 points to 10,406 and the S&P 500 is off by 3 to 1,103. The Nasdaq is lower by 11 points to 2,164.
All of the Financial stocks on our Watch List are mostly lower. These stocks have been tricky to trade which is why we are waiting for the storm to pass. We made some great returns when they bottomed in March and reported back-to-back solid quarters but we are in transition with them right now.
We haven’t shorted the Financials either although there are a few that we still think are due for major corrections…American International Group (AIG, $34.37, down $0.91) is still over-inflated and should be a single-digit stock as well as Moody’s (MCO, $23.64, up $0.67). Patience will pay-off as we feel both of these stocks are headed lower at some point in the future.
Another stock we were/ are looking at is a possible option trade in A123 Systems (AONE, $14.75, up $0.22). We did a big write-up on October 21st and we simply blew this one folks. The stock was at $24 and now stands at $14. The straddle option trade would have been a thing of beauty and we do use them every now and again. We are bullish on A123′s long-term prospects but a spat a bad news has investors bailing like rats on a ship. Here we our thoughts a month ago:
“A123 Systems (AONE, $24.63, up $0.11) is the one we want to start watching…like a hawk. Its 52-week high is $28.20.
A few things we like to see are volume and volatility and this stock has both. The average daily volume is over 5 million shares and the option pits are pretty liquid.
The company makes lithium-ion batteries and had high hopes over a year ago as they thought they were closing in on a Chevy Volt contract but eventually lost out. However, they signed a deal to supply Chrysler with batteries for its cars. And the market for these types of batteries is HUGE.
Besides cars, think smartphones and other products…every iPod, iPhone and Apple laptop has a lithium-ion battery. The “new” battery is smaller, more energy efficient, longer lasting, and are effectively replacing the previous generation of nickel metal hydride batteries.
Of course, there is competition in the space but with other car manufacturers joining the race for electric cars, and the transition over to these batteries have dramatically improved the potential market. However, many other would-be competitors have not even begun mass production yet which will play into A123’s hand once demand starts to peak.
A123 will likely play a big role for temporary energy storage for utilities and they were recently awarded a $250 million grant from the Department of Energy to build a manufacturing plant.
On the negative side, the stock could see some selling pressure once their “lock-up period” is up. Typically, when a company goes public, its insiders can’t sell their shares for a certain period of time which is usually 90 days to a year. If a company is full of smoke-and-mirrors or has some skeletons in its closet, company insiders who know about them can’t act on this “inside” knowledge until after the lock-up period has ended. They will start to sell stock before the public learns of any bad news hoping to get out at the top.
Now, I’m not saying A123 is shady or anything, I’m just explaining how the IPO market works.
A123 appears to be a boom or bust company and from the way it has been trading it has become clear there is action in the stock. The key for us will be to watch for an opportunity to get into some options. We might go long, we might go short, or we might do a straddle or strangle trade. However, we have to wait for our opportunity.
Keep this one on your Watch List and when we see a trade, we will alert our subscribers.” (END)
Well, the “hawk” left its perch and we didn’t get into a trade. Bummer.
We are excited about the possibilities of an Apple (AAPL, $204.12, down $1.76) deal in the future but the company has been hit with some bad news of late that has caused a steep drop in its shares.
Fiat recently tinkered with Chrysler’s electric car plans which included A123′s batteries and this has caused some concerns due to the uncertainty. The company also recently announced earnings and posted a $23 million loss but did see an increase in revenue.
On the bright side, electric cars are the future and there is a major push for their development. President Barack Obama’s recent China visit was a good indication that things will happen sooner rather than later. He has called for the U.S.-China Electric Vehicles Initiative to help get the snowball rolling.
We are still uncertain of the direction A123 Systems shares take from here but we would think most of the “bad” news is already priced into the stock.
Only time will tell if electric cars will turn into an avalanche for the American consumer but if you can identify the companies that have their fingers in the pie before it is main stream then there may be some opportunities down the road.
Which brings up a good point.
Most of you know we are working hard to get the “Momentum Options Trading” Playbook (or whatever we call it) ready and it is our trading manual that is aimed at teaching you how to trade options and to find your own trades. The manual will go hand-in-hand with the website and we really believe it is a must read if you really want to understand the market and to get a better “feel” for our trades.
Yes, we are an option trading service but we also want to be your mentor as well. We have repeatedly said we will limit the number of subscribers we are allowing because we don’t want our trades crowded but we also want you to LEARN how to trade options. We have a success rate of 80% on our trades and it isn’t by accident.
We hope that you seriously consider a subscription before we are full. We cover a lot of things outside of the Members Area but today we wanted to bring you a short story on A123 Systems.
Tags: A123 Systems, American International Group, Apple, momentum stock option trading, Moody's, Netflix, option trading online, option trading picks, options mentoring, options newsletters, options track record, support and resistance levels, triple-digit option trades
Posted in Apple, Company Commentary, Earnings, Financial Stocks, Market Analysis, Market Commentary, Option Trades, Sectors, strangle option trades, Strategies, Trading Psychology | Comments Off
Thursday, October 1st, 2009
9:00am (EST)
The bulls and bears are having a battle this week and the action has been intense. On Wednesday, heavy punches were thrown and by the end of the day, the bears had made it 2-to1 for the week.
On Monday, the Dow rallied 124 points, Tuesday the Dow fell 47 after being down 84 points. Yesterday, the bears took the Dow down to 9,583, a loss of nearly 160 points, before the bulls brought us back to positive territory shortly after 1pm. We got some more selling pressure by 3pm and the bears pulled out the victory as the Dow closed down 30 points and settled at 9,712.
Friday is setting up to be “historic” and we should see a big break either way.
A couple of notes for this morning…
Moody’s (MCO, $20.46, down $0.35) fell to $19 and we were whip-sawed out of a recent trade but I still think it’s headed to $15.
Dust off your Queen albums as CIT Group (CIT, $1.21, down $0.99) looks like it will be the next one to “Bite the Dust”. The company appears to be headed for bankruptcy.
Bank of America’s (BAC, $16.92, down $0.24) CEO, Ken Lewis, can ditto that. He was last seen singing backup vocals as he gave up the head gig after coming back from vacation. This ought to be pretty good news for the stock today. We have had some great success trading BofA this year and although the timing is now right, the stock should be in the $20′s sometime in early 2010.
And finally, Nike (NKE, $64.70) had a banner day and thanks to all of you who emailed us to tell us your good fortunes. A lot of you made upwards of 200% and a lot of you banked up to 75% by playing it safe. This trade felt so good when I was typing it that I knew it was going to be golden. In fact, my fingers are tingling now as I have another trade ready for you this morning. Subscribers, check the Members Area for a New Trade on Abercrombie & Fitch (ANF, $32.88, down $0.39) and for the Current Trade Updates.
As we head to press, Dow futures are down 28, S&P 500 futures are down 4 while the Nasdaq 100 are down 6.
Rick@MomentumOptionsTrading.com
Tags: Abercrombie & Fitch, anf, bac, Bank of America, CIT, CIT Group, MCO, Moody's, Nike, NKE, options picks
Posted in Hot Stocks | Comments Off
Tuesday, August 11th, 2009
11:50am (EST)
The market continues to trade lower as the Dow is now off by triple-digits. At 9,234, the 103 point loss shows the nervousness Wall Street is experiencing ahead of the FOMC meeting. It still is up in the air if this rally continues but if it doesn’t we can start to open a few small positions on the short side.
One stock that I have been watching is Moody’s (MCO, $24.65, down $0.57) which I have mentioned several times in this space. The September 25 puts (MCOUE, $1.90, up $0.25) are getting a little action and I think Moody’s could trade $20 by September. Try to get in for under $2 and do half positions.
I’m also looking at Wells Fargo (WFC, $27.11, down $1.53) and the September 26 puts (FHUUZ, $1.30, up $0.45). I like these put options up to $1.50. There have been over 8,000 contracts traded thus far while the Moody’s options aren’t quite that liquid.
So, let’s just WATCH the Moody puts and roll the dice on Wells Fargo. Bank of America (BAC, $15.94, down $0.74) is taking a hit so let’s close the position and move to the sidelines. The November 17.50 calls (BYOKZ, $1.25, down $0.24) traded to a high of $1.58 and are at our entry price while the November 20 calls (BYOKT, $0.57, down $0.13) are still showing a slight profit as most of you got in for 50 cents. I normally don’t make knee-jerk reactions and these calls were “rolled-over” from a previous position. I’m just looking ahead to September and after such a huge run, we are bound to pull back.
Rick@MomentumOptionsTrading.com
Tags: Bank of America, Moody's, Wells Fargo
Posted in Financial Stocks, Mergers and Acquisitions, Option Trades | No Comments »
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Bulls Hold Key Support Levels
Thursday, May 6th, 2010
9:05am (EST)
The volatility continued on Wednesday as debt worries from overseas continued to be the market’s main focal point. Things really looked ugly before the open as futures were down significantly and the wave of riots in Greece were being shown on every news channel.
No need to rehash the drama that is going on over there because we always like to look at the brighter picture. However, it could get worse if sketchy ratings agency Moody’s (MCO, $24.58, up $0.12) downgrades Portugal’s government bonds.
It was amazing to see the bulls hold the support levels that we have outlined for the past few weeks and we mentioned how we are bouncing around in this trading range. What is different about this range though is the volatility.
Once again, the Dow experienced a triple-digit move to the downside but fought back to slightly positive before ending the day lower.
The Dow traded to a low of 10,814 (-122) and to a high of 10,946 before finishing the day at 10,866, down 60 points, or 0.6%. We said to look for 10,800 to hold and the bulls did.
The S&P 500 fell 7 points, or 0.7%, and closed at 1,165. The index fell to a low of 1,158 but held the 1,150 level. Meanwhile, the Nasdaq fell a double deuce (22 points, or 0.9%) and was last seen stumbling at 2,402.
The one thing that worried us was the Nasdaq not holding the 2,400 level and the fact that it was unable to find green. The index stayed in the red all day and fell below its 50-day MA (moving average).
We think the big reason that support held was the fact that the bulls got some good employment data ahead of Friday’s nonfarm payrolls report. We have been telling you this report from the Labor Department will be a game changer and that is why the volatility is picking up.
If we could paint a picture, just imagine the bulls and bears playing chicken but their cars are getting closer. One of them has to get out of the way or they hit head on. It’s much like a Hollywood ending where we know one side is going to get out of the way but the end result is going to hurt someone.
As we prepare for this event, it’s really is hard to say where the market goes but we do feel the Dow could move 400 or 500 points over the next few weeks. For the S&P 500 it could mean a 50 point move. And if Tech falls apart (which we cannot see) then that index could also move several hundred points.
The bulls got a clue yesterday after the ADP Employment Report for April showed a slightly greater-than-expected 32,000 private payroll additions. As far as other economic news, the April ISM Service Index came in at 55.4, which was just below the 56.0 number that had been expected by the Street.
We haven’t talked much about the oil spill down in the Gulf but we are watching the developments closely. What a mess.
BP (BP, $50.99, up $0.63) has taken responsibility for the disaster and said that it has stopped the flow of oil from one of the three existing leaks on the damaged well.
Predictions are easily calling for a $10 billion cleanup bill and BP leased the rig from Transocean (RIG, $72.76, up $0.02).
We aren’t sure who pays what but it’s a major reminder on why we need to switch to cleaner fuels.
As we head to press, Dow futures are down 52 points to 10,782 while the S&P 500 futures are down 7 to 1,157. The Nasdaq 100 futures are off by 14 points and are at 1,945.
Tags: BP, MCO, Moody's, option picks, option signals, options alerts, RIG, stock options trading, Transocean
Posted in Company Commentary, Market Commentary | Comments Off