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Thursday, January 26th, 2012
12:45pm (EST)
Netflix (NFLX, $116.04, up $21) surprised Wall Street and the talking heads after the bell last night when they reported a better-than-expected quarter. The bar was already lowered so let’s get that out of the way but the results were impressive.
The company posted a profit of $40.7 million, or $0.73 a share, versus $47.1 million, or $0.87 a share, in the year-ago quarter. Total revenue checked in at $875.6 million, up 47% from the quarter last year.
Here was our chart work on Netflix at the beginning of the year when shares cleared the 50-day moving average (MA) and our thoughts:
“We aren’t sure if a bottom is in but shares could be on the verge of breaking out of a trading range (blue box) in the chart below. Yesterday’s close above $80 was bullish for a run into the $90’s (black line) which is where the next patch of resistance lies. If shares can clear this level there is a chance for a run back to triple-digits ($100-$120) believe it or not.” (END)
Here is what the chart now looks like with the $90 and $120 drawn out:
We mentioned the great chart work we have been doing lately but we failed to capitalize on this move as our portfolio has been pretty full and the options were expensive. We normally like to play options that cost $2 or less and we peaked at the Netflix February 115 calls (NFLX120218C00115000, $7.40, up $4.50) before yesterday’s close and they were at $2.80-$2.90. At the beginning of the month they were under 50 cents.
Netflix was at $95 before Wednesday’s closing bell and when we factored in a 10% price move it put shares at $104-$105 which was below the strike price. We were also nervous that customers wouldn’t be back so soon and their content costs so we sat on the sidelines. It would have been a big risk but the February 115 calls are up 150% today alone.
Netflix also trades WEEKLY options and the January 110 calls (NFLX120127C00110000, $6.30, up $4.15) were at $2.15-$2.25 before the close but these options expire tomorrow. Although the options are up 200%, we didn’t feel the risk/reward was favorable enough for us to pull the trigger. The option premiums were juiced and if Netflix would have missed estimates, these trades would have been all-or-nothings.
We’ve been doing fine without Netflix but we should’ve trusted our chart work.
As far as the market, following a gap higher at the open, the index are struggling to hold their gains. The Dow is up 10 points to 12,767 while the S&P is lower by a 4 points to 1,322. The Nasdaq is off by 9 points to 2,809.
We have a lot to cover in our Members Area today as we are taking action on another current call option trade that is up nearly 60%. We also want to cover the 2 new trades we released this morning so let’s get on it.
Tags: NFLX, NFLX earnings, NFLX options, weekly options
Posted in Company Commentary, Hot Stocks, Market Analysis, Trading Psychology | Comments Off
Monday, January 9th, 2012
1:15pm (EST)
The market has traded near the flat line for much of today’s action with sentiment slightly negative. Perhaps, traders are worried over Alcoa’s (AA, $9.34) earnings after the bell which “officially” starts the 4Q earnings season. We don’t expect much from the company as an earnings miss could be in the cards but the Dow component doesn’t carry much weight except for sentiment. Shares do look tasty at current levels and if they slip a bit after earnings, pick some up. At some point, this will be a double-digit stock again.
Elsewhere, a couple of Biotech stocks we have mentioned over the years and last week are getting nice pops. Dendreon (DNDN, $13.70, up $1.35) continues to shoot higher after reporting better-than-expected sales for its prostate cancer drug, Provenge. We sent out a NEWS FLASH last week when shares broke above $10 and said to watch for further upside movement. The chart we showed you talked about the huge gap to fill if shares broke $12.50. The January 12.50 calls (DNDN120121C00012500, $1.65, up $0.80) have nearly doubled today. Giddy up!
Vivus (VVUS, $11.39, up $1.23) is up 12% on news its obesity drug, Qnexa, could get special labeling. The FDA asked the company to remove the “contraindication” for women of childbearing potential contained in the proposed label. The drug would remain contraindicated for women who are pregnant or who can have children. A contraindication typically indicates that a drug should not be taken because of the health risk that clearly outweigh the benefits.
Alcoa, Dendreon and Vivus are all current recommendations for our Weekly Wrap which went 16-0 in 2011. We have up to 6 trades that could be called away in a few weeks for nice double-digit profits if current levels hold.
We also wanted to update the Netflix (NFLX, $92.82, up $6.53) story from last week when we profiled shares at $77 and said a breakout could be coming. We outlined the “trading box” shares had been stuck in and we said if they broke $80, Netflix could be back at triple-digits again, quickly. The break above the 200-day moving average today is further bullishness.
We also profiled some expensive call options for Netflix that have done well since last Thursday but it wasn’t an “official” trade due to the cost. We usually like to trade 10 or 20 contracts on our trade recommendations and usually we won’t pay more than $2 for an option. At 10 contracts, a $2 option will cost you $2,000 which is a lot of money for some people to place on each trade.
The June 100 calls (NFLS120616C00100000, $14.50, up $3.55) were going for $7.50 last Thursday and would have cost $750 for one contract. A 10 contract trade would have cost $7,500. That is a big bet on a stock that has been more volatile than the market but at current prices it would have been nearly a double.
No worries, we closed out a triple-digit winner last week and we are looking to close a few more this week and next.
We have a lot to cover with our current trades and the New Trade we released this morning. As we head to press, the Dow is up 13 points, the S&P is up a point, while the Nasdaq is higher by 2 points.
Subscribers, check the Members Area for the updates.
Tags: dndn, Momentum stocks, momentum trading, NFLX, NFLX call options, VVUS
Posted in Hot Stocks, Market Analysis, Market Commentary | Comments Off
Tuesday, July 26th, 2011
9:00am (EST)
The bears did a little damage on Monday as the circus in Congress continued on after the Republicans and Democrats failed to come to any sort of agreement on how to fix America’s debt crisis. The market plunged 1% on yesterday’s open but the bulls battled back throughout the trading session to cut the losses in half while holding support at the same time.
The Republicans tried a “two-step” approach, which caught market wind and helped with the bounce, that would provide another $1 trillion increase on top of the growing $14.3 trillion debt ceiling in exchange for $1.2 trillion in cuts in federal spending. Another round of spending cuts would come next year of about $2 trillion which would trigger an additional $1.6 trillion in increased borrowing authority.
The Democrats want to cut $2.7 trillion in federal spending and raise the debt limit by $2.4 trillion in one shot which would be enough to get us into 2013.
It is clear both sides are using this battle to sway public opinion on which side is the evil empire to win votes for the elections year-after-next. However, if something doesn’t get done, America should wipe its slate clean with all of them and start over. Let the Tea Parties begin.
Although we hate talking politics, this is an important subject that the boys on the Hill aren’t meeting with urgency. However, we aren’t so sure why there is a big fuss, after all, Reagan raised the nation’s debt limit 18 times and something will get done. For all he has, or hasn’t done, Obama will not let America default.
The Dow dropped 88 points, or 0.7%, to finish at 12,592. The index traded to a low of 12,536 but managed to close just below or 12,600 downside target. Further risk is down to 12,400-12,350 while resistance remains 12,800.
The S&P 500 dipped 8 points, or 0.6%, to settle at 1,337. The index fell to 1,331 and easily held the 1,325 level at the open which is what we were hoping for. There is further support at 1,300 but the S&P also held 1,334 which was a good sign. The 1,345-1,350 area still represent headwinds before 1,375 can be reached.
The Nasdaq slipped 16 points, or 0.6%, and closed at 2,842. Tech traded to a low of 2,828 and held 2,825 which we wanted to see. There is still danger down to 2,800-2,775 but the bulls are just 45 points away, or 2%, from kissing new highs.
Turnings to earnings, Netflix (NFLX, $281.53, up $4.95) beat Wall Street’s earnings expectations after the close on Monday but fell short on their revenue number and warned of slower growth. Shares got spanked in after-hours trading, falling 10%, to nearly $250.
The company reported a profit of $68 million, or $1.26 a share, on revenue of $789 million. Analysts were looking for earnings of $1.11 on sales of $792 million.
Netflix shares will be interesting to watch, especially if consumers balk at the recent price increases. It seems we have seen this picture play out too many times and if the company isn’t careful, they could start losing market share faster than they think.
This week is the heart of 2Q earnings season and there are plenty of names we will be talking about. Remember, a 5% stock move usually means a 100% return with the right option and we plan on ringing the register for triple-digit profits this week with a few of our option trades.
Subscribers, please check the Members Area for the important updates and be sure to be on the lookout today for Trade Alerts and possible NEW TRADES this morning.
Tags: About options trading, NFLX, option trading, stock and option, stock exchange, stock to buy, stock trading, trade online, trading futures, trading online, trading system, what are stock options, what is a call, what is option trading
Posted in Earnings, Market Analysis, Market Commentary | Comments Off
Friday, May 27th, 2011
12:40pm (EST)
The market is moving higher after getting better-than-expected economic news this morning. The first report came out before the bell as Personal Income rose 0.4% during the month of April which matched expectations while Personal spending rose 0.4% versus expectations for a 0.5% pop.
The final Consumer Sentiment Survey for May from the University of Michigan came in at 74.3, up from the 72.4 in April. On average, the suit-and-ties had expected the number to remain unchanged. One Negative Nancy, Pending Home Sales for April were fell 11.6% from the prior month versus a forecast for a decline of 1.4%.
The Dow started the week at 12,512 and is up 73 points to 12,475. A close above 12,500 would be bullish for next week.
The S&P began Monday’s session at 1,333 and is back to even with its 7 points gain. We would love to see a close above 1,335 heading into next week.
The Nasdaq was at 2,803 at the beginning of the week and is up 18 points to 2,800. This is the level we are looking for the bulls to seal the deal at and if the bulls win the week, Tech could lead the way higher next week.
We will be doing our monthly video with our next Weekly Wrap this weekend and we will be showing you all of the WEEKLY options that trade. These options are cheap, inexpensive ways to play the market’s volatile swings but you have to be right on the direction of the stock or an index in a way shorter amount of time, usually 5 days or less.
There are weekly options that are already listed for next week and out so you can use two or three week options if you want. There are only about 50 stocks that you can trade WEEKLY options on and we go over the list.
There is also a “safer” way of using these options by making them straddle or strangle trades. Although it lowers you chances of a greater return it also offsets the risks of playing options without insurance. We will cover a few of these trades as well in our video.
We are also going to show you some LEAP options on stocks that could be ripe for big moves down the road. We are going to show you how to position yourself 6 months to a year out so that you don’t have to worry about the daily swings of the market.
The Weekly Wrap is for our subscribers who like to buy stocks AND options. As option traders, it is hard to get away from the action because we want triple-digit profits, fast. But there are other ways to build wealth. And quickly, too.
For instance, we recommended Netflix (NFLX, $263.58, down $0.17) options in 2009 when the stock was at $55 and said then shares would easily be in the triple-digits. Or how about our ground-breaking coverage on Dendreon (DNDN, $42.25, up $0.34) when shares were under $5 a few years ago? At one point, the trade was a 10-bagger having reached nearly $50 a share. At current levels, Dendreon is on its way back to new highs.
We have also profiled shares of Imax (IMAX, $36.75, up $0.87) at under $3 and it, too, has become a 10-bagger in just a few short years.
We have also profiled dozens of other companies that have either doubled or tripled in price: Boston Beer (SAM, $83.80, up $1.53), Diamond Foods (DMND, $75.61, up $1.28), and SodaStream International (SODA, $57.59, up $1.08) are just a few other stocks we have profiled at much lower levels. All of our original articles can be archived by typing in the ticker symbol in our Search Box to the left on our website so you can see where we have been all over these names.
Our point is, this is one of the reasons we started the Weekly Wrap. Our goal is to find momentum stocks or ones that are stuck in trading ranges to use options with. This strategy can be powerful if played just right but you don’t want to be “called away” if shares are moving higher. Although your profits can become limited because you may have to sell your stock at a certain price even though it’s higher in the market, the premiums you receive also reduce your cost basis.
Of course, this requires a lot of chart work but that is why you have us. We told our subscribers to buy some of these stocks when they we in the single-digits but because we are an options newsletter we can’t officially count them as recommendations. By having the Weekly Wrap we can also take credit for our stock-picking gems and grow our subscribers’ portfolios in the same process.
We heard a story the other day where one fund manager has held Microsoft (MSFT, $24.76, up $0.09) shares for his clients for 10 years, yet, the stock has been dead money. The company has been under pressure to boot its CEO but he isn’t going anywhere anytime soon.
In the meantime, shares have been stuck between $20-$25 or $25-$30 for a decade and this fund manager could have been writing covered calls to juice his clients’ returns. If he had then he wouldn’t be taking heat.
We are running a deal through the end of the month that allows you to get our options trading manual, How to Trade Options on Momentum Stocks, at no charge by ordering a 1-year membership to our Weekly Wrap. You can read all about our training course and videos by clicking on the link above.
Our 2011 Weekly Wrap portfolio is off to a great start in our first official year of launching and we hope to have you on board for our new batch of winning trades over the next 6 months.
This offer won’t last long folks and we are running low on current copies. Once we reprint, there will be no more special deals. The option trading manual lists for $895, but again, it is included with your 1-year subscription to our Weekly Wrap which is cheaper. We have done this deal because we really want to make you a better trader. Most “options courses” sell for 5 times more but that is a lot of money that can be used for trading and we know that. This is why we are offering this special deal on one of the best courses out there on options.
We hope you will join us over the weekend and we will be back Sunday night (or Monday afternoon) with our Weekly Wrap and video update. The market is closed on Monday so enjoy the holiday. For those of you who just subscribe to the Daily, we will see you Tuesday morning. Have a great weekend everyone and get ready to trade next week! We have a feeling we are going to be active.
Special Note: Subscribers, we have a NEW TRADE for today to play next week’s possible bounce. Please check the Members Area now for the updates.
Tags: call options, DMND, dndn, high beta stocks, Hot stocks, Imax, momentum options, Momentum stocks, NFLX, option tips, options, options mentoring, options trading course, stock market options, weekly options
Posted in Market Analysis, Market Commentary, Weekly Wrap | Comments Off
Tuesday, April 26th, 2011
8:40am (EST)
The market did next to nothing after our midday update yesterday as things pretty much stay where they were. The Dow and S&P 500 finished with small losses while Tech squeaked out a tiny gain. The sluggish trading was pretty much what we expected after a long holiday weekend as traders seemed content on watching Monday’s action instead of getting involved.
The bulls made little effort to push the market higher while the bears remained cautious ahead of a number of high-profile earnings this week. There were a number of Chinese internet companies that did well on Monday - Baidu (BIDU, $151.96, up $3.31), Sohu.com (SOHU, $104.14, up $8.45), and China Dangdang (DANG, $25.46, up $1.46) did well – but, all eyes were on Netflix (NFLX, $251.67, down $0.55) which announced after the closing bell.
Flashback from August 12, 2010 – here were our thoughts on Netflix after calling for a double a year earlier when shares were at double nickels (quotes from that day):
“One stock bucking the trend is Netflix (NFLX, $131.17, up $4.70) which is at all-time highs. The stock has been a rocket ship since last November when it was trading in the $50’s and is now in “blue-sky” territory. Wall Street stole this catchy phrase from the Allman Brothers and it is used to describe stocks that are at historic highs. Usually the breakout continues and a company will split its stock if it has a history of doing so.
Stock-splits are a non-event, really, except that you own more shares (unless it is a reverse stock split) but they make it easier for individual investors to afford the stock. We would like to see a split so we can play the options. We normally shy away from option trades on stocks over $100 so we would welcome the news.” (END)
Folks, we are amazed at the parabolic move shares of Netflix have made over the past 2 years and the one thing that has kept us on the sidelines is the high share price (because there hasn’t been a split) which usually means lofty options prices. Instead of paying $1 (or $100) for each option contract, you might be paying for $1,000 as the premium for a near-term strike price might be $10 instead of a buck. In other words, you are risking 10 times more money on each option contract when you can play stocks under $100 for much cheaper.
However, there is some good news. Netflix trades WEEKLY options which are way cheaper so there will be a trade down the road once we find the right opportunity.
As far as the numbers Netflix posted last night and what it means going forward, let’s take a look…
To read more on where Netflix could be headed and what options we are focusing on, click here. We also have some charts we want to cover today so be sure to check them out as well.
Tags: call options, high beta stocks, Hot stocks, momentum options, Momentum stocks, Netflix earnings, NFLX, option tips, options trading course, stock market options, strangle option trades, weekly options
Posted in Earnings, Market Commentary | Comments Off
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Netflix (NFLX) Shocks Wall Street, Nothing New
Thursday, January 26th, 2012
12:45pm (EST)
Netflix (NFLX, $116.04, up $21) surprised Wall Street and the talking heads after the bell last night when they reported a better-than-expected quarter. The bar was already lowered so let’s get that out of the way but the results were impressive.
The company posted a profit of $40.7 million, or $0.73 a share, versus $47.1 million, or $0.87 a share, in the year-ago quarter. Total revenue checked in at $875.6 million, up 47% from the quarter last year.
Here was our chart work on Netflix at the beginning of the year when shares cleared the 50-day moving average (MA) and our thoughts:
“We aren’t sure if a bottom is in but shares could be on the verge of breaking out of a trading range (blue box) in the chart below. Yesterday’s close above $80 was bullish for a run into the $90’s (black line) which is where the next patch of resistance lies. If shares can clear this level there is a chance for a run back to triple-digits ($100-$120) believe it or not.” (END)
Here is what the chart now looks like with the $90 and $120 drawn out:
We mentioned the great chart work we have been doing lately but we failed to capitalize on this move as our portfolio has been pretty full and the options were expensive. We normally like to play options that cost $2 or less and we peaked at the Netflix February 115 calls (NFLX120218C00115000, $7.40, up $4.50) before yesterday’s close and they were at $2.80-$2.90. At the beginning of the month they were under 50 cents.
Netflix was at $95 before Wednesday’s closing bell and when we factored in a 10% price move it put shares at $104-$105 which was below the strike price. We were also nervous that customers wouldn’t be back so soon and their content costs so we sat on the sidelines. It would have been a big risk but the February 115 calls are up 150% today alone.
Netflix also trades WEEKLY options and the January 110 calls (NFLX120127C00110000, $6.30, up $4.15) were at $2.15-$2.25 before the close but these options expire tomorrow. Although the options are up 200%, we didn’t feel the risk/reward was favorable enough for us to pull the trigger. The option premiums were juiced and if Netflix would have missed estimates, these trades would have been all-or-nothings.
We’ve been doing fine without Netflix but we should’ve trusted our chart work.
As far as the market, following a gap higher at the open, the index are struggling to hold their gains. The Dow is up 10 points to 12,767 while the S&P is lower by a 4 points to 1,322. The Nasdaq is off by 9 points to 2,809.
We have a lot to cover in our Members Area today as we are taking action on another current call option trade that is up nearly 60%. We also want to cover the 2 new trades we released this morning so let’s get on it.
Tags: NFLX, NFLX earnings, NFLX options, weekly options
Posted in Company Commentary, Hot Stocks, Market Analysis, Trading Psychology | Comments Off