Tuesday, September 10th, 2013
Out with the old, in with the new.
The Dow Jones Industrial Average is made up of 30 stocks. From time-to-time, stocks are dropped and others added to make up 30 “blue-chips” companies. Today’s announcement in a 3-swap deal kicks Alcoa (AA, $8.07, down $0.02), Bank of America (BAC, $14.63, up $0.15), and Hewlett-Packard (HPQ, $22.24, down $0.13) to the curb while the door opens for Goldman Sachs (GS, $164.23, up $4.74), Nike (NKE, $66.13, up $0.73) and Visa (V, $183.06, up $4.51).
The changes aren’t immediate but will take place after the close on September 20. Since the Dow is a weighted index, Visa and Goldman Sachs will have the second and third highest weightings, respectively. International Business Machines (IBM, $186.86, up $1.88) is still the biggest blue-chip and the changes push Caterpillar (CAT, $86.21, up $0.62) down to fourth.
We talked about IBM and CAT in the Weekly Wrap and in the Monday morning Daily. We said to watch these 2 stocks, along with Apple (AAPL, $503.97, down $2.20) for clues of a further advance in the market.
We have another Profit Alert today and we wanted to stress the importance of chart work. We know every trade cannot be a winner and we hate losing trades more than anything. We strive to hit 70% or better on all of our trade recommendations that is a pretty hard success rate to achieve in options but we have done it consistently, in front of an audience, for 6 years now.
We had a trade that was down 64% coming into the month but we felt pretty good about our research and we said the bulls would rally to start September after a miserable August. So far, so good.
The PowerShares QQQ’s (QQQ, $78.14, up $0.31) were pushing $75 coming into the month but our chart work was showing strong support at $75 and we said a rally past $78 up to $79-$80 could come. This kept our emotions in-check and once we started to get the rebound last week, we had a good feeling we could be ringing the resister this week.
We took profits this morning and although the trade didn’t return 100% like we always target, we were able to cash in for a 21% gain. Not bad for a month’s work. We were in the options at 70 cents and they had traded down to a quarter before rebounding and hitting our limit price to close the trade as 85 cents this morning. For those that bought at 25 cents, they made 200%.
We are still holding a few more call options (and a few put options) as we wait for the market’s next major trend to develop. Remember, the recent gains have only pushed the top of the trading ranges with Tech breaking out so there are a few more confirmation signals that need to trigger before the bulls get the “all clear” sign.
We have also mentioned we are expecting a pullback to possibly start midweek but some of the dynamics are changing that appear to be bullish. If Syria is willing to work with Russia to eliminate the chemical weapons then there is light at the end of the tunnel. However, we have a hothead speaking tonight with a slippery tongue.
The possibility of less military action or no strike on Syria could be a game-changer and the Dow’s new buddies could provide a big lift to the index later this month as they are officially added.
The Dow is currently up 82 points to 15,145 while the S&P 500 is higher by 8 points to 1,679. The Nasdaq is jumping 15 points to 3,722 while the Russell 2000 is advancing 5 points to 1,051 and has cleared 1,050. This is very bullish. The S&P 500 Volatility Index ($VIX, 14.79, down 0.84) is down 5% and is below 15. Also bullish.
We could have New Trades this afternoon or tomorrow, depending how the headlines and the technical picture plays out so stay locked-and-loaded. In the meantime, let’s go see where things are at with our current trades.
Subscribers, check the Members Area for the updates.
Friday, March 18th, 2011
You knew the market would bounce back at some point following this week’s steep losses and yesterday was the bulls’ day to flex their muscles. Futures were pointing towards a strong open as the major indexes bounced back solidly for much of the day and those gains held as the market closed near its highs.
We went over key technical levels yesterday so let’s see where we are at.
The Dow was up 161 points, or 1.4%, and traded to a high of 11,800 before closing at 11,774. This was the EXACT number we said to watch for and we were looking for a close above this level. The low of 11,614 was at the open and higher than Thursday’s close for the Dow. Although the 11,800 level didn’t stick, it was encouraging to see much of yesterday’s gains hold.
The S&P 500 added 17 points, or 1.3%, to finish at 1,273. The index kissed 1,279 and we were looking for a close above 1,275. The low on Thursday was 1,261 so the bulls managed to hold 1,250 which is a pivotal level going into today’s trading. We would like to see a push towards 1,300 so watch all three of these numbers today if we do get extra volatility.
The Nasdaq gained nearly 20 points, or 0.7%, and closed at 2,636. Tech traded up to 2,660 but once again didn’t have the mustard to make a run past 2,700. We were looking for at least 2,650-2,675 on the close but Tech has lagged the market on up days and led the way lower on down days. This worries us a little but futures are pointing towards another leg higher to start today’s session.
There won’t be much in the way of economic news today and we mentioned that March options expire today. Earnings will also be a non-factor as the bears will try to hold down resistance. The bulls are getting good news on the Libya front as the United Nations (UN) declared a no fly zone last night for the country with possible military action. We have now learned as we head to press that Libyan’s FM has halted military operations in line with the UN no-fly decision and futures got another big push and took another leg higher.
As we head to press, Dow futures are up 124 points to 11,835 while the S&P futures are higher by 15 to 1,284. The Nasdaq futures are showing an 18 point pop and are at 2,244. We will be back in the afternoon with an update on Nike (NKE, $85.41, up $0.59) which missed earnings expectations after the bell last night and a look at where the markets stands heading into the weekend. (Shares of Nike are down $6 to under $80 in pre-market trading so lock in profits into weakness!).
We may also release a NEW TRADE if we can get good entry prices on a few names on our Watch List so stay close to your computer and check for updates at 10am or 11am.
Subscribers, check the Members Area for the current updates and for our fresh ideas. We have 12 candidates, yes 12, possible trades we are watching.
Back at 1…
Wednesday, March 16th, 2011
The market is near its worst levels of the day and continues to trade off headline news which has been negative for much of the session. Economic news here at home has been uninspiring for the bulls as they continue to give up ground to the bears.
Before the bell, the Commerce Department reported Home construction plunged over 22% in February to 479,000 homes. It was the lowest level in nearly two years and the second-lowest on record in more than 50 years.
Elsewhere, the Labor Department said the Producer Price Index rose to 1.6% in February, which was double the rise from the previous month and the biggest increase since June 2009. Higher energy costs weighed on food prices as they soared nearly 4% which represented the biggest jump in over 35 years. Harsh winter freezes hurt harvesting in which sent fresh vegetable prices soaring and represented 70% of the increase.
And to no one’s surprise, gas prices also spiked in February as the national average price came in at $3.55/ gallon, up $0.40 from a month earlier.
As a result, the Dow is down 190 points to 11,664, while the S&P is off 20 points to 1,261. The Nasdaq is lower by 40 points to 2,627.
As far as “impact” earnings trades for today, we were looking at FedEx (FDX, $88.63, down $2.08) and Nike (NKE, $86.21, down $0.96) which report earnings on Thursday. We took a look at both stocks in our Members Area this morning but as far as playing the options – we will probably sit this round out.
There are other trades on our Watch List that we are warming up to without the risk of earnings but these two stocks will likely be on the move tomorrow. Subscribers, check for the updates.
Wednesday, December 22nd, 2010
Keep on rocking us, baby.
Well, we aren’t superstitious, and we don’t get suspicious, and yes, the bulls are a friend of ours…
The Dow gained 55 points, or 0.5%, and settled at 11,533. The index hit a fresh two-year high of 11,549 and closed above the 11,500 level, finally, after 7 straight sessions of trading above it intra-day. We are expecting a run up to 11,700.
The S&P 500 added nearly 8 points, or 0.6%, and finished at 1,254. We said yesterday a break and close above 1,250 would be bullish. The index touched a high of 1,255 and we are looking for a run up to 1,275 by the end of next week.
The Nasdaq also came through for us as it broke 2,660 and closed at 2,667, up 18 points, or 0.7%. The index tapped 2,669 and is at its highest levels in 3 years and the bulls will now focus on a break above 2,700 which should be a breeze.
In earnings news, Nike (NKE, $92.30, up $2.03) beat the Street which we all knew would happen but they warned of lower profit margins in the quarters ahead and shares got whacked. We felt the company could say something disappointing as far as their outlook and we mentioned this in our training video that we released Sunday night that a bullish trade looked like “a setup”.
Nike posted earnings of $457 million, or $0.94 a share, versus $375 million, or $0.76 a share, in the year ago period. Revenue came in at $4.8 billion, up from $4.4 billion. Wall Street was looking for $0.88 a share, on sales of $4.8 billion.
The company’s CEO said “as supply and demand find a new normal in the recovering economy, our industry is going to experience margin pressure due to rising input costs”. That was enough to bring the bears out and they pushed shares down to $87, or 6% lower in after-hours trading last night.
As we head to press, futures are showing a flat open but are slightly positive.
| || |