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Wednesday, April 4th, 2012
9:00am (EST)
The bears made some noise yesterday after hearing the Fed turned its back on the bulls with the release of the latest FOMC minutes. Ben Bernanke provided some enthusiasm last Monday when Wall Street took some of his words as though there would be one last round of quantitative easing (QE) but yesterday, the Fed said it was “less inclined” to do so.
A “couple” of the Fed members thought more QE might be needed if the economic recovery loses momentum and in January, the minutes said the same thing. However, January’s minutes said there were a “few” committee members who would be in favor of further easing, if needed.
The market was already in the red by the time the Fed announcement came out but worsened after traders headed for the exits.
The Dow fell 65 points, or 0.5%, to close at 13,199. The blue-chips finished just below 13,200 and traded down to 13,131.
The S&P 500 dropped a six-pack, or 0.4%, to settle at 1,413. The index traded to a low of 1,404 and was able to hold the 1,400 level but failed to break into positive territory after two attempts in the morning.
The Nasdaq gave back the other 6-pack, or 0.2%, to end at 3,113. Tech managed to see a little green, hitting 3,128 shortly after the open but tested a low of 3,097.
Despite the weakness, the S&P Volatility Index (^VIX, 15.66, up 0.02) was only up fractionally but did trade up to 16.65. We gave specific targets to watch for as far as confirmation on a breakdown in our Weekly Wrap and Monday Morning Outlook but we aren’t there, yet. Also, the trend is still up the indexes but we gave specific targets to watch for as well on when a trend change could occur.
Timing a market bottom or pullback is never easy so the trick is to build positions slowly. We have started adding put options to our portfolio with longer-dated options and we have a number of trades that look juicy on our Watch List. We aren’t sure when the fat lady will sing but the bulls bus is warming up.
Futures are showing a nasty open as we head to press and look like this: Dow (-110); S&P 500 (-12); Nasdaq 100 (-20).
Our current put option trades got some nice pin action yesterday and we have set HARD STOPS on a few of them to protect profits. We may also release a NEW TRADE from our Watch List if we like the prices so stay locked-and-loaded. Subscribers, check the Members Area for the updates.
Tags: put options, S&P Volatility Index, VIX
Posted in Market Analysis, Market Commentary, VIX | Comments Off
Wednesday, January 25th, 2012
9:00am (EST)
Oh, baby do you know what that’s worth? ($100 billion)
Oh, Heaven is a place on Earth.
They say in Heaven, love comes first
We’ll make Heaven a place on Earth.
Steve Jobs is certainly smiling from up above and it feels as though he never left us. We thought today’s blast from the past was the perfect song to start our morning as we look ahead to the opening bell…
The market made a nice rebound off yesterday’s lows and remained in a tight range for the rest of the day as Wall Street awaited Apple’s (AAPL, $420.41, down $7.00) quarterly results. Despite the nervousness of an Apple letdown, Tech had a strong day compared to other sectors which helped the major averages hold support as the market ended mixed.
The Dow fell 33 points, or 0.3%, to close at 12,675 while the S&P slipped a point to finish at 1,315. The Nasdaq added 2 points to settle at 2,786 but failed to crack 2,800 but this shouldn’t be an issue today.
As far as Apple’s numbers, needless to say, the suit-and-ties were divided heading into the report as half the analysts seemed to be giddy while the other half said there was a chance for an earnings miss – but none of them seemed sure or wanted to bet the ranch. Shares were halted until 4:50pm (EST) in extended trading last night which was a little unusual and goes to show how the much Wall Street weight the company had on its shoulders.
There were over 125 Apple articles within 3 hours after the close on Yahoo’s (YHOO, $15.69, up $0.01) Finance page yesterday talking about Apple’s mind-boggling results.
The company reported a profit of $13 billion, or $13.87 a share, on revenue of $46 billion. The pencil-pushers were looking for earnings of $10 billion on $39 billion in sales. A quick rundown on the record 3 months: 37 million iPhones sold during the quarter, over 15 million iPads, and 5 million Macs. To put things in perspective, the number of iPhones and iPads sold were over 100% increases from the prior quarter. We didn’t even mention the iPods sold for the quarter and the fact its iTunes store is approaching $2 billion sales. By the end of this year, iTunes alone could be a double-digit billion dollar business!
Apple added another $16 billion to its coffers and now has nearly $100 billion in its war chest. Yes, the company ended the quarter with $97.5 billion in cash and marketable securities on its books. Wow.
Once again, we were hoping for a stock-split of 4-for-1 which would have gotten shares down to $100 or so but Apple hasn’t split its stock since 2005 when it did a 2-for-1 deal.
The options on a $400 stock can be expensive and we looked at the Apple February 370 puts (AAPL120218P00370000, $1.80, up $0.35) and the February 470 calls (AAPL120218C00470000, $1.20, down $0.80) yesterday as a possible strangle option trade after our update which represented a $50 move in the stock. We were calculating a 10% swing either way which would get shares to $380 or $460 based on the price at the time. The 10% move wasn’t enough to get the stock past these strike prices which made us nervous because we want shares to move enough to cover the cost of the trade.
Apple shares were up $30 to $450 in after-hours trading last night once they opened and did hit a high of $470 before chilling. This morning they are at $454, up $34. The puts will take a huge hit while the calls should get a nice pop at the open.
As you can see, the option premiums are rich on triple-digit stocks and you need a massive move in the stock to hopefully make a decent return. We would rather play options on stocks on under $100 where a 5% move would double your money or make you 100+% with the right option.
Apple is one of the few triple-digit stocks we wish we could play options on but the risks outweigh the rewards, especially when selling these types of options. No worries. There are hundreds of other stocks we follow under $100 that trade options and we have no problem letting the big boys trade Apple while we focus on Microsoft (MSFT, $29.34, down $0.39), Aflac (AFL, $49.07, up $1.02) and MGM Resorts (MGM, $13.16, up $0.02).
Our subscribers have banked 125% on Microsoft calls, 127% on Aflac call options, and 131% and 114% on 2 MGM call option trades this month alone. Our Seagate Technology (STX, $19.75, up $0.07) also made 100%. That’s 5 triple-digit call option trade winners on stocks that have moved $1-$3 in the last 3 weeks.
With futures up this morning thanks to Apple, we are hoping our other call option trades get some nice pin action.
Futures are mixed as we head to press and look like this: Dow futures are down 35 points to 12,591 while the S&P futures are off by 3 points to 1,308. The Nasdaq futures are showing a 18 point pop and are at 2,445.
Subscribers, check the Members Area for the updates and stay on your toes for possible Trade Alerts. With the Fed speaking at noon, we could be in for a wild ride today as we near the July and April 2011 market highs.
Tags: AAPL, AAPL earnings, Apple stock options), call options, put options, YHOO
Posted in Apple, Earnings, Market Analysis, Market Commentary | Comments Off
Thursday, December 8th, 2011
1:45pm (EST)
Futures were flat when the European markets opened for trading and remained that way for much of last night as Wall Street waited for headlines. Here at home, futures got a pop after jobless claims came in at 381,000 versus a forecast of 395,000 but it was shortly lived.
Things went from good to bad after ECB President Mario Draghi said there would be no “QE” type of bond buying event, as rumored. This ruined some optimism ahead of the European summit meeting tomorrow.
The bulls tried to brush some of the news off as the market almost made it to positive territory shortly after the open but the downside momentum has not abated. The talking heads are calling today’s pullback a selloff but it has more to do with the volatility of the market than anything else. Support is still holding.
We said Monday and Friday would be the only days that mattered this week and with Monday’s 1% pop, the market is basically flat for the week. There are big bets being made by both sides as to which way this market is headed and it is still unclear which way we could go.
As we head to press, the Dow is down by 168 points to 12,028 while the S&P is off by 22 points to 1,239. The Nasdaq is lower by 39 to 2,609.
We are holding pat with our current positions and while we are hopeful for a breakout, we are also looking at some put positions in case support does fall. Subscribers, check the Members Area for the updates.
Tags: call options, put options
Posted in Market Analysis, Market Commentary | Comments Off
Thursday, September 22nd, 2011
9:00am (EST)
The market got off to a good start on Wednesday but we didn’t think the bulls had enough artillery yesterday to break through resistance with the Fed speaking. We knew the FOMC would have a hard time pillow-talking Wall Street to fall for its “Operation Twist” plan and after releasing their latest meeting minutes, our instincts were right.
The FOMC said it plans to sell $400 billion of U.S. government debt (Treasury bills and notes) and will now start buying bonds with maturities of 6 to 30 years, while selling an equal amount of debt with remaining maturities of 3 years or less. The process should be completed by the end of June next year.
To dummy things down, the Fed will now focus its efforts on selling shorter-term Treasuries and buying longer-term bonds which was tried in the 60′s and had zero impact. Hence, the “Twist” made famous by Chubby and the code name. We couldn’t make this stuff up if we tried but Wall Street wasn’t dancing afterwards.
Of course, the suit-and-ties had already factored-in such a plan so there was no “WOW” factor and the major indexes failed at the top of the range, once again. The current tug-of-war has lasted for nearly two months and we have done well playing calling the action. We mentioned in both of our updates yesterday that we would need hard stops to protect our profits so you could tell by our “nervousness” we didn’t have a lot of faith in the bulls.
We managed to close 2 options trade recommendations yesterday for gains of 67% and 5% although we were whipsawed out of making a triple-digit gain or Oracle (ORCL, $29.54, up $1.19) and double digits on another call option due to the market’s knee-jerk reaction after the Fed’s announcement.
The Dow dropped 284 points, or 2.5%, to finish at 11,125. The blue-chips reached a high of 11,447 and gave early signs that resistance at 11,500-11,600 would be hard to crack. We mentioned short-term support at 11,200 and then 11,000 for the index but a break below 11K, or more specifically 10,800 – would not be good.
The S&P 500 fell 35 points, or 2.9%, to end at 1,166. Like the Dow, the index went out at its lows for the day after failing to hold support at 1,200 which is now resistance, again. The drop below 1,175 also put 1,150 into play again and a break below 1,125 could spell serious danger for the bulls.
The Nasdaq gave up 52 points, or 2%, to settle at 2,538. The index made a brief trip above 2,600 and traded to 2,601 before giving up this level along with 2,550. The bears will now target 2,500 and possibly 2,450 but there were some good stories in Tech yesterday worth mentioning.
Hewlett-Packard (HPQ, $ 23.98, up $1.51) was up 7% and woke up from the dead after Wall Street cheered the rumors they were considering kicking their current Chief Executive Officer (CEO) to the curb. Meg Whitman, former CEO of eBay (EBAY, $32.24, down $0.49), is said to be the frontrunner but we aren’t sure if that would be the best choice. While she did some tremendous things at eBay, HP needs a game-changing CEO, which is going to be hard to find. Shares are at multi-year lows and the break below $30 (green line, black circles) back in mid-August was the warning sign. Despite the pounce and bounce on the news, we would stay away from this stock until it trades back above $30 which could take some time.
Microsoft (MSFT, $25.99, down $0.99) decided to come up off some of its cash and announced a 25% increase to its quarterly dividend to $0.20 per share. The current yield is 2.7% as of yesterday’s closing price but will be closer to 3% when the new dividend is factored-in.
Of course, this is like Microsoft paying a speeding ticket because it has over $40 billion in its coffers. Despite the “spin” the talking heads tried to give the dividend, Wall Street wasn’t buying it as shares struggled all day. A “special” dividend would have been more appropriate as analysts took the news as another sign the company continues to struggle to find growth. To us, a bid for Netflix (NFLX, $128.50, down $0.53) might make sense but they are having their own issues.
Shares of Netflix reached a high of nearly $305 in mid-July and have plummeted nearly 60% since. After some quick chart work last night, which we go over in our Members Area, shares could be headed much lower. If support continues to break down like a rented mule, you can bet we will be all over some Netflix put options which we also profile this morning. We aren’t ready to make them official just yet because there could be a bounce in Netflix over the short-term but the recent trend has certainly been lower.
Futures are pointing towards a nasty open so we could be testing the bottom of the trading range, quickly. Dow futures are down 297 points to 10,710 while the S&P futures are lower by 34 points to 1,121. Nasdaq futures are showing a decline of 60 points to 2,185.
Tags: call options, MSFT, Option Trades, put options
Posted in Earnings, Market Analysis, Market Commentary | Comments Off
Wednesday, August 10th, 2011
1:45pm (EST)
The market continues to see-saw as Europe’s woes came back in focus today on the possibility of a downgrade of French debt which has rattled the major indexes. Naturally, the Banking stocks here at home and across the pond are getting pounded. Bank of America (BAC, $7.10, down $0.84) is flirting with disaster once again and is down 7% after surging 18% yesterday. Shares have hit a low of $6.78 and the 52-week low is $6.31 which was set on Monday.
Yesterday’s support levels are coming back into play and there is a chance we could see new lows this afternoon if the selling pressure continues. Once the European markets close, the U.S. market will be on its own. The focus will then turn to Tech as Cisco Systems (CSCO, $13.93, down $0.13) will announce earnings after the close. We will go over their numbers in the morning but the big catalyst for tomorrow will be the jobs number which comes out before the opening bell.
Initial Claims are expected to come in at 395,000 and a print above 400,000 will spell disaster for the bulls. If there is a better-than-expected print of say, 390,000 or less, then it could help provide stability and another rebound.
A lot of the talking heads are complaining about the “high frequency” traders but it is what it is. The problem with the market pundits is that many of them do not follow support and resistance levels for the major indexes or stocks so they don’t know the downside targets or where the rallies will fade. Of course, we spend double-digit hours looking at charts every day and we point a lot of this stuff out in our daily updates.
We’ve got much more we could Ramble On about but we have a slew of stuff we have to cover inside our Members Area. We got some great entry prices on some of the trades we profiled on our Watch List this morning and we had two openings after closing 2 put option recommendations yesterday. Rambus (RMBS, $10.08, down $0.27) made our subscribers over 1,100% when it collapsed from $14 to current prices and another trade recommendation returned 205% in less than a week!
Folks, these are the types of returns this market is providing and we have been beating the drum that volatility and chaos would be extreme in July and August and that it would be an incredible time to trade options.
As we head to press, the Dow is lower by 344 points to 10,895 while the S&P is down by 34 to 1,138. The Nasdaq is getting punished for 65 points and is at 2,417.
Levels to watch into the close – Dow 10,800; S&P 1,125; Nasdaq 2,400. Above favors the bulls, below favors the bears going into Thursday’s action. Subscribers, check the Members Area for the updates.
Tags: bac, Option Trades, put option trades, put options, what are put options
Posted in Company Commentary, Market Analysis, Market Commentary | Comments Off
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Market Pulls Back as Bears Attack
Wednesday, April 4th, 2012
9:00am (EST)
The bears made some noise yesterday after hearing the Fed turned its back on the bulls with the release of the latest FOMC minutes. Ben Bernanke provided some enthusiasm last Monday when Wall Street took some of his words as though there would be one last round of quantitative easing (QE) but yesterday, the Fed said it was “less inclined” to do so.
A “couple” of the Fed members thought more QE might be needed if the economic recovery loses momentum and in January, the minutes said the same thing. However, January’s minutes said there were a “few” committee members who would be in favor of further easing, if needed.
The market was already in the red by the time the Fed announcement came out but worsened after traders headed for the exits.
The Dow fell 65 points, or 0.5%, to close at 13,199. The blue-chips finished just below 13,200 and traded down to 13,131.
The S&P 500 dropped a six-pack, or 0.4%, to settle at 1,413. The index traded to a low of 1,404 and was able to hold the 1,400 level but failed to break into positive territory after two attempts in the morning.
The Nasdaq gave back the other 6-pack, or 0.2%, to end at 3,113. Tech managed to see a little green, hitting 3,128 shortly after the open but tested a low of 3,097.
Despite the weakness, the S&P Volatility Index (^VIX, 15.66, up 0.02) was only up fractionally but did trade up to 16.65. We gave specific targets to watch for as far as confirmation on a breakdown in our Weekly Wrap and Monday Morning Outlook but we aren’t there, yet. Also, the trend is still up the indexes but we gave specific targets to watch for as well on when a trend change could occur.
Timing a market bottom or pullback is never easy so the trick is to build positions slowly. We have started adding put options to our portfolio with longer-dated options and we have a number of trades that look juicy on our Watch List. We aren’t sure when the fat lady will sing but the bulls bus is warming up.
Futures are showing a nasty open as we head to press and look like this: Dow (-110); S&P 500 (-12); Nasdaq 100 (-20).
Our current put option trades got some nice pin action yesterday and we have set HARD STOPS on a few of them to protect profits. We may also release a NEW TRADE from our Watch List if we like the prices so stay locked-and-loaded. Subscribers, check the Members Area for the updates.
Tags: put options, S&P Volatility Index, VIX
Posted in Market Analysis, Market Commentary, VIX | Comments Off