7:15pm (EST)
All things considered, Friday’s close wasn’t too bad…
We were hoping the bulls would post a strong showing going into the closing bell but the market settled near even after spending much of the session marching higher.
Of course, Wall Street’s eyes were on Greece and there was a sense of relief after the European leaders agreed to bail out the debt-laden country, with help from the International Monetary Fund, if conditions get significantly worse.
The safety net for Greece took pressure off the euro, sending it up slightly against the dollar but that will most likely be short-lived. Expect the euro to get weaker.
We also had some geopolitical concerns over North and South Korea that made the market nervous and sparked the afternoon sell-off but those reports were overblown. All-in-all it was another solid weekly victory for the bulls – their fourth in a row - as many analysts continue to doubt the rally.
The Dow ended the day with a 9 point gain to close at 10,850 after hitting a high of 10,934. For the week, the index was up 108 points, or 1%, and still looks poised to break 11,000. As many of you know, we were hoping for a break above 10,800 which had been the first wave of resistance before we could set our site on 11,000. Mission accomplished. On Thursday, the Dow reached a high of 10,985.
The S&P 500 added a point to settle at 1,166 and for the week the index added nearly 7 points, or 0.6%. On Thursday, the S&P hit a high of 1,180 and all week it toyed with 1,175. We would like to see a close ABOVE this level which could then carry us to 1,200.
As far as the Nasdaq, we were a little disappointed to see the index finish in the red as it lost 2 points and closed at 2,395. For the week, Tech was up 20 points, or 0.9%, and traded above 2,400 each day. We are looking for a close above this level to clear way for us to test 2,500.
Unless the wheels fall off the wagon, it looks like the major indexes are poised to post solid quarterly gains going into the final week of trading for the first quarter. The Dow is up 4%, the S&P is up 4.6%, and the Nasdaq is up 5.6%.
As we near the top of our trading ranges, we remain bullish but we also know the current environment won’t last forever. We think the market can rally into April but at some point the talking heads will get their pullback and they will be the first to tell you we are in correction mode.
The S&P hasn’t seen a 1% correction in over a month so sooner or later the law of averages will catch up with the bulls but for now the trend is our friend.
One sector that continues to see new life is the IPO market. This has been a bullish sign as companies become public at their offering prices and the good ones are also getting a pop. Many IPOs so far this year had been cut, postponed or canceled as investors shied away from risk but that is changing.
MaxLinear (MXL, $18.62, up $0.58) went public on Wednesday as shares opened at $17.95, nearly 30% higher than its IPO price, and later rose to $18.70, on its first day of trading.
The company sold 6.4 million shares for $14 each, and pocketed a little over $90 million. MaxLinear makes chips that are used mainly in mobile handsets but its products can also be found in cable boxes, digital televisions and PCs.
China Lodging (HTHT, $13.92, up $1.67) went public Friday and priced its IPO of 9 million shares at $12.25. The company, which operates a chain of budget hotels in China, raised about $110 million.
Neither of these IPO’s trade options, yet, but they will over the next few weeks. MaxLinear will be the one we are more likely to trade down the road but we still have to wait for momentum to develop.
In other IPO news, Baltic Trading (BALT, $13.48, down $0.02) and Crude Carriers (CRU, $16.95, flat) are two new offerings and are newly formed bulk shippers. Baltic Trading plans to conduct a shipping business focused on the dry-bulk industry spot market while Crude Carriers plans to go after a shipping business focused on the crude tanker industry. We aren’t too crazy about this sector right now and would stay away from both of them.
AVEO Pharmaceuticals (AVEO, $8.81, up $0.26) popped its cherry but closed below its IPO price on their first day of trading.
There were also two other pricings that struggled to make their debut. Another dry shipping company, Alma Maritime, postponed its IPO due to market conditions, while Chinese ad firm Redgate Media failed to price after lowering its expected range.
As far as earnings news, we will update this topic in the morning but the only company we are interested in playing this week is Research In Motion (RIMM, $75.06, up $1.63). The company reports earnings on Wednesday after the bell.
We are going to show our subscribers several ways to play this event in detail inside our Members Area on Monday morning but here is the breakdown.
The straddle option trade (or chicken trade) is pricing in a 10% move in the stock and here is the math. If you do the straddle trade we profile, RIMM will need to be at $82+ or below $68. This trade could yield 10% or more depending on how the stock reacts or it could lose money if shares stay flat.
As far as a strangle option trade, the odds favor an even better return as we can play some out-of-the-money options in anticipation of a huge price move for the stock. At current prices, we would need RIMM to trade above $83 or below $67 before we can start ringing the register.
These two types of trades provide protection because we would be using both call and put options. It’s a safety net and we would need a huge move in the stock after earnings and into April. The beauty of these trades is that it’s possible to make money on BOTH the calls and puts if the stock pops and then drops or drops and then pops.
Of course, we can also play RIMM with no protection in hopes of doubling our money. The calls we would use are priced right under $2 and we would use those if we expect RIMM to trade above $79. If the stock made it to $82 they will likely return 100%.
There is also the chance that RIMM misses their numbers or disappoints Wall Street and the stock tanks. We could use the put options which are priced near $1.50. In this case, we would need RIMM to trade below $70 to make triple-digits.
We are still doing the research (pun intended) on this one but we might be pulling the trigger on a possible option trade in the morning.
There is also another interesting trade we are putting the finishing touches on that we think has a good chance of doubling quickly or by the summertime. The stock was approaching its 52-week high of $45 last week but fell 10% over Thursday and Friday. We smell a “BUY”.
As we head to press, Dow futures are up 21 points while the S&P futures are up 2.5 points. Nasdaq 100 futures are higher by 3.5 points. It looks like the bulls are up doing their homework with us and unless something changes we should be starting higher on Monday. We will be back at 9am (EST) sharp!
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MomentumOptionsTrading.com Weekly Wrap for 3/28/10
Sunday, March 28th, 2010
7:15pm (EST)
All things considered, Friday’s close wasn’t too bad…
We were hoping the bulls would post a strong showing going into the closing bell but the market settled near even after spending much of the session marching higher.
Of course, Wall Street’s eyes were on Greece and there was a sense of relief after the European leaders agreed to bail out the debt-laden country, with help from the International Monetary Fund, if conditions get significantly worse.
The safety net for Greece took pressure off the euro, sending it up slightly against the dollar but that will most likely be short-lived. Expect the euro to get weaker.
We also had some geopolitical concerns over North and South Korea that made the market nervous and sparked the afternoon sell-off but those reports were overblown. All-in-all it was another solid weekly victory for the bulls – their fourth in a row - as many analysts continue to doubt the rally.
The Dow ended the day with a 9 point gain to close at 10,850 after hitting a high of 10,934. For the week, the index was up 108 points, or 1%, and still looks poised to break 11,000. As many of you know, we were hoping for a break above 10,800 which had been the first wave of resistance before we could set our site on 11,000. Mission accomplished. On Thursday, the Dow reached a high of 10,985.
The S&P 500 added a point to settle at 1,166 and for the week the index added nearly 7 points, or 0.6%. On Thursday, the S&P hit a high of 1,180 and all week it toyed with 1,175. We would like to see a close ABOVE this level which could then carry us to 1,200.
As far as the Nasdaq, we were a little disappointed to see the index finish in the red as it lost 2 points and closed at 2,395. For the week, Tech was up 20 points, or 0.9%, and traded above 2,400 each day. We are looking for a close above this level to clear way for us to test 2,500.
Unless the wheels fall off the wagon, it looks like the major indexes are poised to post solid quarterly gains going into the final week of trading for the first quarter. The Dow is up 4%, the S&P is up 4.6%, and the Nasdaq is up 5.6%.
As we near the top of our trading ranges, we remain bullish but we also know the current environment won’t last forever. We think the market can rally into April but at some point the talking heads will get their pullback and they will be the first to tell you we are in correction mode.
The S&P hasn’t seen a 1% correction in over a month so sooner or later the law of averages will catch up with the bulls but for now the trend is our friend.
One sector that continues to see new life is the IPO market. This has been a bullish sign as companies become public at their offering prices and the good ones are also getting a pop. Many IPOs so far this year had been cut, postponed or canceled as investors shied away from risk but that is changing.
MaxLinear (MXL, $18.62, up $0.58) went public on Wednesday as shares opened at $17.95, nearly 30% higher than its IPO price, and later rose to $18.70, on its first day of trading.
The company sold 6.4 million shares for $14 each, and pocketed a little over $90 million. MaxLinear makes chips that are used mainly in mobile handsets but its products can also be found in cable boxes, digital televisions and PCs.
China Lodging (HTHT, $13.92, up $1.67) went public Friday and priced its IPO of 9 million shares at $12.25. The company, which operates a chain of budget hotels in China, raised about $110 million.
Neither of these IPO’s trade options, yet, but they will over the next few weeks. MaxLinear will be the one we are more likely to trade down the road but we still have to wait for momentum to develop.
In other IPO news, Baltic Trading (BALT, $13.48, down $0.02) and Crude Carriers (CRU, $16.95, flat) are two new offerings and are newly formed bulk shippers. Baltic Trading plans to conduct a shipping business focused on the dry-bulk industry spot market while Crude Carriers plans to go after a shipping business focused on the crude tanker industry. We aren’t too crazy about this sector right now and would stay away from both of them.
AVEO Pharmaceuticals (AVEO, $8.81, up $0.26) popped its cherry but closed below its IPO price on their first day of trading.
There were also two other pricings that struggled to make their debut. Another dry shipping company, Alma Maritime, postponed its IPO due to market conditions, while Chinese ad firm Redgate Media failed to price after lowering its expected range.
As far as earnings news, we will update this topic in the morning but the only company we are interested in playing this week is Research In Motion (RIMM, $75.06, up $1.63). The company reports earnings on Wednesday after the bell.
We are going to show our subscribers several ways to play this event in detail inside our Members Area on Monday morning but here is the breakdown.
The straddle option trade (or chicken trade) is pricing in a 10% move in the stock and here is the math. If you do the straddle trade we profile, RIMM will need to be at $82+ or below $68. This trade could yield 10% or more depending on how the stock reacts or it could lose money if shares stay flat.
As far as a strangle option trade, the odds favor an even better return as we can play some out-of-the-money options in anticipation of a huge price move for the stock. At current prices, we would need RIMM to trade above $83 or below $67 before we can start ringing the register.
These two types of trades provide protection because we would be using both call and put options. It’s a safety net and we would need a huge move in the stock after earnings and into April. The beauty of these trades is that it’s possible to make money on BOTH the calls and puts if the stock pops and then drops or drops and then pops.
Of course, we can also play RIMM with no protection in hopes of doubling our money. The calls we would use are priced right under $2 and we would use those if we expect RIMM to trade above $79. If the stock made it to $82 they will likely return 100%.
There is also the chance that RIMM misses their numbers or disappoints Wall Street and the stock tanks. We could use the put options which are priced near $1.50. In this case, we would need RIMM to trade below $70 to make triple-digits.
We are still doing the research (pun intended) on this one but we might be pulling the trigger on a possible option trade in the morning.
There is also another interesting trade we are putting the finishing touches on that we think has a good chance of doubling quickly or by the summertime. The stock was approaching its 52-week high of $45 last week but fell 10% over Thursday and Friday. We smell a “BUY”.
As we head to press, Dow futures are up 21 points while the S&P futures are up 2.5 points. Nasdaq 100 futures are higher by 3.5 points. It looks like the bulls are up doing their homework with us and unless something changes we should be starting higher on Monday. We will be back at 9am (EST) sharp!
Tags: chicken option trade, option picks, option signals, options alerts, Research In Motion earnings, stock options trading, straddle option trade, strangle option trade
Posted in Earnings, Market Analysis, Market Commentary, strangle option trades, Strategies, Trading Tips, Weekly Wrap | Comments Off