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Wednesday, June 1st, 2011
12:30pm (EST)
We knew the economic news was going to be lousy over the next few days although we are holding out hope for a surprise in nonfarm payrolls and the unemployment rate on Friday. Today’s news on the labor market didn’t paint a pretty picture for Friday as the ADP Employment Change report indicated that only 38,000 private payroll jobs were added versus expectations for an increase of 177,000.
The ISM Manufacturing Index for May came in at 53.5 versus expectations for a print of 57.6. This was down from the 60.4 in April but still shows expansion. Anything below 50 means manufacturing is showing contraction. Elsewhere, Construction Spending was up was 0.4% which was a sweet surprise as most of the suit-and-ties had penciled in a drop of 0.5%.
This has led to a pretty disappointing day for the bulls but we kind of figured the bears would test prior resistance which is now support if it holds.
The Dow is down 190 points to 12,379 while the S&P 500 is lower by 20 points to 1,325. The Nasdaq is off by 38 points to 2,797.
As far as specific stocks, Research In Motion (RIMM, $40.50, down $2.35) is at fresh 52-weeks lows after an analyst questioned the company’s upcoming quarter. One sharp kid figures Nokia’s (NOK, $6.52, down $0.49) profit warning could spell trouble for RIMM’s margins as lower selling prices weigh on profits. We aren’t sure if they are taking clues from us but today we are singing. We have sounded like a broken record for 3 weeks and it is good to see the outside world waking up to RIMM’s problems.
Here is what we said in our Members Area this morning:
“RIMM touched a low of $42.55 yesterday and the 52-week low is $42.53. We are so close to a breakdown that we can feel it coming. Our near-term price target is $38 for the stock which gets these options to at least $2.” (END)
More good news came our way after Polycom (PLCM, $58.10, up $0.70) announced a 2-for-1 stock split. If you are a stockholder at the close of business on June 15, you will get one additional share for every one share you own. Of course, the stock price will be cut in half but this is a bullish and we talk about how to play these events in our option trading manual, How to Trade Options on Momentum Stocks.
Some of you may have missed our special on getting this course (at no charge and includes monthly videos) by subscribing to a 1-year membership to our Daily or Weekly newsletter. We have had quite a few emails come in today asking us to extend the offer for a day so here you go.
Folks, we want you around for a year because we really want you to learn how the market works, what to look for, how to identify a good trade, read a chart, understand economic reports, and to know what companies are reporting earnings on what days.
You might as well learn this stuff now because when you retire, what else are you going to do, let someone else manage your money?
On that note, we have 2 NEW TRADES for you today and we have updated our current ones. Subscribers, check the Members Area for the updates.
Tags: call options, high beta stocks, Hot stocks, momentum options, Momentum stocks, NASDAQ: RIMM, option tips, options, options mentoring, options trading course, PLCM, RIMM, RIMM new 52-week lows, stock market options, weekly options
Posted in Market Analysis, Market Commentary | Comments Off
Wednesday, March 30th, 2011
9:00am (EST)
…if only briefly.
The bulls made another step towards serious resistance on Tuesday and either look poised for a jailbreak, or, they are throwing their last punches in a huge brawl that is going to end ugly.
We talked have talked extensively about the market’s moves since mid-October and we said last week the bulls are setting up for a possible big run heading into April. Although the glass is looking half empty for the investors who have been bailing on the market’s recent move up, it is only half full for those who are playing for a breakout. Of course, we are in the latter camp and are riding the bulls back to new highs. This is why we have a market.
The bears have to be disappointed with yesterday’s action because the headlines were tilted in their favor. Economic news was softer-than-expected and most earnings announcements and guidance came in below par. It didn’t matter. The bears didn’t bring enough artillery to the fight as the bulls quickly overpowered them and were back on track in less than an hour.
The Dow nearly pulled off a triple-digit gain but still added 81 points, or 0.7%, to settle at 12,279. The S&P 500 popped 9 points, or 0.7%, and closed at 1,319.
The Nasdaq advanced 26 points, or 1%, to finish at 2,756. We wanted to spend more time on Tech because the close above 2,750 was a beautiful thing. Although we aren’t out of the woods, yet, a run to 2,850 is looking better-and-better by the session. The 52-week high for the Nasdaq is 2,840 and we said a shot at 3,000 could be in the stars.
Of course, we are still bracing for a pullback at any given moment because nailing a top or bottom for any stock, let alone the market, is always tricky. We also didn’t plan for a 4-week trading range from mid-February that saw more volatility than an EKG. However, we did expect a pullback in February which is why we used longer-term options. And we recently opened some new trades to try and take advantage of the rally we have been expecting to come back. Hopefully, the market can make some nice gains today.
As we head to press, futures are pointing towards a higher open; Dow (+45), S&P 500 (+6), Nasdaq (+15). Subscribers, check the Members Area for the updates.
Tags: reverse stock splits, RIMM, stocks that trade weekly options, straddle and strangle option trades, weekly options
Posted in Market Commentary | Comments Off
Tuesday, March 29th, 2011
8:00am (EST)
After a promising start, the bulls gave back all of yesterday’s modest gains in the final hour of trading despite better-than-expected economic news. Earnings were light and will be until the second week of April which is when first quarter earnings start to roll in. Geopolitical events were a non-factor although there was some concern on how much radiation is seeping into Japan’s waters. Elsewhere, Libya seems to be getting closer by the day to getting new leadership which helped bring oil prices down.
We weren’t surprised to see a tight trading range but we were a little disappointed with the close.
The Dow traded to a high of 12,272 before giving back 23 points, or 0.2%, to finish at 12,197. We were looking for 12,200 to stick but the index closed into its low as the closing bell sounded. Further support is at 12,000 but we are looking for a test to 12,350 then 12,500, first.
The S&P 500 dropped 3 points, or 0.3%, and settled at 1,310. We were glad to see 1,310 hold for the second consecutive session and there is further support at 1,300. Near-term resistance remains at 1,325.
The Nasdaq traded to a high of 2,754 and we were hoping for a close above 2,750. The index fell 12 points, or 0.5%, when the dust cleared and finished at 2,730. The close above 2,700 was good to see because we are expecting Tech to rebound following a month long selloff. Further support is at 2,650 while near-term resistance remains at 2,800-2,850.
We have a lot to cover in our Members Area this morning so we have to cut it short. Futures are pointing towards a slightly higher open; Dow (+20), S&P 500 (+2), Nasdaq (+4). Subscribers, check for the updates.
Tags: reverse stock splits, RIMM, stocks that trade weekly options, straddle and strangle option trades, weekly options
Posted in Market Commentary | Comments Off
Monday, March 28th, 2011
9:00am (EST)
“How do you like them Apples?”
This was the question the bulls left the bears with on Friday’s close as they rallied the market near its February highs. More importantly, the rally that stalled for 4-weeks is now back on as the bulls try to end March on a strong note. Although we are sure we haven’t heard the last growl from the bears, it appears our thesis that this rally would last from October 2010 to April is right on.
Of course, we didn’t expect all of the world drama that is currently grabbing the headlines but events around the globe are happening quickly which has caused a lot of the current volatility.
Things are still in a flux but the turmoil in Libya has suddenly gotten better which should mean lower oil prices. Portugal is a mess, Japan is still worrisome, sovereign debt is still an issue and higher food prices are here to stay. These headlines will continue to affect the market but it appears that the U.S. markets may actually be the best place to put your money.
The bears had the bulls in a corner the day before St. Patty’s but it has been all green since. The Dow traded to an intraday low of 11,548 on March 16 which was just above our 11,500 downside target and finished at 12,220 on Friday, up 50 points. For the week the index added 362 points, or 3.1%. The next stop the bulls are pushing is 12,500 with an outside shot at 13,000. Support is at 12,000 and 11,800.
The S&P 500 finally cleared 1,300 last Thursday which brought some buyers back into the market and ended Friday up 4 points to settle at 1,313. The index had reached a low of 1,249 on March 16 and we nailed support at 1,250. For the week, the S&P added 38 points, or 2.7%. The break back above 1,300 should carry to 1,325 with a run to 1,350 if the bulls can push through 1,334 which represents the double off the 2009 lows. The bears will target 1,300 then 1,275 again.
The Nasdaq is the real head-scratcher though. Just when it looked like Tech was going down with 3 fingers up, the bulls threw the sector a life jacket after watching it fall to a low of 2,603 by mid-March. The break above 2,700 breathed new life into the Nasdaq as it ended Friday at 2,742, up 6 ticks. For the week, Tech surged 100 points, or 3.8%. Nice. There is resistance at 2,800-2,850 but if broken there is a chance the bulls could push 3K.
We said last week that the 4-week “trading range” the market has been in since mid-February was getting stretched and becoming more volatile. After testing the bottom of that range, a week later we find ourselves back near the top of the range. These type of “V” patterns are very rare.
As a result, the CBOE Market Volatility Index (^VIX, 17.91, down 0.09) has been on a 7-session slide after touching 31.28 on…March 16. The 45% decline since has been the steepest on record which shows just how extreme the volatility has been. Remember, a VIX reading under 20 indicates confidence and calm while a reading above 30 indicates nervousness and panic. At the beginning of the month, the VIX was at 21 and the run to 31 was a 50% jump in two weeks.
The iPath S&P 500 VIX ($30.37, down $0.04) was at $35 last week and we said the option pits are quite active. The April 30 puts (VXX110416P00030000, $1.52, up $0.07) traded 13,000 contracts on Friday and easily doubled for the week.
If the bulls push the market higher then we should see the CBOE VIX fall to 14-13 which is when we would become cautious again. We said in November this rally had legs until April so we still should see one more run by the bulls. There is an old adage on Wall Street that says “sell in May and go away” so this thesis could also be playing out as well. Either way, we expect the volatility to continue into April.
We have a few trades that are thisclose to becoming official recommendations. Our Watch List has been full and we missed a few good trades last week. In our previous Weekly Wrap, we talked about Imax (IMAX, $31.71, up $1.72) and how it was at the bottom of its trading range. Shares were at $26 last Monday and we were hoping for a dip to $25.50 but it never came. Last Thursday, shares jumped 10% and on Friday they added another 6%. The calls options we were following zoomed 200%.
We are hoping some of our new trades can deliver the same kind of punch and many of them will be momentum plays. We are also profiling some WEEKLY options this morning which also may become official recommendations. These options expire this Friday, April 1.
Futures are up slightly as we head to press. Be on the lookout for a possible TRADE ALERT this morning.
Tags: CBOE VIX, reverse stock splits, RIMM, stocks that trade weekly options, straddle and strangle option trades, VIX, VXX, weekly options
Posted in Market Analysis, Market Commentary, VIX | Comments Off
Friday, March 25th, 2011
1:30pm (EST)
You wouldn’t know it judging by the volatility but the market is now positive for the month of March. The bulls are adding to yesterday’s breakout ahead of the weekend with Tech leading the way. Economic news has been pretty good – the Commerce Department said that gross domestic product (GDP) rose to 3.1% versus estimates for 2.9%. The consumer sentiment level for March was 67.5 versus consensus for a print of 68.
The Dow is up 69 points to 12,239 and has traded up to 12,259. The S&P 500 is higher by 7 points to 1,317 and has kissed 1,319. The Nasdaq is advancing 23 points to 2,759 and has traded up to 2,762.
We knew it would be a really bad day for Research In Motion (RIMM, $56.87, down $7.22). The company reported profits of $934 million, or $1.78 a share, versus $710 million, or $1.27 a share, in the year ago period. Revenue came in at $5.56 billion but the suit-and-ties were expecting earnings of $1.75 a share on revenue of $5.65 billion.
RIMM missed on their revenue numbers and it doesn’t get any better going forward. The company forecast earnings of $1.47-$1.55 a share for its current quarter which was well below estimates of $1.65 a share, on average. Revenue for the period is projected to come in between $5.2-$5.6 billion versus expectations for $5.67 billion.
We profiled a strangle option for RIMM on our Watch List for the March 60 puts (RIMM110325P00060000, $3.10, up $2.30) have gained nearly 300% while the March 65 calls (RIMM110325C00065000, $0.01, down $1.84) and here were out thoughts yesterday morning:
“These are WEEKLY options and RIMM would need to be below $57.50 or above $67.50 for the trade to breakeven, technically. We think shares are going to move 10% because RIMM will be showing its hand on if they are losing (market) share to Apple and Google. If RIMM misses, shares tank, if they beat, there might be some upside but not as much if they don’t “blow away” estimates.” (END)
We told our subscribers to close into weakness this morning and although it wasn’t an “official” trade, many of our option trading course members did very well with this trade because they know how to execute a strangle option trade. It is important to note that WEEKLY options are carry way more risk than “normal” options but the premiums can be cheap.
This will be the LAST weekend we offer our option trading manual How to Trade Options on Momentum Stocks at no charge if you sign-up for a one-year membership to our Daily newsletter or Weekly Wrap publication. The trading manual includes monthly videos to help you find your own trades and covers earnings. With first quarter earnings coming in April, this is the PERFECT time to learn how to play this major event.
The option trading manual is shipped to you at no charge and is going up in price so we urge you to get your copy this weekend. We will be back Sunday night with the Weekly Wrap.
Tags: reverse stock splits, RIMM, stocks that trade weekly options, straddle and strangle option trades, weekly options
Posted in Earnings, Weekly Wrap | Comments Off
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Research In Motion (RIMM) Hits New 52-Week Lows
Wednesday, June 1st, 2011
12:30pm (EST)
We knew the economic news was going to be lousy over the next few days although we are holding out hope for a surprise in nonfarm payrolls and the unemployment rate on Friday. Today’s news on the labor market didn’t paint a pretty picture for Friday as the ADP Employment Change report indicated that only 38,000 private payroll jobs were added versus expectations for an increase of 177,000.
The ISM Manufacturing Index for May came in at 53.5 versus expectations for a print of 57.6. This was down from the 60.4 in April but still shows expansion. Anything below 50 means manufacturing is showing contraction. Elsewhere, Construction Spending was up was 0.4% which was a sweet surprise as most of the suit-and-ties had penciled in a drop of 0.5%.
This has led to a pretty disappointing day for the bulls but we kind of figured the bears would test prior resistance which is now support if it holds.
The Dow is down 190 points to 12,379 while the S&P 500 is lower by 20 points to 1,325. The Nasdaq is off by 38 points to 2,797.
As far as specific stocks, Research In Motion (RIMM, $40.50, down $2.35) is at fresh 52-weeks lows after an analyst questioned the company’s upcoming quarter. One sharp kid figures Nokia’s (NOK, $6.52, down $0.49) profit warning could spell trouble for RIMM’s margins as lower selling prices weigh on profits. We aren’t sure if they are taking clues from us but today we are singing. We have sounded like a broken record for 3 weeks and it is good to see the outside world waking up to RIMM’s problems.
Here is what we said in our Members Area this morning:
“RIMM touched a low of $42.55 yesterday and the 52-week low is $42.53. We are so close to a breakdown that we can feel it coming. Our near-term price target is $38 for the stock which gets these options to at least $2.” (END)
More good news came our way after Polycom (PLCM, $58.10, up $0.70) announced a 2-for-1 stock split. If you are a stockholder at the close of business on June 15, you will get one additional share for every one share you own. Of course, the stock price will be cut in half but this is a bullish and we talk about how to play these events in our option trading manual, How to Trade Options on Momentum Stocks.
Some of you may have missed our special on getting this course (at no charge and includes monthly videos) by subscribing to a 1-year membership to our Daily or Weekly newsletter. We have had quite a few emails come in today asking us to extend the offer for a day so here you go.
Folks, we want you around for a year because we really want you to learn how the market works, what to look for, how to identify a good trade, read a chart, understand economic reports, and to know what companies are reporting earnings on what days.
You might as well learn this stuff now because when you retire, what else are you going to do, let someone else manage your money?
On that note, we have 2 NEW TRADES for you today and we have updated our current ones. Subscribers, check the Members Area for the updates.
Tags: call options, high beta stocks, Hot stocks, momentum options, Momentum stocks, NASDAQ: RIMM, option tips, options, options mentoring, options trading course, PLCM, RIMM, RIMM new 52-week lows, stock market options, weekly options
Posted in Market Analysis, Market Commentary | Comments Off