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1:10pm (EST)
The bulls are pushing the market higher after getting some better-than-expected economic news which has helped relieve some of the euro tensions from this morning. The Consumer Price Index for November increased 0.1% after a 0.2% increase in the prior month. It had been expected to increase 0.2% month-over-month. Core consumer prices for were up 0.1% after coming in flat two the previous three months. Meanwhile, the New York Empire manufacturing for November came in at 10.57, which was better than estimates for 3.0 that had been expected.
Although the market action is rather lackluster today, we are expecting a big move on Friday with December triple-witching. This has been a flat event for 2010, but historically, December is money with average gains of 2%. Triple-witching is when contracts for stock index futures, stock index options, and stock options all expire on the same day and it happens four times a year in March, June, September, and of course, December.
One stock we want to talk about today is the Boston Beer Company (SAM, $95.75, up $11.00) which is seeing a 13% pop in its shares. The company raised its 2010 yearend profit estimates and said earnings would be in the range of $3.30-$3.60 a share. Last month, Boston Beer forecast earnings of $2.85-$3.15 a share.
We have been watching this stock since early February when it was in the $40′s but the option pits just aren’t liquid enough for us to play them. However, we often mention “story stocks” on our site from time to time and this is one of them. In fact, here was an update on the company from May 4 (quotes are from that day):
“Another company we are watching is The Boston Beer Company (SAM, $58.63, up $1.62) which we have mentioned inside our Members Area a few times. Although we are not stock traders, these are shares we wished we would have picked up in the mid-$40’s back in February. We were looking at an option trade but there wasn’t enough liquidity for us to go long.” (END)
The average daily volume for the stock is just 75,000 shares which, like we said, makes it hard to trade options because of the bid/ask spreads which are usually jacked-up due to the lack of volume. However, the December 85 calls (SAM101218C00085000, $10.45, up $9.65) are up over 1,200% today but only 16 contracts have traded.
It’s pretty obvious shares want to test $100 on the “blue-sky” breakout but we are hoping for a 2-for-1 stock split, or 3-for-1, which would make shares cheaper for the average investor and possibly get more volume flowing into the stock and option chains.
We got to leave it there as we have a number of things to cover in our Members Area today. As we head to press, the Dow is up 7 points; the S&P is down 4; the Nasdaq is off 5 points.
We will be back in the morning but we are still seeing golden opportunities as we look out into 2011. If you are not a current subscriber, we urge you to consider this opportunity to get on board. Subscribers, check for the updates.
Headline News Favoring Bears
Tuesday, August 3rd, 2010
12:55pm (EST)
The bulls are having trouble extending Monday’s gains as most of the news today has been disappointing and not up to expectations. Futures were pointing towards a lower open after Procter & Gamble (PG, $59.62, down $2.44) and Dow Chemical (DOW, $25.75, down $2.58) both missed Wall Street’s expectations and the market extended it losses after lousy economic reports on consumer spending and factory orders. However, the market has come off its lows and is trying to get back to even as we head into the second half of trading.
The boring stuff first…
The Commerce Department said June personal income was flat, as expected, while consumer spending was flat, as well. A slight increase to 0.1% has been expected.
Factory orders for June fell 1.2% which was worse-than-expected 0.5% decline that had been forecast. Pending home sales slipped 2.6% month-over-month which was better than the 5% drop that was predicted.
Turning to earnings, the exciting news…
Procter & Gamble reported a profit of $2.2 billion, or $0.71 a share, versus $2.5 billion, or $0.80 a share, in the year ago period. Revenue came in at $18.9 billion. Both numbers were below Wall Street’s estimates as analysts were expecting $0.73 a share on $19.1 billion in sales. Shares are down 4% which is a big move for this slow moving stock.
Dow Chemical reported earnings of $566 million, or $0.50 a share, compared to a loss of $486 million, or $0.47 a share, a year earlier. Revenue jumped 20% to $13.6 billion but analysts were expecting $0.56 a share on sales of $13.7 billion. Shares are down 9% on double the average daily trading volume.
Despite the negative headlines, the bulls are battling back as we head to press.
The Dow is lower by 30 points to 10,644 and bounced right off the 10,600 level as it tries to make it into positive territory. The S&P 500 is down by 5 points to 1,121 after touching a low of 1,116 while the Nasdaq is off by 9 points to 2,286.
It wouldn’t be surprising to see the bulls battle back as it appears the market could be setting up to follow last week’s pattern. We expected a pullback at these levels and Friday actually could end up being a flat day when the unemployment numbers are released. We don’t expect the 9.5% rate to change, and how the market behaves after hearing the news will depend on what the private sector says or how many jobs it added.
Our favorite beer company will announce earnings after the close. Boston Beer (SAM, $66.40, down $1.20) recently set a 52-week high of $74.52 back in June and we have mentioned it quite a few times in our Members Area. It isn’t the best stock to play options on because of the liquidity and low open interest. However, it would have been a sweet LEAP option trade as we have been covering this one in the $40’s since February.
We will be on the sidelines when Boston Beer reports but we might pop one open if they beat expectations.
Tags: Boston Beer, call options, dndn, Dow, how to trade options, momentum options trading, Momentum stocks, option picks, option stock picks, options alerts, options newsletter, options track record, PG, put options, SAM, stock options trading, volatile options
Posted in Earnings, Economic News, Market Analysis, Market Commentary | Comments Off