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Bears Growling, Futures Down Sharply

Monday, April 9th, 2012

9:00am (EST)

The other curve ball will be Friday. The Unemployment Rate is due out and an uptick could cause panic as investors feel the recovery could be stalling. If the number is flat or moves lower, it will help the bulls case for higher prices. The problem is the market will be closed on Friday so we will have to wait until the following Monday to see how Wall Street reacts. Followed by the start of earnings on Tuesday.

We are expecting a continued rally this week with Thursday being the wildcard. (4/1/12 Weekly Wrap, Monday Morning Outlook)…

The bulls got off to a solid start on Monday as they made another run towards our near-term fluff targets for the market (Dow 13,500; S&P 1,425-1,450; and Nasdaq 3,250). Much of the momentum came from the prior week’s strong finish as the Dow traded up to 13,300 and closed at 13,264. The S&P and Nasdaq hit fresh 52-week highs of 1,422 and 3,123, respectively.

There was a little follow through by Tech on Tuesday morning as the Nasdaq reached 3,128 but the other indexes were lagging heading into the FOMC meeting minutes. Wall Street seemed a little hesitant to buy stocks ahead of the news despite Ben Bernanke’s comments on the possibility of further stimulus help during the prior week which sparked a rally to new highs. Needless to say, the bulls were shocked when the minutes came out later in the day after hearing the Fed say it was “less inclined” to do another round of quantitative easing (QE). This caused a pullback as all of the major indexes finished the session lower but still holding support.

Overseas markets took their cue from the U.S. and finished sharply lower on Wednesday which can be blamed for some of the continued weakness here at home. This and the fact that Spain is now back in the picture after an uneventful bond auction earlier that morning. Spain is a lot bigger than Greece so their debt crisis does matter and it showed. The market fell 1% for the day with the Nasdaq falling 1.5%.

Futures were pointing towards a weak open on Thursday following the release of the Jobless Claims numbers which were better than the prior week but only because of revisions. Initial claims came in at 357,000, which was down 6,000 from the previous week’s upwardly revised 363,000 claims. The 4-week average fell over 4,000 to just below 362,000 but analysts were expecting a print of 355,000. The figures are still at 4-year lows but Wall Street took it as a sign that initial claims could be on the up from February’s lows. This made traders a little nervous ahead of Friday’s Nonfarm Payrolls and Unemployment Rate numbers which lead to a mixed session.

Although the market was closed for Good Friday, we still went to the office and we still went through our usual pre-market morning rituals as we eagerly awaited the numbers. Futures were slightly up heading into the reports but turned on a dime once they came out. Make no mistake about it, they were absolutely atrocious.

Nonfarm payrolls for March dropped to 120,000 versus expectations for 205,000. It was the lowest jobs showing since October’s reading of 112,000. The unemployment rate dipped to 8.2%, down from 8.3%, but only because another 165,000 people threw in the towel on finding a job.

The news sent futures spiraling which were open until 9:15am (EST). The Dow futures were down nearly 150 points to 12,830 while the S&P 500 futures fell 20 points to 1370. The Nasdaq 100 got crushed for 30 points and stood at 2,720 going into the weekend.

We did some chart work Thursday night that we will get to in a moment which clearly shows the break in the uptrend lines for the major indexes even before Friday’s headlines.

We had a good feeling the market was going to be disappointed and we took the rest of the day off on Friday to celebrate because we have been preparing for a pullback. We have been opening quite a few put option trades over the last week or two to take advantage of a possible pullback, including one on Thursday, and if things hold up, our subscribers will be loving the open today despite a possible 1%+ decline.

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If you are not a subscriber but would like to read more please click here. We are one of the fastest growing stock options trading advisors on the internet and we are off to a great start for 2012. We offer 2-3 powerful call or put option trades each week (depending on market conditions) aimed at triple-digit and double-digit returns for our newsletters which are 60-13 (82%) over the first 3 months of 2012.

Our list of winners include 475% on AXP, 292% on a COF call option, 131% and 114% on 2 MGM trades, 200% on SGMS, 107% on AFL, 100% on STX, 82% on TSM and 125% on MSFT just to name a few. In other words, these solid gains could have turned a $10,000 trading account into $32,000 for a 220% return using our recommendations.

Tags: Dow Futures, Nasdaq futures, nonfarm payrolls., S&P futures, stock market commentary, stock options trading advisors
Posted in Economic News, Market Analysis, Market Commentary | Comments Off

Nasdaq Trips 3,000; S&P 1,375

Wednesday, February 29th, 2012

1:25pm (EST)

The bulls have done us proud by hitting ALL of our fluff targets but the market immediately took a step back after Ben Bernanke started speaking.

Economic news came in better-than expected as 4Q Gross Domestic Product (GDP) was up 0.9% for the quarter versus expectations for an increase of 0.4%. The Chicago Purchasing Managers Index (PMI) checked in at 64 versus a forecast for a reading of 61. The Fed’s Beige Book is the report we are most focused on and it is due out at 2pm (EST) sharp.

The Fed Chairman said economic growth will continue to be close to last year’s output of the second half but said the economy will have to grow at a faster rate in order for unemployment to continue to fall. Bernanke’s comments hinted there are no immediate plans for monetary easing.

Those remarks took the air out of the bulls sails but the indexes have recovered, somewhat, as we head into the second half of trading.

We have a ton of information to cover inside our Members Area so we have to cut it short.

As we head to press, the Dow is down 20 points to 12,985 while the S&P is off by 3 points to 1,369 after kissing a high of 1,378. The Nasdaq
triggered 3,000 for the first time since December 2000 but is currently lower by 7 points to 2,980.

We will be back in the morning with our next update.

Tags: Bernanke, Fed Chairman, stock market commentary
Posted in Market Commentary | Comments Off

Futures Higher Ahead of the Bell

Monday, September 28th, 2009

9:10am (EST)

Futures are pointing towards a slightly higher open this morning. Ahead of the bell, Dow futures are up 45 points to 9,664. The S&P 500 futures are higher by 6 points to 1,047, while the Nasdaq 100 futures are up 9 to 1,706.

In earnings news, Cal-Maine Foods (CALM, $27.78) reported a quarterly loss of $0.16, versus Wall Street’s estimate of $0.26. Revenue came in at $188 million, which compares to estimates of $207 million. This is one of the things we are watching for during the upcoming earnings season – revenue growth.

I mentioned last night that companies were easily able to beat 2Q earnings with aggressive cost-cutting but Wall Street will be looking for more growth this time around.

Overseas markets were weak this morning so I don’t expect the higher open to last as volume is expected to be light today.

Rick@MomentumOptionsTrading.com

Tags: Cal-Maine Foods, CALM, Option Trades, options blog, options trading strategies, stock market commentary
Posted in Market Commentary | Comments Off

Weekly Wrap for 2/22/09

Monday, February 23rd, 2009

1. Commentary
2. Gold and Platinum
3. Trading Bank of America
4. 2008/ 2009 Portfolios
5. Current Trades
6. Earnings
7. Closing Thoughts

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1. Commentary

If 666 is the number of the beast, it must be that of a bear because it roared its ugly head at the market. The market was nervous all of last week which led to a big decline in the three major indexes. After taking Monday off, the mood was no better Tuesday on Wall Street with the market still waiting for more details on how the government would deal with the toxic assets that have plagued banks’ balance sheets. On Friday, those fears reached panic as talk of nationalizing the banks reached a frenzy.

When Senate Banking Committee Chairman Christopher Dodd said banks may have to be nationalized for a short time, the market was underwater and sinking fast. The rebound off the lows came after the Obama administration said they support a privately held banking system. If that weren’t bad enough, there was talk of Europe’s recession being worse than expected.

As a result, we got 6% losses across the board for the week. The Dow fell 485 points to finish at 7,365 while the Nasdaq skidded 93 points to close at 1,441. The S&P 500 was punished for a 57 point loss and settled at 770. YTD, the Dow is off 16%, the S&P 500 is down 15% and the Nasdaq has lost about 9%.

That fact that the market couldn’t rally despite President Obama announcing the details of the Homeowner Affordability and Stability Plan shows the uncertainty the market is facing. Usually, this type of event would have moved the market significantly higher but the market appears to be more concerned with the toxic assets on the banks books, and until they are removed from their balance sheets, pressure will remain on the sector and the market as a whole.

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2. Gold and Platinum

The hot topic of late has been gold which broke through the $1,000 mark and finished at $1,002/ ounce, up nearly $26, or 2.6%, on Friday. Naturally, there are gold bulls calling for $1,500 and even $2,000 an ounce but lets not get ahead of ourselves.

Gold peaked at $1,033 and fell as low as $750 in November. From those lows we have already rallied 50% so that tells me gold has become overbought in the short-term. However, that doesn’t mean gold can’t continue higher. Over the last couple of years, gold has had a pretty good run from late January until the end of February and history seems to be repeating itself this year.

With the market lacking a clear direction since the passage of the stimulus package and bank bailout plans, gold could continues to benefit as a safe haven. We have done well playing gold’s surge as you will see in the “Current Trades” section but don’t be surprised if we get a little breather in the rally.

Elsewhere, silver gained 55 cents and is at $14.50/ ounce while platinum added $13.60 to close the week at $1,096/ ounce. Copper lost 6 cents and is at $1.42/ pound.

I haven’t mentioned platinum that much but I’ve been researching it here of late. Platinum is 3x rarer than gold and is a key component in automobile emissions controls, jewelry, electronics and lab equipment. Platinum was at $2,000 around this time last year and historically trades at a much higher multiple versus gold. As far as platinum stocks go, they have been hammered. Stillwater Mining (SWC, $4.40, down $0.21) and North American Palladium (PAL, $1.55, down $0.05) are a couple of names that come to mind but you see where their stock prices are at. Stillwater is down from a 52-week high of $23 while North American is down from $9+.

Platinum metals biggest market is the automotive industry, where platinum and palladium are used in the manufacture of catalytic converters for exhaust systems. Naturally, these two stocks have suffered as the drop-off in auto sales have hurt their business. This has not helped the market for platinum although the demand for the metal remains strong. It’s used heavily used in catalytic converters, which control engine emissions, and with emissions standards tightening, the demand will be there.

There is no platinum ETF’s (exchange traded funds) but there are ETN’s (exchange traded notes) you can watch. The iPath Platinum Sub-Index (PGM, $26.71, up $0.37) and the E-TRACS UBS Long Platinum (PTM, $13.26, up $0.14) are a couple ways to play the sector.

I’m more interested in gold at the moment as the uncertainty of the auto industry is still front and center. Platinum could move another 20%, however, I’m sticking with gold for as long as the rally lasts.

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3. Trading Bank of America

Bank of America (BAC, $3.79, down $0.14) hit a record low on Friday and Citigroup (C, $1.95, down $0.56) tanked to nearly a 20-year low as both companies were under heavy selling pressure on talks of them being nationalized.

Citigroup hit a low of $1.61 while BofA hit a low of $2.53. I had mentioned last week that the action in BofA was going to be intense and you can have taken advantage of the chaos on Friday. Although we have a few active trades in BofA there was an opportunity to trade the March options off their lows.

This is a true story. As the talks of BofA and Citigroup intensified the BofA March 4 calls (BYOCD, $1.06, up $0.21) were trading at 67 cents a little after 1PM. There was a friend of mine who I was teaching the market to because he had just opened an options account. He was anxious to make a trade and I told him there are opportunities to trade but you have to be quick and not get caught up in the emotion.

As I was explaining to him what was going on with BofA’s stock, I was showing him the March 4 calls and explaining to him how they work. (I also couldn’t believe he paid $4,000 for an options course that does not mentor you but that’s another story). He didn’t know I worked for one of the best options mentoring sites out there…

Anyway, when news hit that the government “supports a privately held banking system”, BofA started rallying shortly after 1:30PM. He bought 10 contracts of the March 4 call options at 67 cents and you could see the excitement as he watched the calls trade higher over the next couple of hours. I told him to exit the trade no matter what by the end of the day and he couldn’t figure out why.

I told him the stock would likely rally for the rest of the day but the uncertainty of nationalization still hangs in the balance. Although we don’t know if this is going to happen for certain, it was too big of a risk and I told him if the market gives you a 35% return in a day, take it. He did and sold at 99 cents. In 2 1/2 hours he made $300.

The comments from the White House helped shares of Citigroup and Bank of America recover some of their losses but I don’t know if it will be enough. Bank of America’s stock was up another 23 cents to $4.02 after the close.

We will have to see how this one plays out but BofA did say that it was told by Washington that nationalization wasn’t an option under consideration. The U.S. government has injected more than $100 billion into the nation’s largest banks last year and Citigroup and Bank of America have received the most support. That is something to think about despite the fact of what Washington is saying.

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4. 2008/ 2009 Portfolios

I have gotten a lot of requests to post a “track record” of the options trades I cover in the blog and in the Weekly Wrap. I have been spending the past few weeks researching the blog and I’m excited to say that I should have the results by the end of the month.

When I started the log last April, it was a way for us (OptionsMentoring.com) to keep you up to date on the market while at the same time teaching you about options. The research and daily blogs have even helped my trading skills too as I try and recommend trades that are easy to understand and follow. I also explain the trades in more detail which has also
helped me keep focused.

Please realize that I don’t personally do every trade I blog about but I do trade some of my recommendations. The portfolios should be used for informational purposes only but you will notice how I stick to stocks that I know and ones whose trends I can easily recognize. I covered well over 100 trades in 2008 and so far in 2009, there are almost 50.

You will notice that I like to keep positions between $1,500-$2,500 a trade which usually gets me 10, 20, or 30 contracts at a time. If you start an options account with $2,000, then obviously, your purchasing power will not be as great and you have less room for error. A couple of bad option trades means you might have to put more cash in your account. I usually recommend you have at least $5,000 when you start an account but if you only have $2,000 then realize commissions could eat a lot of your profits if you are only buying 1 or 2 contracts at a time.

Once these are posted, I will let everyone know…

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5. Current Trades

Akamai Technologies (AKAM, $17.71, up $0.15)

Akamai Technologies held its own despite the market’s uncertainty although we were stopped out of the March 17.50 calls (UMUCW, $1.25, unchanged) at $1.10. The stock opened at $17.28 on Tuesday and the options opened at $1.10. The trade was technically a loss but I didn’t mind taking a 10% because I didn’t want to fight it. Yes, the calls are still trading at their original entry price and even hit a high of $1.80 on Thursday when the shares hit $18.49. However, I wanted to take advantage of some of the other opportunities in the market.

I mentioned if we are stopped out that maybe we would re-enter the trade at a later date and cheaper price. That still holds true but let’s concentrate on what is open.

Bank Of America (BAC, $3.79, down $0.14)

I unwillingly kept these open on Friday mainly due to the fact that they were cheap out-of- the-money call options and the fact that BofA was making strong statements in the market while its stock was tanking. The only thing I regret about the March 6 calls (BYOCF, $0.45, up $0.14) and the March 7 calls (BYOCG, $0.32, up $0.13) is that I didn’t buy protection or that I didn’t make the trade a straddle. We could have made more than enough to cover the call side of the trade if we had evened it up with put options. That’s why they call it hindsight…

Anyway, these positions were entered at 90 cents and 60 cents, respectively, on 2/12. The stock was up another 23 cents to $4.02 in Friday’s after-hours session.

Dow Jones Industrial Average Index (DJX, $73.66, down $1.00)

The March 75 puts (DJXOW, $3.85, up $0.45) were profiled Tuesday night in the blog and again Wednesday morning. We entered the trade at $3.10 and these put options traded as high as $4.50 on Friday. That was almost a 50% profit and you could have closed the trade if you did not feel comfortable holding it over the weekend.

The March 74 puts (DJXOV, $3.50, up $0.50) could have been bought for $2.75 on Wednesday’s open and hit a high of $3.65 on Friday.

I had mentioned on Friday in the blog that the Dow could slip below 7,300 and that it did. That was my “immediate” target for the Dow but we have to be careful of a “snap-back” rally. If you left the trades open, be cautious of this and don’t give back your profits if the market starts to rally. However, we could be looking at future gains if the Dow continues to crack.

Genentech (DNA, $85.02, up $0.26)

Well, this was not one of my better trades and I’ll be the first to admit. Out of nearly 50 trades I have profiled this year, this was going to be the first one that was headed for a loss until Akamai Technologies beat it to the punch. Look, everybody has a losing trade and I’m no different but this one really frustrates me.

The February 95 calls (DWNBS) ended up expiring worthless and were profiled at 85 cents back in January. I could have gotten out at 40 cents but I kept the position open because the March 95 calls (DWNCS, $0.30, up $0.05) are my backup. Granted, they haven’t performed well either but they still have value. They actually lost 10 cents for the week.

I’m not so sure anything will get done between Roche and Genentech by the time the March call options expire but Roche is still trying to get the cash together. Meanwhile, Genentech’s stock performed well for the week despite three people taking one of Genentech’s drugs are believed to have died of a rare brain infection. Given the uncertainties, it would be wise to cut our losses and move on. However, I’m stubborn with this one and am still holding out hope that $100/ share offer is coming from Roche.

Research in Motion (RIMM, $39.15, down $2.94)

We took advantage of the continued weakness in the stock and I profiled a couple of put options on Wednesday when the shares were at $43.22. The stock closed 10% lower from that original write-up and hit a low of $38.44 on Friday.

Research in Motion fell from $57 to $49 after lowering guidance which pushed the stock below its 10 and 20-day moving averages. I mentioned the next level it appeared likely to test was its 50-day. RIMM took care of that. The next support lies at its 52-week low of $35.09. I’m not sure if we get there or not because the bulls might be ready to make a statement. However, it sure feels like that low will be taken out.

The March 40 puts (RUPOH, $3.70, up $1.35) were profiled at $2.15 and hit a high of $4.15 on Friday. The March 35 puts (RUPOG, $1.60, up $0.20) were recommended at 85 cents and hit a high of $1.90!

In the blog on Friday, RIMM was at $40 at 11AM and broke down like a rented mule afterward. Obviously, both put options could have been closed for 100% profits. I don’t always tell you exactly when to close positions but if you have followed the blog my rule of thumb is 50% stops and 100% profits.

If RIMM reaches news lows again this week, set stops there or exit the trade if the stock starts to head back up.

Spider Gold Shares (GLD, $97.80, up $2.03)

The ETF added $5 for the week as gold continued its surge. At one point, shares hit a high of $98.99. I’ve been talking about two key levels with this trade. Gold hitting $1,000 and this ETF hitting $100. Both parts of that equation have basically happened as both call options hit 100% returns.

The March 99 calls (GLDCU, $3.50, up $0.80) were profiled at $2.05 and hit a high of $4.20 on Friday.

The March 100 calls (GLDCV, $3.20, up $0.70) were recommended at $1.90 and traded to $3.80 before falling back.

When others start rushing in, that is when we start heading for the exits. No one knows how far gold will rally and it’s all about supply and demand right now. Here is another position where 100% profits could have been taken before the weekend.

I’ll provide updates as usual in the blog and I’ll be looking to close some of these out to enter new trades. The market never dances with the same partner twice so we could get some new candidates this week.

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6. Earnings

Monday: Campbell Soup (CPB, $29.45, down $0.11), Forest Oil (FST, $15.78, down $0.49), Healthcare Realty Trust (HR, $14.63, up $0.90), Kaydon (KDN, $25.91, up $0.48), Nordstrom (JWN, $11.89, up $0.06) and Texas Roadhouse (TXRH, $8.45, up $0.28).

Tuesday: Domino’s Pizza (DPZ, $6.55, up $0.33), DreamWorks Animation (DWA, $19.41, down $0.14), First Solar (FSLR, $134.01, up $2.71), FirstEnergy (FE, $47.39, down $0.83), H.J. Heinz (HNZ, $32.56, down $0.39), Home Depot (HD, $19.46, down $0.70), Macy’s (M, $7.86, up $0.20), Marvel Entertainment (MVL, $23.81, down $0.83), Office Depot (ODP, $1.51, down $0.02), Papa Johns International (PZZA, $21.19, up $1.21), RadioShack (RSH, $11.26, down $0.05), Target (TGT, $29.75, down $0.14) and Wynn Resorts (WYNN, $24.95, up $1.95).

Wednesday: Del Monte Foods (DLM, $6.57, down $0.13), Dollar Tree Stores (DLTR, $35.18, up $0.81), Express Scripts (ESRX, $56.27, down $0.07), Garmin (GRMN, $15.17, down $0.75), J. M. Smucker (SJM, $41.54, up $0.14) and Washington Post (WPO, $390.30, down $1.20).

Thursday: Autodesk (ADSK, $15.26, down $0.59), Boyd Gaming (BYD, $3.52, down $0.03), Cinemark Holdings (CNK, $8.19, down $0.36), Cooper Tire & Rubber (CTB, $4.61, down $0.17), Deckers Outdoor (DECK, $57.60, up $2.44), Dell (DELL, $8.41, up $0.29), Gap (GPS, $11.55, down $0.01), Kohls (KSS, $34.84, up $0.13) and Safeway (SWY, $20.90, up $0.56).

Friday: Magellan Health Services (MGLN, $35.54, down $0.51), Republic Services (RSG, $23.81, down $0.03), Shanda Interactive Entertainment (SNDA, $31.49, up $1.10) and Westar Energy (WR, $17.22, down $0.67).

I’m watching First Solar, Home Depot, Wynn Resorts and Dollar Tree Stores for possible trades.

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7. Closing Thoughts

It is kind of scary watching the market go down if you are clueless to what is going on with Wall Street. I understand a lot of people don’t have the luxury of watching ticker tape or following the news on a daily basis but if there is a way you can, then I encourage you to start. For me, the breakdown in the market last week was like waiting for snow in a grey-filled sky. It was cold, I knew the snow was coming and I was anxious to go out and play in it. If you are an option trader or a market watcher, there are certain times where you can feel the pulse of the market which allows you to get into some good trades. The market’s mood was clearly evident last week and there were opportunities to make money despite the negative sentiment on Wall Street.

With today’s technology, it is easy to track stocks or options using your phone. If you have a brokerage account you can trade stock or options by using a regular phone or a smart-phone.

With email, you can set alerts on certain stocks and get something in your inbox when that stock hits your alert. The point I’m trying to make is that I often hear people don’t have to follow the market. They only seem to follow it when stocks go up because they don’t know how to short a stock or buy a put option when opportunity knocks.

As you have seen, there are 100%-er’s out there every week. It’s up to you to have the committment to grow your portfolio. When things are at there worse, don’t panic. Get in there and look for trades that make sense.

No one knows where the market will close on Monday or next Friday or in May. My number one tip for people that ask me about the market is that I tell them to trade the trend. And as long as the trend remains volatile, the more opportunity there is to make money. Should be another volatile week…

Rick Rouse
Rick@OptionsMentoring.com

Tags: Bank of America, Genentech, Gold, nationalization, platinum, RIMM, stock market commentary
Posted in Earnings, Market Analysis, Option Trades | No Comments »

Weekly Wrap For 1/18/09

Sunday, January 18th, 2009

1. Commentary
2. HSBC Holdings
3. Genentech
4. Intel
5. Earnings
6. Closing Thoughts

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1. Commentary

The market continued its slide last week led by the financial sector which lost over 15%. We had the usual suspects in-play as a number of high profile banks begged, borrowed, and pleaded with Congress for more money or sold assets to raise cash. In the end, some of the banks got a lift and the government presented an $825 billion stimulus plan that calls for $550 billion in spending and $275 billion in tax cuts. That was enough to bring the market back into positive territory on Friday but did little to help the outcome for the week.

The Dow lost 317 points, or 3.7%, to finish at 8281. The good news for the Dow is that it pretty much held the 8000 level without failing and that was huge for the bulls. The Nasdaq fell 42 points, or 2.7%, to close at 1529 for the week and also held key support levels. The S&P 500 was the biggest loser on a percentage basis as it lost 4.5%, or 40 points, and settled at 850.

The market’s volatility wasn’t as great as the volatility we saw in September and October but make no doubt, it is still there. As option traders that is great news because options have a better chance of ending up “in-the-money” in a high-volatility market than they do in a more stable market. However, you still have to be careful because high volatility can lead to the overpricing of options.

We should continue to see hundred-point swings in the Dow in the weeks ahead because we are still in a bear market. These types of markets can produce sharp bounces but until we start seeing better company earnings for several quarters, the bulls will likely have an uphill battle.

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2. HSBC Holdings

We took advantage of the financial sector’s woes and had a nice trade in HSBC Holdings (HBC, $39.95, down $0.38) going until we were stopped out. I mentioned the stock on Tuesday and here is what got the ball rolling:

From Tuesday’s Blog:

“HSBC Holdings (HBC, $46.70, down $0.98) could be on the verge of a major breakdown as the put option pits have been busier than a craps table on payday. The company is a British bank and speculation has been building that it may be the next house of cards that could fall.

HSBC has been dropping on revenue concerns and the put option activity was heavy on Monday. What is interesting was the amount of volume in some of the January put options which are set to expire this week. There were nearly 1800 contracts of the January 45 puts (HBCMI, $0.75, up $0.30) that switched hands yesterday.

The February 45 puts (HBCNI, $2.74, up $0.64) saw over 2600 contracts trade while the March 45 puts (HBCOI, $4.60, up $0.80) traded over…87,000 contracts! Holy sheet!

Folks, that is an amazing number of contracts traded for an option. The March 40 puts (HBCOH, $2.55, up $0.40) traded nearly 14,000 contracts and the March 35 puts (HBCOG, $1.50, up $0.25) traded 12 six.

That is over 100,000 contracts on 3 strike prices. So I did some research…

In December, HSBC was trading at $54 at the start of option expiration week and by Friday, the day the December options expired, bears had taken the stock down to $45. There was an enormous amount of put options buying that same week.

It appears option traders are betting big on HSBC breaking through its 52-week low of $44.59. Once again, the January put options would be the riskiest but I do like all of the February and March put options I have listed.” —

From Thursday:

“February 45 puts (HBCNI, $7.50, up $2.35). These puts were profiled Tuesday and could have been bought for under $3. We now have a profit of over 150% and you can set stops at $6.50.

The March 45 puts (HBCOI, $9.25, up $2.25) are up nearly 100% from an entry price of $4.75 and stops should be set at $8. The March 40 puts (HBCOH, $6.25, up $1.75) are up 125% from an entry price of $2.75 while the March 35 puts (HBCOG, $4.00, up $1.25) are up 135% from an entry price of $1.70. Wow. Set stops at $5 for the 40 puts and $3 for the 35 put options.

The March 25 puts (HBCOE, $1.60, up $0.50) continue to see huge volume as 26,000 contracts have traded so far. These puts were at $1 on Tuesday.” –

We were stopped out of all of these trades on Friday when the stock hit a high of $41.41 but as you can see, they did very well.

**************************************************

3. Genentech

Genentech (DNA, $85.10, up $0.02) reported a solid quarter on Thursday as profits came in at $931 million, or $0.87 a share, up from $632 million, or $0.59, a year earlier. Revenue was up 25% to $3.7 billion from $3 billion. The nearly 50% rise in profits were due to the strength of the company’s blockbuster cancer drug Avastin, but Genentech disappointed Wall Street when they gave a weaker-than-expected outlook for 2009. Avastin brought in $730 million and could be used for treating brain cancer down the road.

Our main interest is what is happening between Roche and Genentech as far as a buyout offer. Genentech was mums on that subject as Wall Street continues to expect a new offer of at least $100/ share.

Roche recently commented that its bid for Genentech was on track, though no one really knows what the heck that means. Roche will come out with an offer but they will try to lowball. Genentech could start up to 15 clinical trials and apply for 10 FDA approvals this year and Roche badly wants in on that action. Additionally, Genentech could get up to 4 FDA approvals. Those will certainly be market moving events.

The February 95 calls (DWNBS, $0.70, unchanged) were entered at 85 cents and the March 95 calls (DWNCS, $1.25, down $0.05) were profiled at $1.50. Stops are set 50% belowthose entry points but can be lifted. I’m willing to take the risk of keeping them open. The premiums were not that much to start with and I think a bid is coming sooner rather than later for the company.

**************************************************

4. Intel

Intel (INTC, $13.74, up $0.45) got through the week in relatively good fashion despite a 90% drop in the company’s 4Q profits. The company reported profits of $234 million, or $0.04 a share as revenue fell 23% to $8.2 billion. Intel issued two revenue warnings for the quarter over the past three months and didn’t provide much guidance for the current quarter except to say it expects sales of $7 billion.

The results met Wall Street’s expectations and analysts believe there could be a turnaround in store by the second half of the year. The stock was at $14.15 heading into the week and traded as low as $12.71. The 52-week low is $12.06 and traders had to be pleased that the stock held this level.

The January 20 2010 calls (WNLAD, $0.68, down $0.01) were trading for 92 cents and the January 15 2010 calls (WNLAC, $1.93, down $0.04) were going for $2.30 and both got cheaper. The premiums were a little juiced as you can see and I still don’t think they are attractive enough to go long. If you are thinking of buying the stock, you could maybe write covered calls on them but I still think there are better opportunities than Intel.

We will keep an eye on the stock and see if things pick up but right now I think shares are stuck in the $12-$14 range.

**************************************************

5. Earnings

Here is a look at some of the companies that will be reporting earnings this week:

Tuesday: Forest Laboratories (FRX, $25.76, down $0.24), Johnson & Johnson (JNJ, $57.44, down $0.18), TD Ameritrade Holding (AMTD, $12.65, up $0.02).

Wednesday: Abbott (ABT, $49.92, up $0.70), Apple (AAPL, $82.33, down $1.05), eBay (EBAY, $13.26, down $0.18), U.S. Bancorp (USB, $18.32, down $0.70).

Thursday: Brinker International (EAT, $9.30, down $0.12), Capital One Financial (COF, $24.10, down $1.37), Google (GOOG, $299.67, up $0.68), Intuitive Surgical (ISRG, $99.97, down $0.71), Lockheed Martin (LMT, $82.16, up $2.68), Microsoft (MSFT, $19.71, up $0.47), Nokia (NOK, $14.01, down $0.04), Potash (POT, $72.34, up $2.48).

Friday: General Electric (GE, $13.96, up $0.19), Harley-Davidson (HOG, $13.70, down $0.25), Schlumberger (SLB, $39.90, down $0.28), Xerox (XRX, $7.69, down $0.13).

Talk about Murderers’ Row…these heavy hitters are Wall Street’s rendition of the 1920′s Yankees’ batting order. You can expect big price swings in many of these stocks this week.

**************************************************

6. Closing Thoughts

The market is closed on Monday for Martin Luther King Jr. Day and Tuesday will no doubt be the biggest day ever in American history. Wall Steet will be watching Washington with the rest of America with the inauguration of President-elect Barack Obama. I would imagine the market closes on a positive note as the new dream team administration could give the market a fresh outlook. Obama will be armed with a war chest full of money and Wall Street will be eager to see where he puts it to work.

Congress is set to dispense the other $350 billion of the government’s $700 billion financial bailout fund and there’s another $825 billion coming in a stimulus package. The key after Tuesday will be the earnings with the biggest names in the market set to report. Not all sectors are as bad-off as the banks but there will need to be some evidence of things improving. So far we haven’t gotten that.

It does appear as though the market is shrugging off bad news to a degree but we are still in a dangerous market that can produce wild price swings. It looked as though the market was in serious trouble by mid-week and the Dow did manage to have back-to-back positive days despite the volatility to close the week.

The Dow hit a high of 14279 back on October 11, 2007 and since then it had bottomed to a low of 7392 by November 21. The 50% decline is where Wall Street and investors started nibbling but I don’t think Wall Street feels like the worst is over or 100% safe from another correction.

For us, I could care less where we are headed as long as the volatility continues. We have played both call and put options in this market which shows that sentiment changes on a weekly and sometimes daily basis.

Questions, comments, thoughts?

Rick Rouse
Rick@OptionsMentoring.com

Tags: company earnings, Genentech, HSBC Holdings, Intel, stock market commentary
Posted in Company Commentary, Earnings, Market Analysis | No Comments »

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Rick & Team, GREAT Call on NKE for my two trading accounts:
1) Entry at .65, out at 1.45, 1.55 Profit = $415
2) Entry at .60, out at 1.75, 1.50 Profit = $485 PETER G.

Hey Rick! Here is an update on what your picks have done in my accounts.

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3) Took profit on your Imax March 12.5. 20 cent trailing stop at 1.90 yesterday. Not sure what the profit on that was, but profit is profit.

I see that you took a loss on some of these. It’s all good. I look to trade your “ideas” not your exact calls. I THANK YOU! For your ideas and commentary. Keep up the good work. And keep those ideas coming. LAWRENCE O.

Loving this subscription so far! I got into the BRK feb 76 calls the day you talked about right before the split...now up over 300% (0.70 to 2.475)! Keep the good picks coming and let's see some OSIS and EMC upside soon! Just wanted to share my positive enthusiasm on your newsletter...it gives us individual investors great ideas on not only the options market, but also the broader equity market! Case in point is BRK...I can't always read the breaking business news but its easy to read your twice daily updates on my smartphone...helped me get some BRK shares immediately after the split which I will hold for the long haul! Thanks again! C.J.

Aloha Rick - Thank you so much for the great CL pick. I am not sure if there was buy-out/merger news or what but at 3PM today Colgate-Palmolive absolutely EXPLODED to the upside, and my calls turned into green candy when they went from 1.40 to 3.8 in a matter of seconds! I even sold a few for over 4.0! Much thanks and keep the solid picks up my friend, honestly. Only a fool would scoff at 267% gains... Peace! SHAUN

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PARAG P.

Hi Rick, as a new member all I can say is, 'show off' LOL, with PCLN. JAY P.

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Hi, good morning. I jumped the gun a little on this one (PCLN). But still made $1,675.00 profit!! Very happy!! Keep up the good work!! Thanks. TRISH D.

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Rick - I wanted to say thanks for getting me started on the right foot with your service. I have made six trades since starting on October 22, 2009. Five are winners and One loser netting me $6,245. Thanks again and keep the trade recommendations coming. GREG F.

I got into the Nike 60 Call at 1.85, sold at 5.00, also bought a 55 put at 1.05, but got stopped out at .35. What a ride! $2830.00 in the black even with the put. It's right at 100% return. I hope earnings season coming up is going to look like this trade. NOEL

Nice call on Nike. I think I'll go buy a pair with my profits! : ) I did the straddle for safety but still made 62% on the trade. Not bad for less than 24 hours. If Goldman is right, then the Nov 70s or 75's could be a steal today. TODD F.

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“Limit order was set at 1.60 on RIMM so it sold. I may have left some money on the table but you can't go broke making a profit. That was a fun trade. Thank you. Good call. I’ve been watching and trading Rick's advice since March. It’s usually a fun ride, but I give him heck when it's wrong to. :) ” NOEL

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“I did follow a lot of your trades with 1-2 contracts per trade and YTD I’m up 108%. I try not to follow blindly by not entering all of your trades and sometimes entering the ones you don’t. I entered AIG a few weeks ago against recommendation – that one hurt.” CHARLES M.

“I have been following you for several months and am interested in the new service. I hate to see the free service go away but as they say, “all good things must come to an end”. My ability to join will be greatly influenced by the monthly fee so I’m very curious to see the new prices. Thanks for making April a great month for me and my family.” BRYAN C.

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“I made over 6k on your Dendreon trade, and I’m very interested in learning how you pick and trade options. Sign me up.” ED

“Rick – Wow what a day! I got in at the Dendreon calls at $2.25. Thanks to for your advice. I appreciate that. This company has a lock on this type of therapy and no one else in the world is close. Kind of reminds me of the type of companies that Peter Lynch and Warren Buffet suggest that investments be made in. Companies that can build a moat around their business model, that allows them to charge a premium for their product or service. In other words - a monopoly.” GREG

“Hi Rick, Thank you so much for the Dendreon trade, I made almost $10,000 with that trade with a little over $2,000 investment. You have shown me the power of options trading. Again, thank you so much for all your inputs.” KEN

“Hi Rick, thanks for the encouragement to play the dendreon calls! did freaking great! Got in the first lot at $1.44 on 3-24-09, sold at $2.45, 70% not bad. Bought it back at $2.30 on 4-7-09 closed out on 4-14-09 for 454% gain! Wow! I love it when that happens. So, thanks the encouragement to get back in when others were saying sell, sell, sell. Keep up the good work.” GARETT

“Rick – Thanks for Dendreon – it has made all the headlines today! I missed on RIMM earlier, but I’ve been holding onto DNDN calls since 3rd week March. Of course today it all paid off today, as DNDN rocketed up.” TERENCE

Jan. 31 2012
Rick, new member...Studied all current trades, did some chart work,picked ZNGA, PEP, MGM...Sold on Feb. 2 for $3600.00 profit...Cost for 1-year membership to your newsletter was less than $1000.00..All I have to say..Thank you. John H –

3/18/11
Rick, I purchased 10 contracts of the Nike March 85 puts Thursday afternoon for $2.00. Thing is, I was upset because the puts went down to $1.60 or so before the market closed. Well, needless to say Nike didn’t impress Wall Street and when I turned on the computer this morning the puts were worth $7.10! Sold them for a $5,100 profit!. Thanks again, you are the MAN. Chuck J-

2/3/12
Hi Rick,

I will start off with a thank you for your time and dedication to all
the research you and your team commit yourself to. This is not me just being excited about the profits I have accumulated aka (bank) ! You have helped me get back to the passion I had of researching stocks/options. Keith N-

Hi Rick,

I want to share my great results on GMCR. Based on your comments on February 15th, I bought 20 options at $0.28. They closed today at $7.00, which is a 2,300% gain. My $560 dollars turned into $14,000 in less than a month. In decades of trading, this is my single best trade ever. Thank you! By the way, the Dow was down 228 points today and I could care less. What a great trade. It proves the amazing power of options. I am so grateful for your service, which calls it straight all the time, your options trading manual, and most of all, your amazing skill
at finding winning trades. I have attached a copy of the trade from
my brokerage screen.

Hi Rick,

Wow!! my account it up 70% since i joined last month and market is going the opposite direction. Really appreciate your service. I just wanted to drop a note to say THANK YOU. Hope to be with you guys for a very long time. Mel

Rick,

Great call on Fosl I bought the may 120 puts for 3.70 yesterday morning just sold for $32.00 today
Keep up the great work
Thank you, Henri

Rick –

I bought 10 Deckers Outdoor (DECK) May 55 puts at $0.50 on 4/26/12 and sold them on 4/27/12 for $1.65. I made $1150 in one day. Thanks. I knew something good would happen sooner or later.
HOW THE HECK did you know Green Mountain Coffee (GMCR) was going to go down 20 points???!!!! I bought 10 of the May 35 puts at $0.49 and then 5 more at .30. I sold them at 5.80. Thank you again.
You have made a believer out of me. Alan

Rick –
I have only been a member for about 6 weeks but I have done well on most of the trades. My first two were QQQ and SPY a month ago and since then I've gotten into the groove and been doing well.
I try to execute the trades that you recommend as soon as you send them out, sometimes I can't and I miss the Entry price. However, sometimes when I miss the Entry, the price goes down and I get a better price.
That's exactly what happened with GMCR.
You recommended it at around $.81 I think, but by the time I got to it, the price was $.27. I bought 100 Puts on Wednesday May 2, 2012 and sold half of them 24 hours later at $5.95 for a nice 2,203% gain. As per your recommendation, as GMCR went above $30 I sold the remaining 50 Puts at $5.50 for a slightly less 2,037% gain.
On average that one trade netted me a 2,120% gain, entirely based on YOUR recommendation (and a little bit of luck). To put this in real terms, I risked $2,700 on Wednesday and pocketed $54,550 just 24 hours later.
So uhh, let's do that again real soon!!
Feel free to use my name. The tax guys have me on speed-dial already anyway. Dennis

Rick:
That was awesome on your GMCR pick, I know how risky it can been holding into earnings but you pulled it off.
I just started my autotrading with you today and am in on your QQQ play. I look forward this service.
I have a busy career and I have tried to follow and trade throughout the day and found it too hard. I hope you continue to have a great year, I plan to go along for the ride. I am starting slow but will pile more in once I have secured some profits.
Keep up the good work your trading has been spot on. I am sure you paid your dues to get this point in your career. Anthony

Rick:

Great call on GMCR! I have been trading for about 15 years actively. This may be the best trade I ever made. Got in on Monday, April 30 and the stock was up from when you recommended it. It went up further after I got in. Here are the facts:
Monday, April 30th: Bought 15 June 37's at $1.25= $1900 approx
Thursday, May 3rd: Sold 15 June 37's at $9.30=$13,950
Gain for the week: $12,050.
I understand you will not get them all right. It’s important to ride those winners and as you could tell from my selling price, I sold when the stock went to $28.10, so left a little on the table. Who can complain.
Keep the suggestions coming, looking for another jump on your FSLR, one that I have been riding very hard.
Best regards, Bob

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