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Tuesday, October 12th, 2010
9:00am (EST)
The market traded in a narrow range on Monday as many of the seasoned vets on Wall Street took the Columbus Day holiday off. Volume was light as both the bulls and bears were cautious ahead of the flurry of earnings reports that will begin to hit the market over the next several weeks.
Despite the flat day, the bulls have clearly had the momentum and it has been building. We have mentioned time and time again that the market has been in a tight trading range for nearly five months, and usually when this happens, there is a huge breakout to the upside of a massive breakdown to the downside outside of this range.
Although the bulls got an ugly jobs report on Friday, the market broke through our key resistance targets and held (Dow 10,800-11,000; S&P 1,150-1,160; and Nasdaq 2350-2,400) as the September monthly jobs had one silver lining. Weekly initial claims finally dipped beneath 450,000 for the first time this year as the private sector employment picture appears to be getting a little better.
The bulls held these important breakouts for the major averages on Monday, although all 3 indexes dipped below our aforementioned targets. The Dow gained a little over 3 points to finish at 11,010 after traded to a low of 10,977 while the high was 11,030. The index now has a shot at trading up to 11,150-11,200 with 10,900-10,800 serving as solid support.
The S&P 500 was up less than a point and closed at 1,165 after trading in a 6-7 point range. The index has slight support at 1,150 and much stronger support at 1,125-1,130 while 1,170 will be the first major hurdle in its way to a run to 1,200.
The Nasdaq also closed less than a point higher at 2,402 and briefly slipped to a low of 2,397 while making a high of 2,413. The bulls will now push 2,450 which could clear the way for a test to the 2,500 level.
We could see some serious action today as the Federal Open Market Committee will release the minutes of its most recent meeting during market hours. Everybody is counting on the Fed for more quantitative easing or “QE2″ and they will likely buy more U.S. Treasury bonds but does the market really need it?
Yes and no.
There are some who believe the market has already priced in QE2 which means a “sell the news event” or a pending correction but the bulls believe the Fed’s actions will help motivate banks to lend money because they’ll have excess reserves. However, that last sentence is key, because here lately, banks have pretty stingy with any kind of loan and the Financial stocks still have not rallied with the current market.
The other worry is that QE2 will continue to cause the U.S. dollar to depreciate which makes our exports cheaper. This is the one area we are concerned with because we have been telling you about the currency wars that is taking place around the globe. The International Monetary Fund and Group of 7 are holding meetings this upcoming weekend and there could be pressure on China to make its currency more expensive. There are “experts” who say the Chinese Yuan is something like 50% undervalued compared to the Dollar which hurts U.S. manufacturing jobs and why “some” believe unemployment is near 10%.
If there is concern for a pending correction, then this could be the wild card over the next few weeks. Other than that, 3Q earnings should come in better-than-expected as there weren’t many companies who lowered expectations or gave a warning.
There are also a number of economic reports due out this week that will affect the market. We mentioned today’s big Fed report and tomorrow, the market will digest the weekly report on U.S. petroleum supplies, along with September import and export data, and the Treasury’s budget numbers for September.
Weekly initial jobless hit the Street on Thursday, along with the September producer price index and the August trade balance. Friday will be a busy day as the September consumer price index, retail sales, the New York Fed’s Empire State manufacturing index, and the University of Michigan’s consumer sentiment index for October all are due out.
As we head to press, Dow futures are down 30 points to 10,933 while the S&P 500 futures are lower by 4 points to 1,158. The Nasdaq 100 futures are off by 5 points to 2,020. Subscribers, check the Members Area for the latest updates.
Tags: explain the concept of options, straddle option trades, strangle option trades
Posted in Market Analysis, Market Commentary | Comments Off
Friday, October 8th, 2010
1:35pm (EST)
Give the bulls credit. They are trying like hell to push this market though resistance.
Despite a nasty jobless claims report, 2 out of the 3 major indexes have pushed through our price targets as both the Dow and S&P 500 have cleared our fence. All we are waiting for is the Nasdaq, which seems to have a pants leg stuck in the barbwire, to confirm the jailbreak.
The Dow has broken 11,000 as the index has traded to a high of 11,016 and will need to close above this level to give the bulls a clear victory this week. The index is currently up 56 points and is a smidge over 11K at 11,009.
The S&P 500 has busted through 1,160 and is up 6 points to 1,164 and looks to be headed towards 1,175 and possibly 1,200.
However, the Nasdaq is at 2,399, up 16 points but just cleared 2,400, earlier, as we were heading to press.
Here were our thoughts yesterday:
“There is a feeling that the release of Friday’s monthly employment report will sway the market one way or the other but we think 3Q earnings will likely set the stage for where the market is headed over the short-term. We also have an uneasy feeling with the world currency debasing race that is currently going on and the parabolic moves gold, copper and silver are making is mind-blowing but we believe there could be some surprises, good and bad, that will dramatically impact the market over the next 3 weeks.”
Well, so far so good. It’s easy to be bullish in a market like this and while we would turn bullish (short-term) if the 3 major indexes CLOSED above our price targets, we are also aware that it will be vital to carry some kind of put option protection going forward.
It’s hard for investors to remember the bad times when the good times are so good right now, but, it was only 2 years ago this week that the Dow dropped 18% in a week. In other words, the index fell nearly 1,900 points in five days.
There is a saying that “history repeats itself” and often times in the market or in certain stocks, a pattern or history is repeated. We aren’t saying history will repeat itself…all we are saying is in this environment, strangles and straddles option trades will be your BEST FRIEND.
The strategies involve the purchase of both a call and put option which allows you security as long as the market is volatile. Check. We have that folks. In other words, you don’t have to know which way a stock or the market is going to have to move. You want volatility and huge price swings. Check.
This weekend there will be a number of important events taking place concerning the world’s currency and the market will be closed Monday.
Next week, Intel (INTC, $19.51, up $0.11) will report earnings on Tuesday (after the bell) along with Fastenal (FAST, $54.64, up $1.94). FAST which will report BEFORE the bell and the 52-week high is $56.65. If the bulls are still dancing and the two companies get “A’’’s on their earnings report cards, then look for Dow 11,300; Nasdaq 2,500; and S&P 1,200 over the near-term.
If some unexpected news or event happens over the weekend, or if Intel MISSES Wall Street’s estimates, then the market could retreat back into the 4-month long trading range, or worse.
Either way, we think 3Q earnings season will be intense and loaded with some GREAT opportunities to make some money on both call AND put options. We plan on using a combination of both (strangles and straddles) but we will also be playing some directional trades straight up.
Remember, we teach these kind of option strategies in our new trading manual “How to Trade Options on Momentum Stocks” which is available NOW with a FREE 1-month membership included (a $129 value).
We will be releasing our first video this weekend for those of you have ordered our course. Details will be emailed to you and we plan to cover the upcoming earnings season and how to find trades, as well as an overview on strangles and straddle option strategies which are covered in our option manual.
Have a great weekend everyone and get ready for some action over the next 3 weeks!
Tags: explain the concept of options, INTC, Intel, momentum options trading, option picks, option trading blog, option trading course, option trading courses, straddle option trades, strangle option trades, triple-digit options returns
Posted in Earnings, Market Analysis, Market Commentary | Comments Off
Friday, October 8th, 2010
9:05am (EST)
In was a flat day on Wall Street yesterday although the market zigzagged on both sides of the ledger before ending mixed. It seemed as if both the bulls and bears were hesitant ahead of last night’s “official” kick-off of the third quarter earnings season and knowing this morning’s nonfarm payroll numbers for September would be out. We cover both below.
The bulls were able to push the major averages near resistance (again) after hearing better-than-expected retail sales figures, as well as upbeat jobless numbers from the Labor Department. However, the bears kept things in check as they held resistance going into the close.
The Dow peaked near 11,000 shortly after the start of trading, but spent the rest of the session near the 10,950 level before finishing with a loss of nearly 20 points to close at 10,948.
The S&P 500 slipped 2 points to finish at 1,158 but below 1,160 while the Nasdaq added 3 points and settled at 2,383 and below our breakout target of 2,400.
Turning to earnings, Alcoa (AA, $12.20, down $0.17) reported a profit of 9 cents a share which was 3 cents better than the analysts’ estimates of 6 cents a share. Revenue rose nearly 15% to $5.3 billion, versus calls for $4.95 billion.
The futures are pointing towards a lower open after the latest unemployment report hit the Street. September nonfarm payrolls fell by 95,000, which was worse than the 5,000 loss that was expected. Private payrolls increased 64,000, which was less than the 74,000 increase that had been widely expected while the unemployment rate remained unchanged at 9.6%.
As we head to press, the Dow futures are lower by 25 to 10,887 while the S&P 500 are showing a loss of 3 points to 1,154. The Nasdaq 100 futures are down 7 points to 2,007.
Special Note: Adobe (ADBE, $28.69, up $2.96) surged nearly 12% yesterday after speculation Microsoft (MSFT, $24.53, up $0.10) could be targeting the company in a takeover attempt following a ”closed door” meeting between the two companies.
Shares of Adobe were briefly halted yesterday after a circuit breaker was triggered around 3pm (EST) or an hour or so before the market closed.
We recently profiled a strangle option trade for Adobe in late September to where our subscribers have already banked a 200% profit. The put options returned 525% while the call options were left for dead.
Yes, the call options were trading for a penny…a penny…before the news hit. In other words, these options gained 3,800% yesterday which adds even more gravy to the trade.
Subscribers, check the Members Area for the important update as we tell you exactly how to play our current position out. And remember, we teach these kind of option strategies in our new trading manual “How to Trade Options on Momentum Stocks” which is available NOW with a FREE 1-month membership included (a $129 value).
Tags: Adobe (ADBE), explain the concept of options, Microsoft, momentum options trading, option picks, option trading blog, option trading course, option trading courses, straddle option trades, strangle option trades, triple-digit options returns
Posted in Economic News, Hot Stocks, Market Analysis, Market Commentary | Comments Off
Thursday, October 7th, 2010
1:05pm (EST)
The bulls are trying to push past our resistance targets for the major indexes after getting a better-than-expected jobless claims report. Initial jobless claims came in at 445,000 versus the expected 455,000, while continuing claims were 4.46 million versus expectations of 4.45 million. This gave futures a lift which lead to a nice open but trading is slightly negative as all eyes are now focused tomorrow’s non-farm payrolls report. Wall Street is expecting the unemployment rate will rise to 9.7% last month from 9.6% in August.
The Dow made a run at 11,000 and traded as high as 10,998 but is currently down 52 points to 10,914. If the bulls are able to break 11,000 today then we would be a little nervous of a continued breakout because it could be a classic trap by the bears. If the index closes right below 11,000 and gets a good number tomorrow, then we would expect the index to easily run past 11,000 with a run possibly up to 11,300.
The S&P 500 is down by a 7 points and stands at 1,153 but has traded past 1,160 to a high of 1,164. We think a run to 1,175-1,200 could be in the cards but it will depend. And finally, the Nasdaq is down 9 points to 2,371 and has traded as high as 2,392. We are watching the 2,400 level like a hawk.
There is a feeling that the release of Friday’s monthly employment report will sway the market one way or the other but we think 3Q earnings will likely set the stage for where the market is headed over the short-term. We also have an uneasy feeling with the world currency deflating race that is currently going on and the parabolic moves gold, copper and silver are making is mind-blowing but we believe there could be some surprises, good and bad, that will dramatically impact the market over the next 3 weeks.
Speaking of earnings, PepsiCo (PEP, $65.58, down $2.53) reported a profit of $1.9 billion, or $1.19 a share, versus $1.7 billion, or $1.09 a share, in the year earlier period. Revenue jumped 40% to $15.5 billion versus expectations for $15.4 billion. Excluding items, the company said earnings were $1.22 a share versus expectations of $1.21 a share. The stock took a hit after the company said growth going forward would be between 11%-12%, down from 11%-13% growth.
Alcoa (AA, $12.23, down $0.14) and Micron Technology (MU, $7.09, up $0.14) will release their quarterly earnings after the bell.
We will be back in the morning with September’s nonfarm payrolls report and unemployment rate, as will the Commerce Department’s report on August wholesale inventories. Subscribers, check the Members Area for the updates on our current trades and comments for our Watch List.
Tags: AA, Alcoa (AA), explain the concept of options, momentum options trading, option picks, option trading blog, option trading course, option trading courses, PEP, PepsiCo earnings, straddle option trades, strangle option trades, triple-digit options returns
Posted in Commodities, Company Commentary, Earnings | Comments Off
Thursday, October 7th, 2010
9:00am (EST)
The bulls got a warning sign from the bears yesterday although the market held up rather well after hearing the private sector employment index unexpectedly dropped by nearly 40,000 in September. The report was released before the opening bell and knocked the futures lower as soon as the news was released. This type of action doesn’t bode well ahead of tomorrow’s major jobless report.
It was a mixed day as the Dow gained 23 points to close at 10,967 after touching a high of 10,974. The Dow showed a little strength and 11,000 is still within reach but there were a number of Tech stocks that broke down like a rented mule.
The S&P 500 fell less than a point and closed at 1,159 and just below the 1,160 level. The index will have to close above this level if it is going to make a run at 1,175 and then 1,200. The index traded to a high of 1,162 which was Tuesday’s high so this bears watching if the market stalls.
The Nasdaq ended the day with the most bruises as the index fell nearly 20 points to finish at 2,380. The index traded to a high of 2,399, which was Tuesday’s close and we have mentioned 2,400 as major resistance.
Equinix (EQIX, $70.34, down $34.75) got punished after warning revenues will come in short of Wall Street’s expectations. The company said it expects revenue of $328-$330 million versus expectations of $335-$338 million. Analysts were looking for $337 million.
Shares fell 33% but the October 75 puts (EQIX101016P00075000, $15.20, up $15.00) soared 7,500% after opening at $10. The options closed at 20 cents on Tuesday. Yes, it would have been nice to have been in that trade but if you still have any October put options open, they could pay off if other bombs keep dropping.
This hit a number of companies in the data center sector, as well. Akamai Technologies (AKAM, $44.25, down $3.66) lost 8%, Rackspace Hosting (RAX, $23.29, down $2.92) fell 11%, Savvis (SVVS, $19.39, down $2.24), which raised revenue, got whacked for 10% while VMWare (VMW, $77.56, down $7.66) slipped 9%.
There was one stock that we wanted to mention this morning.
We have been following TiVo (TIVO, $10.08, up $0.89) for a few years now and many of you know about the wild roller-coaster ride shares have been on all year.
TiVo was at 52-week highs in April but fell to $10 by May after a negative legal ruling on its patent sent shares down nearly 50% in one day. Since then, shares have lanquished but the got a shot in the arm on Wednesday after the company said the U.S. Patent and Trademark Office backed the validity of its patent that allows viewers to rewind, pause or fast-forward live TV.
TiVo has been involved in lengthy legal battles over its technology and has been fighting with both Dish Network (DISH, $19.10, down $0.53) and EchoStar (SATS, $19.30, down $0.20) for royalty payments.
This victory was so important because the patent office reaffirmed the validity of the “time warp” patent after EchoStar asked for a reexamination. Well, be careful what you wish for. TiVo said the decision is final and not appealable by EchoStar which can only mean bad news for Dish Network.
Dish is on the hook for $100 million, or so, and could lose a majority of its customers if it can’t work out a deal with TiVo. The satellite and cable companies have been ripping TiVo off (in their minds) and it appears they could be right in that these companies did steal their technology.
This story could get interesting as Dish and TiVo are scheduled to go to court in November. If TiVo gets another win then we could see shares trading at $15, quickly. If momentum kicks in, we could see shares rally to $20 or new 52-week highs but that might be asking a bit much. The stock traded as high as $11.20 yesterday and has broken out of a 5-month range with the $10 area being MAJOR resistance. There is virtually nothing stopping shares from making a run to $15-$16 if the news keeps coming in positive for TiVo.
As we head to press, Dow futures are higher by 55 points to 10,961 while the S&P 500 futures are up 8 to 1,162. The Nasdaq 100 futures are showing a gain of 8 points to 2,012. Gold is up $12 to 1,360/ ounce while silver is up 37 cents to $23.41/ ounce.
Subscribers, check the Members Area for the updates.
Tags: option picks, option trading blog, option trading course, straddle option trades, strangle option trades, TiVo, triple-digit options returns
Posted in Company Commentary, Hot Stocks, Market Commentary | Comments Off
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Let The Battle Begin
Tuesday, October 12th, 2010
9:00am (EST)
The market traded in a narrow range on Monday as many of the seasoned vets on Wall Street took the Columbus Day holiday off. Volume was light as both the bulls and bears were cautious ahead of the flurry of earnings reports that will begin to hit the market over the next several weeks.
Despite the flat day, the bulls have clearly had the momentum and it has been building. We have mentioned time and time again that the market has been in a tight trading range for nearly five months, and usually when this happens, there is a huge breakout to the upside of a massive breakdown to the downside outside of this range.
Although the bulls got an ugly jobs report on Friday, the market broke through our key resistance targets and held (Dow 10,800-11,000; S&P 1,150-1,160; and Nasdaq 2350-2,400) as the September monthly jobs had one silver lining. Weekly initial claims finally dipped beneath 450,000 for the first time this year as the private sector employment picture appears to be getting a little better.
The bulls held these important breakouts for the major averages on Monday, although all 3 indexes dipped below our aforementioned targets. The Dow gained a little over 3 points to finish at 11,010 after traded to a low of 10,977 while the high was 11,030. The index now has a shot at trading up to 11,150-11,200 with 10,900-10,800 serving as solid support.
The S&P 500 was up less than a point and closed at 1,165 after trading in a 6-7 point range. The index has slight support at 1,150 and much stronger support at 1,125-1,130 while 1,170 will be the first major hurdle in its way to a run to 1,200.
The Nasdaq also closed less than a point higher at 2,402 and briefly slipped to a low of 2,397 while making a high of 2,413. The bulls will now push 2,450 which could clear the way for a test to the 2,500 level.
We could see some serious action today as the Federal Open Market Committee will release the minutes of its most recent meeting during market hours. Everybody is counting on the Fed for more quantitative easing or “QE2″ and they will likely buy more U.S. Treasury bonds but does the market really need it?
Yes and no.
There are some who believe the market has already priced in QE2 which means a “sell the news event” or a pending correction but the bulls believe the Fed’s actions will help motivate banks to lend money because they’ll have excess reserves. However, that last sentence is key, because here lately, banks have pretty stingy with any kind of loan and the Financial stocks still have not rallied with the current market.
The other worry is that QE2 will continue to cause the U.S. dollar to depreciate which makes our exports cheaper. This is the one area we are concerned with because we have been telling you about the currency wars that is taking place around the globe. The International Monetary Fund and Group of 7 are holding meetings this upcoming weekend and there could be pressure on China to make its currency more expensive. There are “experts” who say the Chinese Yuan is something like 50% undervalued compared to the Dollar which hurts U.S. manufacturing jobs and why “some” believe unemployment is near 10%.
If there is concern for a pending correction, then this could be the wild card over the next few weeks. Other than that, 3Q earnings should come in better-than-expected as there weren’t many companies who lowered expectations or gave a warning.
There are also a number of economic reports due out this week that will affect the market. We mentioned today’s big Fed report and tomorrow, the market will digest the weekly report on U.S. petroleum supplies, along with September import and export data, and the Treasury’s budget numbers for September.
Weekly initial jobless hit the Street on Thursday, along with the September producer price index and the August trade balance. Friday will be a busy day as the September consumer price index, retail sales, the New York Fed’s Empire State manufacturing index, and the University of Michigan’s consumer sentiment index for October all are due out.
As we head to press, Dow futures are down 30 points to 10,933 while the S&P 500 futures are lower by 4 points to 1,158. The Nasdaq 100 futures are off by 5 points to 2,020. Subscribers, check the Members Area for the latest updates.
Tags: explain the concept of options, straddle option trades, strangle option trades
Posted in Market Analysis, Market Commentary | Comments Off