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Monday, June 28th, 2010
9:00am (EST)
Futures are pointing towards a slightly lower open this morning despite members of the Group of 20 nations pledging to cut budget deficits. The debate between spending to stimulate slowly growing economies and opting for austerity to quickly get ballooning deficits under control continued at the G20 meetings that were held over the weekend. There are still some sticky points on what cuts will be made for some countries but things are progressing.
As far as economic news this morning, May personal spending was up 0.2% after being flat in April while personal income was up 0.4% in May versus up 0.5% in April.
Toyota Motor (TM, $70.00, down $0.43) could set a new 52-week low today after news on the company’s latest safety-related recall. Toyota shares are below $70 in pre-market trading after the recall of 17,000 Lexus hybrids. The latest U.S. federal auto-safety documents reported the vehicles spilled fuel during a crash test.
Lexus has not identified a fix to address the problem, but it is working hard to do so, naturally. Until then, dealers will not deliver any new vehicles in their inventory and this is just another negative headline in Toyota’s latest mishap.
Toyota has been on our Watch List off and over the past few months, but we haven’t pulled the trigger on a trade, yet. We are going to do a little more research to find out where shares could land if Toyota starts to make new lows.
As far as earnings this week:
MONDAY – Cal-Maine Foods (CALM, $33.46, up $0.37), Micron Technology (MU, $9.46, down $0.16), Neogen (NEOG, $27.49, up $0.97), Standard Microsystems (SMSC, $23.54, up $0.14) and Tongxin International (TXIC, $5.04, up $0.04).
TUESDAY – Barnes & Noble (BKS, $16.43, up $0.49), CACI International (CACI, $42.62, up $0.25), General Mills (GIS, $37.34, down $0.23), OMNOVA Solutions (OMN, $7.60, up $0.26), Sealy (ZZ, $3.04, up $0.04), Worthington Industries (WOR, $13.17, up $0.13), and Zep (ZEP, $17.14, up $0.16).
WEDNESDAY – Acuity Brands (AYI, $43.99, down $0.05), American Greetings (AM, $20.27, up $0.26), Apollo Group (APOL, $43.75, down $2.22), Christopher & Banks (CBK, $6.86, up $0.24), Global Payments (GPN, $38.65, up $0.50), Investors Real Estate Trust (IRET, $9.20, $0.41), Lindsay (LNN, $35.10, up $0.12), Monsanto (MON, $48.27, down $0.74), Mitel Networks (MITL, $8.99, flat), Schnitzer Steel (SCHN, $43.04, up $0.49), Shaw Communications (SJR, $18.63, down $0.01), Smith & Wesson (SWHC, $4.10, up $0.02), Unifirst (UNF, $41.84, up $0.86) and Xyratex (XRTX, $15.37, up $0.66).
THURSDAY – Constellation Brands (STZ, $16.01, down $0.05), Franklin Covey (FC, $6.71, down $0.07), Methode Electronics (MEI, $9.98, up $0.08), MSC Industrial Direct (MSM, $51.78, up $0.60) and MSCI (MXB, $29.09, up $0.46).
FRIDAY - Vitacost.com (VITC, $9.96, up $0.34) and Volt Information Sciences (VOL, $9.43, up $0.54)
As we head to press, Dow futures are down by 24 points to 10,080 while the Nasdaq 100 futures are off by 2 points to 1,837. The S&P 500 futures are lower by 3 points and were last seen at 1,071.
Tags: momentum options trading, option picks, options alerts, stock options trading, TM, Toyota Motor
Posted in Market Analysis, Market Commentary, Watch Lists | Comments Off
Tuesday, March 2nd, 2010
9:10am (EST)
The market got off to a strong start on Monday and the bulls are looking to follow-up on that momentum this morning. The Dow rallied 79 points to finish at 10,403, as 26 of its 30 components finished higher. It was only the second time since January that the Dow has closed above the 10,400 level which was nice to see on a technical level.
The S&P 500 added 11 points to settle at 1,115 and finished above its 50-day moving average for the first time since mid-January. The Nasdaq put in the most work yesterday as it soared 35 points, or 1.6%, to close above the 2,250 level for the first time since January.
 NASDAQ Composite Index There is little in the way of economic reports due out but automakers will report monthly sales throughout the day. Meanwhile, General Motors joined the list of “uh oh” by announcing the recall of 1.3 million cars over power-steering trouble. The auto industry is expected to have its worst month since September 2008 due to the recall trouble at Toyota Motor (TM, $73.64, down $1.19) as well as bad weather.
There is an old school saying on Wall Street that when a falling stock becomes a “screaming buy” because it cannot conceivably drop further, try to buy it 30% lower. Toyota is down from a 52-week high of $91.97 and looks tempting at these levels. There seems to be good support at these levels but a 30% haircut gets shares down to the $50’s. Just saying…
As we head to press, Dow futures are higher by 50, or 0.4%, to 10,435. The S&P 500 futures are up 6, or 0.5%, to 1,121, while the Nasdaq 100 futures are showing a 10 point pop, or 0.5%, to 1,853.
We have a lot to cover in our Members Area this morning including a possible NEW TRADE if we can get our limit price so let’s get to it…
Tags: General Motors, option earnings trades, option picks, option signals, options alerts, stock options trading, Toyota Motor
Posted in Market Analysis, Market Commentary | Comments Off
Tuesday, February 9th, 2010
9:00am (EST)
The bulls could not follow through with Friday’s last hour comeback as the bears seemed ready to stop any momentum they thought they had. We mentioned how trading was choppy in our midday update but things got worse from there.
The Dow finished with a 103 point loss and settled at 9,908. It was the first close below 10,000 in 3 months for the index. The Nasdaq ended with a 15 point loss and stands at 2,126 while the S&P fell 9 points to 1,056.
The hits keep coming for Toyota Motor (TM, $72.85, down $1.86) as the company is now recalling nearly a half-million of its Prius hybrid cars for brake issues. The stock has been volatile of late and last night shares were up $1.70, to $74.55 in after-hours. This morning, shares are over $75 in pre-market trading.
We have missed a couple of good earnings plays on option trades that we should have pulled the trigger on. Last Friday we talked about our channel checks for Hasbro (HAS, $34.71, up $3.91) and said we thought the company would beat Wall Street estimates.
The problem is we didn’t want to go long over the weekend and a lot of companies have gotten shelled despite reporting solid earnings. However, now that we have gotten through the “bulk” of earnings, some of these trades are now working as they are under the earnings radar.
We have talked about the enormous returns (and risks) on options that have less than two weeks before they expire. The February options expire on the 19 but we should have shot the ball on Hasbro trading higher…
The Hasbro February 32.50 calls (HAS100220C00032500, $2.40, up $2.10) soared 700% yesterday and were trading at 30 cents last Friday…
We also mentioned in our midday update yesterday that Electronic Arts (ERTS, $17.49, up $0.23) would be reporting after the close. We haven’t really talked about the company’s recent problems but it is a stock we have followed in the past. We knew there was a good chance shares were heading lower no matter what they said about their earnings. Sure enough, EA gave a weak outlook and the stock tanked in after-hours to $16.04, down $1.45.
At 3:30pm yesterday we took a peak at the February 17 puts (EZQ100220P00017000, $0.47, down $0.15) and thought seriously about sending out a trade.
Then we wanted to figure out the returns if we made it a strangle trade by adding the February 19 calls (EZQ100220C00019000, $0.26, up $0.12). We also knew we needed a move of 10% for the stock but we wanted to do some quick research and math. By the time we finished we didn’t think we could push the trade out to our subscribers with five minutes left before the closing bell sounded so we passed.
If shares open at $16 or lower the put options will be worth at least $1 which would have been a double straight-up on the put options or a 25% return if you had played a strangle by using the calls and puts.
There are a few other notable companies reporting earnings this week starting with Baidu (BIDU, $443.23, down $5.57) and Walt Disney (DIS, $29.48, down $0.06) after the close today.
On Wednesday, Wall Street will hear from Allstate (ALL, $28.36, down $0.55).
Thursday earnings include: Blue Nile (NILE, $49.49, up $0.25), Buffalo Wild Wings (BWLD, $46.48, up $0.11), Chipotle Mexican grill (CMG, $99.92, up $4.72), Las Vegas Sands (LVS, $15,54, down $0.17), Pepsi (PEP, $58.96, down $0.55), Philip Morris (PM, $45.53, down $0.13), Panera Bread (PNRA, $70.96, up $0.36) and Viacom (VIA, $29.70, down $0.46).
Despite yesterday’s sell-off, futures are pointing towards a strong open as the Dow futures are up 78 points to 9,973. This should translate easily into a triple-digit open for the index and put us back over 10,000. The S&P 500 futures are up 10 to 1,066. Meanwhile, the Nasdaq 100 futures are higher by 19 points to 1,753.
Tags: Electronic Arts, ERTS, option picks, option signals, options alerts, stock options trading, Toyota Motor
Posted in Earnings, Market Analysis, Market Commentary, Option Trades | Comments Off
Wednesday, April 22nd, 2009
8:40am (EST)
I’ve been talking about the Tech rally for over a month now which has helped the Nasdaq post a 6% gain YTD. Sure, some stocks deserve to trade at higher multiples than other Tech stocks but when you have good companies getting punished for great earnings while bad companies get rewarded for lousy earnings, it can be frustrating.
That’s exactly how I feel with Yahoo (YHOO, $14.38, up $0.72) right now. It’s a pretty tough job trying to outsmart the market and finding trades that work but when you get a market in transition, funny things happen.
As an option trader, one of the best ways to see if a new “trend” is developing is by looking over your trading history. For instance, in January and February I was recommending both calls and put options as the market came screaming into the New Year and started fading. Then, at the beginning of March, the call buying picked up and it has only been recently that I have thrown in a few put option plays.
After March 6th, I have profiled about 50 option trades and the win/loss record has been fantastic. In fact, there were only 10 trades for a loss which means we were right 80% of the time. In options trading, that kind of track record is what you are striving for. Actually, if that number is only 60% or 70%, then you are on well on your way to a successful option portfolio.
Of those 48 trades since the first week of March, only 3 have been put options. One of them was a put option on the PowerShares QQQ ETF (QQQQ, $32.69, up $0.45) which was stopped out at a 50% loss and the other was a Toyota Motor (TM, $76.47, up $0.68) trade which slapped us in the face for a two-day loss of 50%.
The point being is that the market is in transition while we are trying to figure which way the next move will be. Usually when that happens, I limit my exposure until we get clearer signs.
I said yesterday we are still in a trader’s market but these are the times where you have to be careful. That means tighter stops and quicker profits.
That being said, we were stopped out of Onlin (OLN, $14.14, down $0.64) yesterday. Now I know why the stock dropped 7% on Monday. In the Sunday night Weekly Wrap I had set entry prices on the May options well-below the closing price of where they had been on Friday. With Monday’s drop we were in by default. Then, on Tuesday we get another 4% drop. An analyst who covers the stock said its chemical business was hurtin’ for certain and the “chemical margins” were something I had baked into the lowered entry prices and talked about Sunday night.
When putting the trade together over the weekend, I had set an entry price of $1.20 for the May 15 calls (OLNEC, $0.50, down $0.40) which at the time was 25% lower than the $1.60 closing price from where there were on Friday. When I did the Monday morning blog, they were at 90 cents so stops should have been set at 50-60 cents.
The May 17.50 calls (OLNEW, $0.15, down $0.07) had an entry price target of 30 cents which was a 40% discount from where they had closed on Friday. So stops should have been set at 10-15 cents.
Look, these things happen and when I did the update I said we might be catching a falling knife. That was two trades on my win-loss record and I’m not happy about it. I felt good when I did the research over the weekend and how the company had reaffirmed the higher range of earnings but this “research note” was a whammy. When the news finally hit the tape, this analyst’s clients had been dumping shares for much of the past few days.
Hey, sometimes these things happen so we will see where this one ends up for bragging rights.
As far as the other positions; NetApp (NTAP, $18.04, up $0.25) is up 30% and ValueClick (VCLK, $9.87, up $0.59) is flat. We are going to give IBM (IBM, $102.31, up $1.88) and Yahoo a little more time. Yahoo is a mess but there is buzz about a takeover. The stock jumped in after-hours but gave back some gains by the 8pm cut-off. This morning, shares are higher by 35 cents in pre-market trading.
Of course, Dendreon (DNDN, $19.74, up $0.22) continues to perform well and Amazon.com (AMZN, $78.74, up $1.17) reports earnings on Thursday. Some of you wrote me and said you got in the Amazon May 90 calls (ZQNER, $1.60, up $0.05) at $1.40-$1.50 on Monday so I will keep track of the trade. The target was $1.30 but some of you couldn’t resist. The calls hit a high of $1.80 yesterday but I would set stops at your entry points and close at least half of the position before earnings if you are up.
As the market decides its next move, we may have to start using straddles or strangle option trades to help with the volatility.
Oh, before I forget, we are working hard on getting all of the trades from 2008 and 2009 from the blog into a PDF file. Once we have everything ready, I will let you know. When the portfolio is available you can go by the dates of the trades and follow why I was bullish or bearish on a stock by accessing the blog archives on the right of the page.
Stay tuned….
Rick Rouse
Rick@OptionsMentoring.com
Tags: Dendreo, Onlin, PowerShares QQQ ETF, Toyota Motor, Yahoo
Posted in Hot Stocks, Market Analysis, Option Trades | No Comments »
Tuesday, December 23rd, 2008
The futures are down, pointing towards a lower open this morning. The Dow futures are off by 14, to 8,525, while the Nasdaq futures are slipping by 3, to 1,194. The S&P 500 futures are unchanged at 873. Earlier this morning, the market was looking to open in positive territory as futures we up but have reversed course as we are about 45 minutes from trading.
I had mentioned in the weekly wrap that the trading volume could be light this week and yesterday was no exception. Many traders seem to be steering clear of the market due to the holiday-shortened week and the market held up rather well on Monday despite Toyota Motor (TM, $60.88) dropping a nasty bomb.
The stock drop $4.50 yesterday after the company forecast its first operating loss in 70 years. Toyota said it will post a $1.7 billion, or 150 billion yen, loss in the upcoming quarter. The automaker had previously forecast a profit of $6.5 billion. Toyota’s president said they we’re “facing an unprecedented emergency situation” and added “unfortunately, we can’t see the bottom.” This could have a ripple effect on Japan’s economy. As you can imagine, the January 60 puts (TMMY, $3.80) had a huge day and easily doubled on the news. I wouldn’t go chasing here but these options could pick up steam if the stock continues lower.
Walgreen (WAG, $24.98) was the shoe on the other foot as it missed Wall Street’s expectations by a nickle. The company reported earnings fell to $408 million, or $0.41 a share, down from $456 million, or $0.46 a share, from a year ago. Quarterly sales did improve by nearly 7% but same-store sales were only up 1.7%. The company’s bread and butter are its prescription sales which rose 6.2% from the prior year and accounted for 65% of sales. The stock was down $1.10 on Monday.
As far as today, we got a couple of economic reports that the market didn’t digest too well this morning and it could be an uphill battle for the market close higher today.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Toyota Motor, Walgreen
Posted in Company Commentary, Market Analysis | No Comments »
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Futures Down, More Recalls at Toyota (TM)
Monday, June 28th, 2010
9:00am (EST)
Futures are pointing towards a slightly lower open this morning despite members of the Group of 20 nations pledging to cut budget deficits. The debate between spending to stimulate slowly growing economies and opting for austerity to quickly get ballooning deficits under control continued at the G20 meetings that were held over the weekend. There are still some sticky points on what cuts will be made for some countries but things are progressing.
As far as economic news this morning, May personal spending was up 0.2% after being flat in April while personal income was up 0.4% in May versus up 0.5% in April.
Toyota Motor (TM, $70.00, down $0.43) could set a new 52-week low today after news on the company’s latest safety-related recall. Toyota shares are below $70 in pre-market trading after the recall of 17,000 Lexus hybrids. The latest U.S. federal auto-safety documents reported the vehicles spilled fuel during a crash test.
Lexus has not identified a fix to address the problem, but it is working hard to do so, naturally. Until then, dealers will not deliver any new vehicles in their inventory and this is just another negative headline in Toyota’s latest mishap.
Toyota has been on our Watch List off and over the past few months, but we haven’t pulled the trigger on a trade, yet. We are going to do a little more research to find out where shares could land if Toyota starts to make new lows.
As far as earnings this week:
MONDAY – Cal-Maine Foods (CALM, $33.46, up $0.37), Micron Technology (MU, $9.46, down $0.16), Neogen (NEOG, $27.49, up $0.97), Standard Microsystems (SMSC, $23.54, up $0.14) and Tongxin International (TXIC, $5.04, up $0.04).
TUESDAY – Barnes & Noble (BKS, $16.43, up $0.49), CACI International (CACI, $42.62, up $0.25), General Mills (GIS, $37.34, down $0.23), OMNOVA Solutions (OMN, $7.60, up $0.26), Sealy (ZZ, $3.04, up $0.04), Worthington Industries (WOR, $13.17, up $0.13), and Zep (ZEP, $17.14, up $0.16).
WEDNESDAY – Acuity Brands (AYI, $43.99, down $0.05), American Greetings (AM, $20.27, up $0.26), Apollo Group (APOL, $43.75, down $2.22), Christopher & Banks (CBK, $6.86, up $0.24), Global Payments (GPN, $38.65, up $0.50), Investors Real Estate Trust (IRET, $9.20, $0.41), Lindsay (LNN, $35.10, up $0.12), Monsanto (MON, $48.27, down $0.74), Mitel Networks (MITL, $8.99, flat), Schnitzer Steel (SCHN, $43.04, up $0.49), Shaw Communications (SJR, $18.63, down $0.01), Smith & Wesson (SWHC, $4.10, up $0.02), Unifirst (UNF, $41.84, up $0.86) and Xyratex (XRTX, $15.37, up $0.66).
THURSDAY – Constellation Brands (STZ, $16.01, down $0.05), Franklin Covey (FC, $6.71, down $0.07), Methode Electronics (MEI, $9.98, up $0.08), MSC Industrial Direct (MSM, $51.78, up $0.60) and MSCI (MXB, $29.09, up $0.46).
FRIDAY - Vitacost.com (VITC, $9.96, up $0.34) and Volt Information Sciences (VOL, $9.43, up $0.54)
As we head to press, Dow futures are down by 24 points to 10,080 while the Nasdaq 100 futures are off by 2 points to 1,837. The S&P 500 futures are lower by 3 points and were last seen at 1,071.
Tags: momentum options trading, option picks, options alerts, stock options trading, TM, Toyota Motor
Posted in Market Analysis, Market Commentary, Watch Lists | Comments Off