1. Commentary 2. E*Trade Financial Soars 3. Marvel Entertainment Nears 52-Week High 4. Earnings 5. Current Trades 6. Closing Thoughts ************************************************** 1. Commentary The market made another push higher last week which brought the Dow into positive territory for the year. Yeap, that’s right. Friday’s 28 point win has the Dow at 8,799 which represents a 0.4% gain YTD. The underlying story is the Dow still has momentum although it is barely noticeable because of the small moves. That’s okay because the bulls are still in control and flying under the radar as they decide their next plan of attack. Chip stocks had a decent week after Texas Instruments (TXN, $20.79, down $0.05) raised its 2Q guidance. The company issued new earnings guidance of 14-22 cents, up from 1-15 cents, and now expects revenue of up to $2.5 billion. Qualcomm (QCOM, $46.05, up $0.07) also raised guidance and Intel (INTC, $16.31, down $0.04) rallied above $16. We also got some TARP payback clarity. Goldman Sachs (GS, $145.64, up $0.49), JPMorgan Chase (JPM, $35.13, up $0.19) and US Bancorp (USB, $18.58, up $0.22) are 10 or the 19 banks that will be allowed to repay nearly $70 billion of TARP funds starting as early as this week. The Financial stocks have been holding steady and it’s only a matter of time before they make their next big move, up or down. The longer they stay in a coil, the tighter the spring gets… ChangeYou.com (CYOU, $41.45, down $1.40) hit a new high of $44.85. I talked about the IPO market just a few weeks ago in the May 25th Weekly Wrap (quotes are from that day): “Taking a look back, the other IPO’s for 2009 include: Bridgepoint Education (BPI, $12.10, down $0.58), Changyou.com Limited (CYOU, $29.01, up $1.16), DigitalGlobal (DGI, $18.80, up $1.10), Mead Johnson Nutrition (MJN, $29.70, down $0.03) and Rosetta Stone (RST, $24.23, up $1.09).” Too bad I didn’t list any June call options. Still, Changeyou.com made a 50% move in two weeks! Bridgepoint is at $14.48, Mead is trading for $31.36 and Rosetta Stone is pushing $27. All-in-all, it was another solid outing for the bulls and there will be a few things to watch for this week. Aside from the economic news, we get some key earning reports due this week which could help sway sentiment on Wall Street. ************************************************** 2. E*Trade Financial Soars It’s hard to use the word “soars” on a $2 stock but E*Trade Financial (ETFC, $1.97, up $0.31) jumped nearly 20% on Friday on no apparent major news. However, there are rumblings that Citadel Investments is interested in acquiring the company and perhaps a deal is in the works. The stock traded nearly 75 million shares which was 3x the normal average daily volume and there were signs earlier in the week when Citadel’s CEO was named to E*Trade’s board of directors that a move could be coming. A deal or buyout makes since considering Citadel owns approximately 90 million shares, or 15%, of E*Trade’s stock and over 70% of the company’s senior debt. E*Trade has been struggling to raise capital as its loan losses continue to be a drag on the balance sheet. E*Trade was once a huge “high-flyer” back in the late 1990’s meaning the stock made tremendous moves. It would easily run up to $100 every six months or year and do a 2-for-1 stock split. Check out the historical chart and you’ll see. Now, certainly investors aren’t expecting that kind of move but they are clearly expecting a move over $2. The interesting part will be how much over $2? Options traders were betting 15 cents on Friday that the stock makes it to at least $2.15 by this Friday. The June 2 calls (EUSFF, $0.15, up $0.10) soared 200% as 18,000 contracts traded hands. They opened at 10 cents and the last asking price was 20 cents. This could be one of those explosive situations that could turn out to be a windfall if a buyout is forthcoming. By comparison, the July 2 calls (EUSGF, $0.35, up $0.15) traded 10,000 contracts and the July 3 calls (EUSGG, $0.14, up $0.09) were active. I’m not recommending taking on any positions here, I just think it is an interesting story. I use to follow E*Trade religiously when it was going gang-busters but lost interest in the stock once it fell below $5. However, it is still on one of my Watch Lists which is why I noticed the action on Friday. E*Trade was once a solid brokerage firm that was on it’s way to becoming a staple in the brokerage industry. However, they dropped the ball by having their fingers in too many pies and the mortgage meltdown crushed them. These are risky bets on a company that has struggled recently but that didn’t stop eager option buyers who are hoping a takeover is coming. ************************************************** 3. Marvel Entertainment Nears 52-Week High Marvel Entertainment (MVL, $37.51, up $0.20) continues to push towards its 52-week high of $38.50 and was a trade I profiled back in April. On April 23rd, I had this to say (quotes are from that day): “I think the Marvel June 30 calls (MVLFF, $1.05, down $0.25) could be good for a 25%-50% return. I like them at the current entry price of $1.05.” The trade was later profiled in the April 26th Weekly Wrap which many of you received. Here is an excerpt (quotes are from that day as well): “On Thursday, I gave regular readers of the blog a sneak preview on a Marvel Entertainment (MVL, $28.40, up $0.46) trade. We all know Marvel and the company is doing some good things. This Friday, the release of Wolverine is due out and I have already checked…demand is strong. Opening weekend tickets are selling faster than a Jay Cutler jersey in Chicago and you can bet when numbers are released, this movie will easily be number one. I’m not sure if it duplicates the success of Iron Man but the buzz is enormous. This play isn’t on the strength of Marvel’s balance sheet but on the momentum leading into next week. Analysts aren’t expecting a pop in numbers until 2010 as they have pegged a 50% drop in EPS (earnings per share) for 2009. However, Marvel will now launch the summer box office season for three years in a row, from 2010 through 2012 and there are a slew of blockbusters on the way, including Iron Man 2, SpiderMan 4, Thor, The First Avenger: Captain America and eventually, The Avengers. The box office receipts will be in the billions for these films and don’t forget the licensing fees, their publishing division, and its move into animated television production. And their character library remains virtually untapped. That is the future and if I bought stocks, I would buy Marvel if I wanted to own it for the next 5-10 years.” – (END) We closed the trade on May 7th on this note (quotes are from that day): “We have to say goodbye to Marvel Entertainment (MVL, $32.95, down $0.07) for the time being. I love covering the options on this stock because they have done well for us over the past couple of years since I started here at OptionsMentoring.com. This time around we rode the June 30 calls (MVLFF, $3.80, down $0.20) for monster gains. I recommended the call options in the blog on April 23 when they were going for $1.05. After selling half at $2.10, we rode this magic carpet for a nice 300% gain and had set stops at $4.00.” – (END) Fast-forward to today and those same June 30 calls (MVLFF, $7.50, up $0.20) are now up 650%! Yes, we took profits a little early but we wanted to show you the powerful returns that some of our trades are capturing. Another trade that seems to be working well is TiVo (TIVO, $11.44, up $0.14) which was profiled just last week in the Weekly Wrap. Although I suggested against chasing the June 10 calls (TUKFB, $1.65, up $1.15) which closed at $1 on June 5th, they have gained 65%. I did say there could be a trade down the road and there was plenty of action in the further out months. TheOptionInvestor.com is where the action is, folks. For $97 a month, don’t you think it’s worth a look? We also offer discounts for longer subscriptions. ************************************************** 4. Earnings Monday: Casey’s General Stores (CASY, $25.43, up $0.51) La-Z-Boy (LZB, $3.66, up $0.03) and Motorcar Parts of America (MPAA, $4.24, down $0.16). Tuesday: Adobe Systems (ADBE, $30.15, down $0.25), Best Buy (BBY, $38.55, up $1.32) and Smithfield Foods (SFD, $11.92, up $0.10). Wednesday: Actuant (ATU, $14.14, up $0.58), Clarcor (CLC, $30.14, down $0.03), FedEx (FDX, $54.39, down $1.77), IHS (IHS, $50.76, up $0.70) and Somanetics (SMTS, $17.35, up $0.11). Thursday: Carnival (CCL, $24.17, up $0.44), Discover Financial Services (DFS, $9.30, down $0.35), J. M. Smucker (SJM, $44.10, up $0.32), Pier 1 Imports (PIR, $1.79, down $0.03) and Research In Motion (RIMM, $83.02, down $2.42). Friday: CarMax (KMX, $13.85, up $0.26). ************************************************** 5. Current Trades & Closed Trades We launched our new trading service at the start of June and the response has been overwhelming. Subscribers just closed out their first 100% return when Cisco Systems (CSCO, $19.91, down $0.19) traded to over $20 last week. Also, an Apple (AAPL, $136.97, down $2.98) trade returned over 50% for our subscribers. Join TheoptionInvestor.com today to stay in tune with current market events. Our track record is proof that we can make profits in any kind of market. All of the positions can be referenced from our daily blog by using the opening and closing dates that the trades were made. We offer both non-directional trades and directional trades. The non-directional trades aim to make you 4%-8% a month while the directional trades target 50%-100% returns. However, we have profiled trades that have returned 200%, 400% and even 800%! One trade produced a return of 2,650%! The introductory rates are for a limited time only and have been offered to our regular readers. We are now extended this offer to you: 1 month – $97 3 month – $261 or $87 per month (10% off) 6 month – $462 or $77 per month (20% off) 1 year – $804 or $67 per month (30% off) ***Best Deal* ***Note: We may also limit the number of subscribers so that we can provide the best possible trades. We don’t want our positions to become “crowded” and we also want to provide the best customer service possible. By limiting the numbers of subscribers, we can offer both at a reasonable price. The trades are emailed to you directly and are updated every few days. We provide you entry and exit points as well as stops and how to protect your profits. Also, each option trade is detailed as to why we feel a particular stock is ready to pop or drop. In other words, we will be there with you every step of the way. ************************************************** 6. Closing Thoughts The market has climbed higher for three months now and the pullback that Wall Street has been bracing for just hasn’t happened, yet. The market continues to advance although some will argue the gains have been minimal. Still, it is an encouraging sign for the bulls. However, bears are hoping a weaker dollar, rising interest rates, and higher commodity prices will play in their favor as summer picks up. The “sideways” action has served as a solid base but Tech has been lagging. The Nasdaq has carried the load this year as it is up nearly 18%. The Dow is up 0.4% while the S&P 500 is up 4.8%. This week, Wall Street will be watching the Treasury auction off 1, 3, and 6-month bills. The competitive bids determine the interest rate paid on each bill so how well they are received will be the key. Other important events this week include the National Association of Home Builders housing market index for June, which will be released Monday. Tuesday, the Commerce Department fills us in on housing starts for May. The Conference Board releases its May index of leading indicators on Thursday. There will be a few more economic reports sprinkled in but it appears the next big “battle” will be fought in July. This is when 2Q earnings will start to roll in and comments concerning company outlooks will be the wild card. The Financial stocks will probably take center stage as investors are hoping they can post back-to-back solid quarters. Rick Rouse Rick@TheOptionInvestor.com
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