11:30pm (EST) Yeah, I knew that headline would get your attention instead of a “Monday Night Wrap”… In what turned out to be a decent day if you are a bull, the market managed mixed gains after spending most of the session in the red. We were looking at a nasty open which was somehow mitigated by a better-than-expected ISM Services Index reading. I won’t bore you with the details on what this economic announcement means (Google or Bing it…) but it seemed to help. Call it a mild victory for the bulls, or, call it the calm before the storm if you are bearish. In any event, the Dow wound up higher by 44 points and closed at 8,324. The S&P 500 added 2 points but still finished under 900 at 898. The Nasdaq took a hard dive right after the opening bell but managed to recover some of those losses. Still, it was not enough as the Tech index fell 9 points to finish at 1,787. Taking a look at specific stocks, Alcoa (AA, $9.26, down $0.60) took a trip to a low of $9.03 after an analyst predicted even bigger losses than current Wall Street estimates. The current average estimate has pegged the company losing 32 cents a share but the one analyst sees a loss of 58 cents. The July 10 put options (AASB, $1.02, up $0.40) were profiled at $1.00 and made it to a high of $1.16 when Alcoa hit its low for the day. I didn’t think they would do much but when you do the math it is still a 15% gain. Earnings are on Wednesday so try and be out of the trade before then. Alcoa is getting “cheap” and the best time to buy beaten down stocks are when the clouds are the darkest. I think Alcoa is at least a $15 stock once aluminum demand picks back up and we will have to wait to see what earnings may bring. If the stock continue lower and falls below $8, I may seriously pick up some shares for my own portfolio. I’m not a big stock buyer but Alcoa is a steal at these levels if your time horizon is one or two years. The PowerShares QQQ’s (QQQQ, $35.41, down $0.19) July 36 puts (QQQSJ, $0.94, up $0.04) traded 75,000 contracts as option traders played them like a fiddle today. I said to use them as a direct play on the market’s weakness but we didn’t get the ”snowball” or downside that we were hoping. Still, some traders were able to pick these put options up for under a $1.00 as they traded to a low of 93 cents after the opening bell. The puts traded to a high of $1.26 which represented a 25% gain. Keep them on your Watch List… If you will notice, a lot of trades that I have been profiling have been short in nature because of the volatility in the market. We should get a clear direction over the next few weeks so until then, we have to keep tighter stops on our positions and be quick to pull the trigger on profits. Rick@MomentumOptionsTrading.com]]>
