1:00pm (EST) The bulls are resuming their climb towards Dow 10,000 after getting positive earnings from Alcoa (AA, $14.54, up $0.34) and a couple of better-than-expected economic reports. The Dow added nearly 250 points on Monday and Tuesday and took a breather yesterday as it lost 6 points. Currently, the Dow is up 93 to 9,818 while the S&P 500 is up 12 points to 1,070. The Nasdaq is chipping in with a 27 point rally and is at 2,139. The Labor Department reported that new claims for jobless benefits fell to 521,000 last week, down from 554,000 the previous week and better than Wall Street had expected. The bulls found added momentum in this report because it was the lowest level since early January. Retail stocks are rolling as retailers saw their first sales gains in more than a year last month. The sector showed an increase of 0.1% for September, compared with a 1% drop a year ago. I don’t see what the big deal is but a number of stocks are benefitting as a result. Abercrombie & Fitch (ANF, $35.14, up $2.48) is up nearly 8% and we just closed a short-side trade that netted us nearly 30%. The stock is now at the “top” of its recent trading range so it remains to been seen if it breaks resistance here and heads up to $40 or falls back to $30. We may have to look at this one again next week… I also wanted to talk about using cheap out-of-the-money options and earnings. Most of our trades aren’t based around earnings but they come up every three months so you have to work around them. Most options “experts” will tell you to leave these types of plays alone but if you have a solid trading plan, one that consistently produces profits, then it is cool to throw a little loose change on some speculative trades. I had mentioned a couple of Alcoa options yesterday that weren’t in the Members Area because I didn’t know which way Alcoa would be reporting. The Street was expecting a loss but I had pointed out that there was 3x more call buying than put buying heading into Alcoa’s earnings report. The October 14 calls (AAJN, $0.84, up $0.08) were at 63 cents yesterday in the 1pm update and hit a high of $1.20 this morning…almost a free double that market was giving us… Anyway, those are the types of returns these types of option trades can provide but you have to be in-and-out. I thought Alcoa would miss earnings (like Wall Street was predicting) but the momentum in this stock was apparent all week. We have one of these types of trades going with Intel (INTC, $19.92, up $0.17) right now. Subscribers, check the Members Area for the 1pm update on this trade and the Pepsico (PEP, $60.13, down $1.04) trade.]]>
