November 2009 | Members


9:00am (EST) It what comes as no surprise, CIT Group (CIT, $0.72, down $0.23) made it official by filing for Chapter 11 bankruptcy protection on Sunday. The news may not be a shock but really it should be.  CIT Group joins an ever growing list of once proud companies that have now gone belly-up. Wall Street will overlook the fact that it is one of the biggest Chapter 11 filings in U.S. corporate history…right up there with Enron, General Motors, Lehman Brothers, Washington Mutual and WorldCom. The Financial stocks have been very weak of late and have helped pull this market lower.  CIT’s bankruptcy filing showed $71 billion in assets versus total debt of $65 billion.  Over 155 million shares changed hands on Friday and we hear Vegas has the over/ under for today’s action at 1 billion shares… Bank of America (BAC, $14.58, down $1.15) tanked 7% Friday on fears of a S&P downgrade and is back below $15.  The company’s biggest problem seems to be finding a replacement for its CEO, Ken Lewis, who will retire at the end of this year.  We would love to see this one fall to $10… We knew when the Financial stocks rallied off their March lows we would get to a point to where there would pull back.  Just like they fell too far to the downside back then, maybe they may have rallied too far and now we are seeing that pullback.  After two solid earnings quarters, they seem to be on shaky ground. There will be a lot of action this week and below we list quite a few of the companies that will be reporting earnings this week.  We also have a pretty sweet show-and-tell session in our Members Area this morning with the Current Trades.  We have included some charts to try and show you exactly why we are in these trades and what we are looking for.  The option trade we profiled for Apollo Group (APOL, $57.10, down $1.05) is nearing a triple-digit return and hopefully we get there in the next few days. We have about 30 minutes before the bell and stock futures are pointing towards a slightly higher open. The Dow futures are currently ahead by about 40 points; the S&P’s are up by 5 points, while the Nasdaq futures are up 4. BREAKING NEWS…Dendreon (DNDN, $25.27) is up to $27 in pre-market trading after news broke that the company has re-submitted its approval application to the FDA for Provenge. CURRENT TRADES Today is “chart day” and I’m not sure if they will be included in this email or not.  If I can’t figure out how to include them in this email, please go to the Members Are on the website to check them out. Since the trading manual is almost ready, we thought we would show you some of the things we will be teaching you if you sign up for the course. Folks, I’m really excited about the manual.  As a beginner, this manual will help you cut YEARS off your learning curve on how to find good option trades with triple-digit potential.  Not only that, you will learn how to get a feel for the market, what to look for, how to setup your trading business and your brokerage account. Our goal is to have the manual ready by Thanksgiving but in any event, it will be available by Christmas.  Remember, if you are interesting in the Trading Manual, send us an email to Research in Motion (RIMM, $58.73, down $2.63) November 55 puts (RFYWK, $1.14, up $0.61) Entry Price:  $1.00 (10/30/09) Exit Target: $2.00 Return: 14% Stop: 50 cents, raise to 75 cents Action:  We wanted to profile this trade at 11am on Friday but waited to confirm the breakdown in the stock before sending the trade out.  We were getting mixed signals all week but we were pretty sure a breakdown was coming. Last Monday, the stock broke below $65 which was our first clue the chart gave us but shares still closed above $65.  Then on Tuesday, RIMM closed at $63.75.  The stock held above $60 Wednesday and Thursday and we knew on Friday when the market started tanking this level was not going to hold. RIMM fell below $60 shortly after 11am and that’s when we got serious about the trade.  Shares were at $43 at the end of March and you should see the huge move up to $63 in just one week.  Yes, RIMM caught fire and moved that high, that fast.  Now, look at where the stock ended Friday and how the graph looks now.  There is NO support from $60 to $45.  If you look back at the two “tops” back in March, those “bumps” represented the $45 level and the stock made a huge breakout.  This level will now act as support if the stock freefalls from here. Chart for Research In Motion Ltd. (RIMM) You should also see the $60 level acted as “resistance” back in February but then turned into support once the stock made that huge run in the first week of April. Hopefully, from the looks of things, RIMM drops like a rock and falls to back to $45.  Obviously that would be a HUGE return for us but the November options expire in less than three weeks.  Our goal is to be out of this trade by Friday or sooner. Garmin (GRMN, $30.26, down $0.59) December 25 puts (GQRXE, $1.10, up $0.25) Entry Price:  $0.75 (10/29/09) Exit Target: $1.50+ Return: 47% Stop: None, set one at 50 cents Action:  Shares of Garmin touched a low of $29.63 on Friday and we are targeting the $27-$28 area over the short-term.  You will notice from the chart below that this level should act as support from August.  If that doesn’t hold then it clears the way for a drop to $25. Chart for Garmin Ltd. (GRMN) Apollo Group (APOL, $58.15, down $1.91) November 55 puts (OAQWK, $1.80, up $0.15) Entry Price:  $1.00 (10/28/09) Exit Target: $2.00 Return: 80% Stop: 50 cents, raise to $1.10 Action:  Apollo took a beating shortly after our Mid-Day update on Friday and was trading around $58.  Soon afterwards the stock fell to a low of $56.37 and these puts traded to a high of $2.10.  Below is a 1-year chart for Apollo but you can see that MAJOR support is about to be broken from the May and June bottom. Chart for Apollo Group Inc. (APOL) We said these options would hit $3 if the stock fell to $55 on Friday but these options also have expire in less than three weeks.  They are still out-of-the-money so we want a test of $55 within the next few days.]]>