The bulls made a dramatic statement to the bears’ yesterday that has been clear for over a month now and it was…”get out of our way”. As the market headed higher in October (after a strong September), it was becoming apparent with the higher highs and higher lows the bears were not going to be able to hold the resistance levels we have been outlining for you along the way.
Thursday’s rally was strong and you can bet there was a lot of short-covering for those who were banking against the market going higher. We knew going into the open the bulls were going to take out resistance and we were looking for a close above the 52-week highs for the indexes. Mission accomplished.
The Dow soared 219 points, or 2%, to close at 11,434. The 52-week high had been 11,258 and was taken out in the first few minutes of trading. Our near-term targets on a breakout are 11,500-11,600 for the index and we said 12,000 could come into play. After yesterday’s pop, it appears as if we were a little conservative in our time frame. Support is now 11,200 with 11,000 serving as backup.
The S&P 500 was the last index to jump on board the bull train but finally cracked our 1,200 target by adding 23 points, or 1.9%, to finish at 1,221. The S&P also closed above its 52-week high of 1,220 which confirmed this rally could be the real deal. We mentioned the 1,250 level could come into play by year-end and 1,300 in 2011 if we took out both levels.
The Nasdaq powered higher by 37 points, or 1.5%, and settled at 2,577. The index traded to a high of 2,579 and easily challenged our next target of 2,600-2,700 for Tech with a possible push to 3,000.
The BEST part about yesterday’s rally was that it made a number of our current option trade recommendations very profitable. Even further, the rally will allow us to ride the current winners higher should the bulls continue to push, or, we can lock in gains to protect profits should the market retreat.
We wanted to profile one stock this morning before we hit the Members Area which could be worth watching going forward. SodaStream International (SODA, $30.00, up $5.88), which makes home beverage carbonation systems, surged 25% yesterday after an initial public offering (IPO) on Wednesday.
The company raised $110 million in its debut by selling 5.5 million shares which were priced at $20 a share and the top end of its estimated range. The underwriters have a 30-day option to buy up to an additional 800,000 shares to cover any excess demand which could raise another $20 million.
We aren’t 100% sure if this stock is the next Green Mountain Roasters (GMCR, $33.88, down $0.41), which revolutionized the coffee industry with its k-cups and made our life easier, but there are some similarities.
SodaStream’s home beverage carbonation system allows you to convert tap water into carbonated soft drinks and sparkling water. Green Mountain made coffee making easy but they don’t sell the machines that their simple k-cups go in. SodaStream sells the machines AND the mix which is “a smarter way to enjoy soda” according to the company’s slogan.
You can choose from 4 different home soda makers that range in price from $79.95-$199.95. The refills cost $4.99 and can make 12 liters of soda, or 33 cans. The machines are being sold in thousands of stores and if they are selling well, the stock could be headed for further gains.
We have updated all of our current trades and we have added a few new suspects to our Watch List for possible options trades next week. Subscribers, check for the updates!