We covered a lot of this week’s outlook in our Weekly Wrap last night and the targets from last week are still intact. The bulls are looking for Dow 11,600-11,700; S&P 500 1,275; and Nasdaq 2,700 over the near-term. We start 2011 at 11,577; 1,257; and 2,652, respectively. If the aforementioned targets are broken then we could see Dow 13,000; S&P 500 1,300; and Nasdaq 3,000.
In our Weekly, we mentioned some factors that could get the bulls motivated over the next few weeks but let’s not put the horse before the cart just yet. The bears will be looking for a fresh start and we haven’t forgotten about them, so, we will also be watching for any weakness over the next few weeks for signs of a pullback, if there are any. With 4Q and yearend earnings coming up in two weeks, the battle could be just beginning as companies confess their results.
One stock we have to mention this morning is Imax (IMAX, $28.07, up $1.21) which hit another 52-week high on Friday of $32.30. Many of our long-term subscribers know we were one of the first publications, maybe the first, to say Imax would be a double-digit stock when shares were under $3 just two years ago. At the time, we said 3D technology was starting to get better and so would the movies.
When the stock broke $10 on the strength of Avatar in 2009, we said shares would double again and reach $20. We had a feeling Imax would continue higher throughout 2010 on the continued strength of 3D movie sales but the company is more than just a “chain” of theaters.
If you look at our track records over the years, you will see we have profiled some sweet triple-digit options returns on Imax but we really should have told our subscribers to buy 1,000 shares as well, along with playing the options. By now, you would be approaching a 10-bagger, or a $25,000 profit.
This is one of the reasons we started more coverage of small-cap and low priced stocks in our Weekly Wrap. Our goal is to provide you more ways of using options but sometimes it just makes sense to buy a stock instead of the options on a company if you really feel they are going to be a “game-changer” or the stock is ridiculously cheap, or a turnaround story. (Sirius XM Radio, SIRI, $1.63 was another double we missed by not telling you to buy the stock). Imax has been ALL three and shares got a nice pop on renewed takeover chatter.
Sony (SNE, $35.71, up $0.14) and Walt Disney (DIS, $37.51, up $0.03) were the latest suitors and Imax would make a nice “division” for either company. Although we don’t see anything happening soon, we do feel there is a good chance Imax gets a takeover bid in 2011.
As we head to press this morning, Dow (+86) S&P 500 (+10), and Nasdaq (+22) futures are up. Folks, we are going to have a BIG open this morning to the upside which bodes well for our portfolio.
Special Notice: For those of you who ordered a 1-year subscription to our Daily or Weekly Wrap newsletters, your options course, How to Trade Options on Momentum Stocks, will ship in the next 24-48 hours. The course also includes our Momentum Stocks Watch List. In addition to the trading manuals, we offer ongoing videos that help explain some of the situations we talk about in the course.
We made a video last night which should be in your email inbox sometime this morning. It covers a few companies reporting earnings this week as well as a look back on U.S. Steel (X, $58.42, down $0.60) which has moved 20% since breaking strong resistance at $50 back at the start of December.