12:15pm (EST)

We mentioned this morning the bulls needed to hold key support levels or face further downside risk going into next week.  Today’s plunge is following a recent pattern of lower Friday’s (and lower Monday’s) as the market is now looking at its sixth-straight week of losses.  We will delve more into the selling pressure before and after the weekends in our Weekly Wrap but we mentioned a couple of months ago this is an easy way to tell if money is going in or out of the market and could signal a trend change.

The Dow is down 136 points to 11,988 as the bears easily took out 12,000 after the open.  We mentioned near-term support at 11,800 but things could get a lot worse if the March lows don’t hold.

The S&P has broken below our 1,275 target and is off by 14 points to 1,274.  The next crucial area of support is at 1,250 and all indications are this level could be hit next week.

The Nasdaq is dancing right around our 2,650 target and is lower by 30 points to 2,654.  There is risk down to 2,625 today but Tech could be in serious trouble if these downside targets fail to hold.

Don’t forget that our Weekly Wrap will be out Sunday night and we have two more exciting companies we will be profiling.  The newsletter is quickly growing as word spreads about our recent trades and our stock analysis.

In fact here is a little excerpt on what we said last week about Clean Energy Fuels (CLNE, $13.13, up $0.11) when shares were at $14.23 to start the week:

“We want to be in ahead of the Nat Gas announcement so we are hoping shares can come down to $13 before the announcement.  There is strong support at this level and where we would look to go long and write covered calls.  We are watching the July 15 calls (CLNE110716C00015000, $0.60, flat) for both a breakout and a possible way to play Clean Energy as a covered call.” (END)

As you can see, shares are right at support and it’s time for us to decide what to do.

The other stock we profiled was Sequans Communications (SQNS, $12.92, down $0.75) which started Monday’s session at $16.95.  We don’t normally short stocks, we prefer put options, but Sequans does not trade options.  Here were some of our thoughts:

“The graph shows a bearish candlestick pattern.  We use the upper Bollinger Band as the resistance line.  The support line is at $8.50.  All the technical’s are near or at overbought levels.

If we assume the stock falls as fast as it rose, it would fall 13 cents a day.  From current price of $16.95, it would take the stock 65 days to reach the support line of $8.50.  However, a pullback is usually no more than 1/3 of the stock’s rise.  Thus, 1/3 of $8.45 (difference between $8.50 and $16.95) is $2.82.  Dividing by 13 cents a day gives 22 days.  Thus, it will take 22 days for the stock to reach $14.13 if there is more downside pressure.” (END)

Shares of Sequans fell to a low of $13.50 on Tuesday and Thursday and continue to look weak.

We also closed out a Dendreon (DNDN, $38.42, down $1.34) covered call trade for the Weekly Wrap that made 9%.  We mentioned the $40 level appeared to be in jeopardy so we wanted to protect profits and we are hoping to buy it back at $36. 

The Weekly Wrap also profiles all of the companies that are reporting earnings for the week and RealD (RLD, $20.50, down $3.57) was a stock we said could move 10% or after the company announced earnings.  Our subscribers cashed in on today’s sell-off on the dip below $20 with gains of up to 250%.

In other words, just because it is a weekly newsletter, don’t discount the action, tips, analysis, and potential profits you can make by using a more conservative approach with options. 

We have been offering a special deal where you can get our option trading course, How to Trade Options on Momentum Stocks, at no charge (an $895 value) if you order a 1-year subscription to our Weekly Wrap (only $599).  The course also includes monthly/ bi-monthly videos which show you how to find potential trades, earnings announcements, straddles and strangles, LEAPs and chart reading (and free shipping to anywhere in the world).

We also have some new features we will be adding in the coming months so stay tuned.  If you would like more information on our option trading manual, click here.  If you have further questions on the market or covered calls and puts or options in general, email or call us.

We cannot run this promotion for much longer so we urge you to take advantage of our special deal while it lasts.  Now is the most important time ever because the market could be on the verge of a short-term trend change.  Remember, you can make just as much money shorting the market or buying puts as you can on the way up.  Don’t be nervous if there is a correction because the profits are going to fat.  

We will be back Sunday night and until then, have a great weekend!