Continued from our 9am update…

The Dow added 42 points on Friday to finish at 12,479.  The index traded to a high of 12,504 which is near our 12,600 resistance level (orange line).  We have been outlining a break above 12,800 as confirmation on a possible run to 13,000 over the near-term.  Support is still strong at 12,350-12,400 (black line, green circles) over the short-term.  The good news is that the index is still above its 20-day and 50-day moving averages but a break below these levels could lead to a test of Dow 12,000.  For the week, the blue chips dropped 177 points, or 1.4%.  For the year, the Dow is up 7.8%.

The S&P 500 gained 7 points to settle at 1,316.  The 1,325 area served as a battle ground for much of the week but the bulls did a great job of holding support and pushing resistance.  After falling to a low of 1,313 on Tuesday, the bulls were able to reach 1,331 on Wednesday’s bounce.  However, the index traded to a low of 1,306 and 1,307 by the end of the week and it will be imperative the 1,300 level hold as support this week (black line, blue circles).  If not, there could be a test down to 1,275 (purple line) and possibly, 1,250.  If the bulls can build on Friday’s gains and tackle 1,325-1,334 then they will target 1,350 again (orange line) which would set the stage for a run at 1,375-1,400.  For the week, the S&P dropped 27 points, or 2.1%.  For 2011, the index is up 4.7%.

The Nasdaq advanced 27 points to close at 2,789.  The index remained the most volatile and traded in a range of 2,750-2,850 for the week.  We would have liked to have seen a close above 2,800 on Friday but Tech is still on track to challenge its 52-week high 2,887 (orange line) with a chance of 3,000, if taken out.  Near-term support is still strong at 2,750 (black line) and then 2,725-2,700 (blue line).  For the week, Tech gave back 70 points, or 2.4%.  YTD, the index is up 5.2%.

The Russell 2000 popped 5 points and ended at 828.  The small-cap index managed to hold the 825 level after touching a low of 829 on Tuesday and 821 on Thursday but closed above 820 which is strong support (red line).  There is further support at 800 (green line, black circles).  Resistance is still at the 52-week high of 868 (blue line) and we are looking for a run up to 875-900 on a breakout.  The Russell declined 24 points, or 2.8% for the week, but is still up 5.8% year-to-date.

The S&P Volatility Index (^VIX, 19.53, down 1.27) jumped over 20% and battled the 20 level all week after closing above this level on Wednesday.  We mentioned in our update that morning that this would be an area to watch closely and although our target was stretched, we still saw the bulls had fight left in them.  Following Friday’s rally, the index closed below this level and will be closely watched this week.

As you can see, the bulls did a great job of holding support and it all comes down to earnings and the U.S. debt situation.  Let’s not forget the ongoing debt concerns in Europe which will also hamper any rally until there is more clarity.  The stress tests were a start but their accuracy is being questioned. 

Earnings have been strong which should provide a floor of support over the near-term for the bulls although there is still risk down to the aforementioned lower levels.  However, the market is still at the upper-end of its trading range and we are pretty confident the U.S. debt ceiling will get raised.  It will take a while before we can reduce the deficit but we so many eyes on Congress, it’s them, not Wall Street, on the hot seat.

If you have been listening to Obama, he has been rooting for the market to go higher although in the same breath he is clinging to the corporate jet and big oil tax break theme.  A few months ago he was cheering for “Dow 14,000” which happens to be our year-end target and Washington needs a higher market.

Somehow, someway, we think the bulls test news highs in July. 


Please remember, ALL “Exit Targets” and “Stop Targets” are targets.  You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless we list one.  We will send out an “Alert” or “Trade Update” if we want you to close a position OR if a new trade comes out.  Otherwise, follow instructions at all times in the 9am and 1pm updates.  Also, we will usually give you a heads-up if we think we are going to send an email outside of these time frames but it is rare that we do.

Global Payments (GPN, $51.29, up $0.08)

August 55 calls (GPN110820C00055000, $0.45, down $0.05)

Entry Price:  $0.40 (7/13/11)

Exit Target: $0.80

Return:  13%

Stop Target:  None 

Action:  This is a 6-month chart for Global Payments as shares are near all-time highs.  There was a nice bounce off support (red line, green circles) and resistance is at $53.  The company reports earnings this Thursday and is usually a strong mover.  We are expecting the company to beat expectations offer a rosy outlook which could lead to new highs of $55+.  However, if Global disappoints, shares will easily fall below $50.    

Patriot Coal (PCX, $23.48, up $1.64) 

August 24 calls (PCX110820C00024000, $1.25, up $0.50)

Entry Price:  $0.90 (7/13/11)

Exit Target: $1.80

Return:  39%

Stop Target:  None 

Action:  Patriot Coal will report earnings on July 26.  The stock surged nearly 8% on Friday and faces resistance (red line, black circles) at $24 which, if reached in a few weeks, should get the trade to a 50%-75% return.  A run to $25-$26 gets us a double.  Support is strong just below $22. 

Qualcomm (QCOM, $54.96, up $0.04)

October 65 calls (QCOM111022C00065000, $0.40, flat)

Entry Price:  $0.85 (7/11/11)

Exit Target: $1.70

Return:  -53%

Stop Target:  None 

Action:  The market makers wanted to keep shares under $55 on Friday although they reached a high of $55.50 as there were a lot of option bets made around the July 55 strike price.  We went with the October options to allow for the run to $70 play out and we were a little early.  Although we said last week when we entered the trade there was a chance for a test down to support at $55 (black line, red and green circles), there is also further risk to $53-ish.  However, a beat-and-raise on earnings should get the stock pushing $60 again.

TiVo (TIVO, $10.12, down $0.01)

August 11 calls (TIVO110820C00011000, $0.35, flat)

Entry Price:  $0.55 (7/1/11)

Exit Target: $1.10

Return:  -36%

Stop Target:  None 

Action:  TiVo is currently in a clearly defined trading range (yellow box) and will either breakout or breakdown once $10 (support, black line and orange circles) or $11 (red line, resistance) is violated.  TiVo could run to $18 on short covering, buyout news, or a partnership.  Our breakeven point is $11.55 and we have a little over a month to wait for a surge past $11. 

iShares Russell 2000 (IWM, $82.81, up $0.55)

August 86 calls (IWM110820C00086000, $0.85, up $0.05)

Entry Price:  $1.10 (7/1/11)

Exit Target: $2.20

Return:  -23%

Stop Target:  $0.55 

Action:  The chart shows a bull wedge (green lines) and a reverse head-and-shoulder pattern (red lines) which is also bullish.  The 52-week high is $86.81 and we are expecting a run to $89-$90 for the small-cap index by mid-August.

Freeport-McMoRan (FCX, $55.34, up $1.09)

August 57 calls (FCX110820C00057000, $1.80, up $0.35)

Entry Price:  $1.18 (7/1/11)

Exit Target: $2.40

Return:  53%

Stop Target:  $0.60

Action:  The company reports earnings on July 21 which should be the catalyst to take the stock to new highs or back under $50.  We think Freeport can trade to $60+ if the market holds up and they come in with better-than-expected earnings AND guidance.


Seattle Genetics (SGEN, $18.87, down $1.46)

August 22.50 calls (SGEN110820C00022500, $0.30, down $0.65)

Entry Price:  $1.10 (6/28/11)

Exit Target: $2.50

Return:  -73%

Stop Target:  $0.55 

September 20 calls (SGEN110917C00020000, $1.40, down $1.00) 

Entry Price:  $1.50 (5/9/11)

Exit Target: $3.00 (closed half at $2.20 on 6/8/2011)

Return:  20%

Stop Target:  $2.20   

Action:  There is strong support in the $18.50 area and down to $18 which is where shares traded at on Friday.  There is additional help down at $17 (black line, green circles) which represented prior resistance before the breakout.  

Symantec (SYMC, $18.97, flat)

October 20 calls (SYMC111022C00020000, $0.80, flat) 

Entry Price:  $0.93 (6/21/11)

Exit Target: $2.00  

Return:  -14%

Stop Target:  None

Action:  Shares are approaching their 100-day MA which is also near strong support at $18.65.  There could be a test down to this area but our target is $22 for Symantec over the next 3-6 months.  The company is set to report earnings on July 27. 

Rambus (RMBS, $14.16, up $0.13)

August 17 calls (RMBS110820C00017000, $0.25, flat)

Entry Price:  $0.60 (6/20/11)

Exit Target: $1.20+  

Return:  -58%

Stop Target:  None

Action:  If Rambus can win its current litigation case then expect a breakout and a run into the $20’s.  This is a day-to-day trial that could take a month or more so this trade carries risk and is already down over 50%.  However, this trade will make 5x the entry price if the stock trades $20 which is possible on a settlement – which could happen any day.

Rambus will report earnings next Thursday, July 21.  The stock held $14 (black line) all last week but could face pressure down to $13-and change (red line).  Resistance is at $15 (green line) and there is a big gap to fill from $15 up to $19 which was prior support. India (REDF, $13.44, up $0.84)

October 15 calls (REDF111022C00015000, $1.50, up $0.30)

Entry Price:  $1.25 (6/01/11)

Exit Target: $2.50

Return:  20%

Stop Target:  None

Action:  This trade made a nice comeback last week and it’s one we have been in for 6 weeks now.  Shares traded to a high of $13.57 on Friday but, more importantly, they cleared $13 (red line) which was strong resistance.  The October options have 3 months before they expire and remains a likely takeover target or could begin to rally on short-covering.  If so, there could be a run to $17-$18 gain (black line).  

MGM Resorts International (MGM, $14.93, up $0.21)

September 17 calls (MGM110917C00017000, $0.50, up $0.05)

Entry Price:  $0.70 (5/13/11)

Exit Target: $1.40

Return:  -29%

Stop Target:  None

Action:  Shares tried to get back above $15 on Friday which is short-term resistance (blue line).  We have over 2 months before these options expire and we are looking for shares to make a run at $17 once $15.75 is cleared.  Support is strong at $14. 

Other 2011 Portfolio OPEN positions (3):  These are trades that are still open in the portfolio that have longer expiration dates or are on “hold” but are not worth mentioning until they turn around.  This means we would not open any new positions.  We are still keeping track of the trades and we will record the results, accordingly, when we close them or the options expire.  Click on the 2011 Portfolio link in the Members Area to view ALL open/ closed trades.

RF MicroDevices August 10 calls (from February 2011)  

Dendreon August 50 calls (from April 2011)

Vivus September 10 calls (from May 2011)


These trades are NOT recommendations.  They are trades that we like but have not added to the portfolio as an official recommendation because of market conditions or because we are waiting for better entry prices.  We try not to have more than 12-15 open trades at any one time which is why we created a Watch List.  We will not list entry prices because these stocks are on the verge of breaking out or they could sell-off.

Travelzoo (TZOO, $77.09, up $2.04) 

August 90 calls (TZOO110820C00090000, $3.00, up $0.50)

August 60 puts (TZOO110820P00060000, $2.10, down $0.40)

Thoughts:  The 52-week high is $103, the low is $13.75.  Last time out shares moved over $20 and have moved higher in the last 4 quarters.  If the company can impress the Street, then the stock could hit triple-digits again.  If not a drop to double-nickels ($55) could be in the cards.  


Quality Systems (QSII, $86.72, down $0.75)

September 100 calls (QSII110917C00100000, $0.70, down $0.10)

Thoughts:  The 52-week high is $92.38 and the chart on Quality Systems is a thing of beauty.  There is strong support at $86 (black line, green circles) and if it holds we would expect shares to make a run back to $90 and new highs (red lines, orange circles).  

RealD (RLD, $20.09, up $0.32)

August 17.50 puts (RLD110820P00017500, $1.10, down $0.10)

Thoughts:  RealD is trying to hold support at $20 (red line, purple circles) and is having a rough time doing so.  Shares fell below $20 after they announced earnings but rebounded to test resistance (black line) at $25 before fading.  If $20 doesn’t hold then shares face risk down to $16 (orange line, green circles) which was prior resistance.  

Cisco Systems (CSCO, $15.59, up $0.16)

September 16 calls (CSCO110917C00016000, $0.60, up $0.07) 

Thoughts:  There is strong support down to $15 (black line, red circles) and there is a lot of accumulation going on with shares down at these levels.  A break above $16 (green line) could get the momentum going for a run back to $17-$18 by year-end (blue line).

Polycom (PLCM, $31.02, up $0.45)

August 33.75 calls (PLCM110716C00033750, $0.90, up $0.10)

Thoughts:  Polycom did a nice job of holding support (black line, red circles) just above $30.  These call options will double on a move back to new highs (green line).

Juniper Networks (JNPR, $30.63, up $0.27)

August 33 calls (110820C00033000, $0.65, up $0.10)

Thoughts:  Shares of Juniper are holding short-term support (red line, green circles) but still faces risk down to $29 (black line).  

Williams-Sonoma (WSM, $38.01, down $0.11)

August 39 calls (WSM110716C00039000, $1.20, flat)

Thoughts:  The stock has made a nice bounce off $35 (black line and is having trouble clearing resistance at $38 (red line).  If it can, then we expect a run to $40+ (green line).