On that note, Friday’s action was mixed as the Dow fell 43 points to end at 12,681. The index traded to a high of 12,740 which was just below our 12,800 resistance target (orange line) after clearing 12,600 on Thursday. We have been outlining a break above 12,800 as confirmation on a possible run to 13,000 all month. Support is incredibly strong at 12,350-12,400 (black line, blue circles) but this week could be extremely volatile. For the week, the Blue-Chips advanced 201 points, or 1.6%. For 2011, the Dow is up 9.5%.
The S&P 500 added a point to settle at 1,345. The index fell to a low of 1,336 on Friday but held serve after testing 1,346. Tuesday’s pop got the S&P back over 1,325 and Thursday’s rally over 1,334 set the table for a run at 1,350 which is still near-term resistance (blue line, red circles). If cleared, it would set the stage for a run at 1,375-1,400. The bears will target 1,334 and 1,325 again this week with major support coming in at 1,300 (black line, green circles). For the week, the S&P popped 29 points, or 2.2%. For the year, the index is up 6.9%.
The Nasdaq gained 24 points to close at 2,858. The index managed to reclaim the 2,800 level on Tuesday and the bulls held it all week, pushing it to a high of 2,862. Tech is still on track to challenge its 52-week high 2,887 (orange line) with a chance of 3,000, if cleared. Near-term support this week will be 2,800 with backup at 2,750 (black line, blue circles) and then the 200-day moving-average at 2,700. For the week, the Nasdaq jumped nearly 70 points, or 2.5%. YTD, the index is up 7.8%.
The Russell 2000 was flat for the day and finished at 841. The small-cap index managed to hold the 800 level after touching a low of 811 on Monday but managed to overtake the 820 level again on Tuesday which has been strong support (red line). 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. If 820 breaks again, the 800 (green line, black circles) level should provide further support. The Russell added 13 points, or 1.6% for the week, and is up 7.4% year-to-date.
The S&P Volatility Index (^VIX, 17.52, down 0.04) closed above the 20 level on Monday after testing, but never finishing, above this level the prior week. We have been saying this is an important level to watch and we said it could get “stretched” (black line, green circles) as the index ran up to 22 to begin the week. However, Tuesday’s advance brought the VIX back below 20 and the index trended lower the rest of the week. We also mentioned we liked the bulls’ fight last week in our Weekly Wrap and the rally off support has the market at the top of its trading range. If there is a breakout, look for the VIX to fall below 15 (blue line) and test its lows of the year.
Of course, all the cards will be on the table this week as something will get done, we would imagine, with the country’s debt crisis. Folks, if not, we may have to close ALL of our current bullish call options and buy put options but let’s hope this will not be the case.
Europe seems to be getting their debt concerns in order and if the zombies on the Hill can come up with a game plan then the market should hit new highs. If there is a delay, hesitation, or more dissention in Washington over raising the debt ceiling then the market will pull back or even worse, there will be a major correction. How far remains to be seen.
John Boehner mentioned over the weekend that he wanted to get something done so that the Asian markets wouldn’t get rattled and we have mentioned months ago Obama has gone on record rooting for Dow 14,000.
Needless to say, the ball was dropped once again as no deal has been made. Futures were weak all night and we are going to have a nasty open because of the ridiculous stalemate going on in our Nation’s capital. Although the trend is still higher, it looks like we will test support levels today.
Dow futures are down 82 points to 12,539 while the S&P futures are lower by 10 points to 1,331. Nasdaq futures are showing a decline of 14 points t o 2,413.
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.
Rambus (RMBS, $15.61, up $0.67)
September 17 calls (RMBS110917C00017000, $0.65, up $0.20)
Entry Price: $0.65 (7/22/11)
Exit Target: $1.30+
Stop Target: None
August 17 calls (RMBS110820C00017000, $0.30, up $0.05)
Entry Price: $0.60 (6/20/11)
Exit Target: $1.20+
Stop Target: None
Action: Rambus made a nice break above resistance at $15 (black line, green circle) after trading in a tight range following May’s huge sell-off. There looks to be a clear run to the next level of resistance which is just under $19 (red line, blue circles) and represented prior support.
We have been following this company for years and this could finally be the case that wins Rambus a windfall. The current litigation isn’t expected to end until August but we are hearing things could wrap up sooner than that. In other words, there could be a settlement or a verdict soon.
Broadcom (BRCM, $35.47, up $0.65)
August 38 calls (BRCM110820C00038000, $0.70, up $0.10)
Entry Price: $0.55 (7/20/11)
Exit Target: $1.10
Stop Target: None
Action: The company reports earnings today!
The red lines show a “symmetrical triangle” which forms during a trend as a continuation pattern and the next level of short-term resistance (black line, green circles) is at $36. If cleared, shares could make a quick trip to $38 (blue line, orange circles) with a shot at $40 which will be enough to get us out of the trade for a double.
Qualcomm (QCOM, $57.46, up $0.52)
October 65 calls (QCOM111022C00065000, $0.55, up $0.05)
Entry Price: $0.85 (7/11/11)
Exit Target: $1.70
Stop Target: None
Action: Qualcomm reported outstanding earnings last week but shares sold-off and tested strong support (black line, green circles) at $55 which was prior resistance (red circles). These options have 3 months before they expire and we are looking for a run past resistance at $60 (blue line) which will be a brick wall. If cleared, we believe Qualcomm can make a run to $70.
TiVo (TIVO, $10.29, up $0.21)
August 11 calls (TIVO110820C00011000, $0.25, flat)
Entry Price: $0.55 (7/1/11)
Exit Target: $1.10
Stop Target: None
Action: TiVo fell to the bottom of its trading range and is holding support at $10 (red line. If shares can break above resistance (green line, orange circles) $11 they have a little room to run. We are looking for a surge to $18 on short covering, buyout news, or a partnership. Our breakeven point is $11.55 and we have until mid-August to wait for a move.
iShares Russell 2000 (IWM, $84.05, up $0.11)
August 86 calls (IWM110820C00086000, $1.00, down $0.10)
Entry Price: $1.10 (7/1/11)
Exit Target: $2.20
Stop Target: $0.55
Action: The Russell got a nice bounce off support (black line, green circles) just above $81 and is at a crucial level heading into this week. The 52-week high is $86.81 and we would like to see a move above $85.50 this week which is short-term resistance (red line, blue circles) and prior support.
Freeport-McMoRan (FCX, $55.67, up $0.33)
August 57 calls (FCX110820C00057000, $1.45, up $0.20)
Entry Price: $1.18 (7/1/11)
Exit Target: $2.40
Stop Target: $1.40
Action: Shares face resistance at $57-$58 (black line, orange circles) which should lead to a pop to $60 is taken out. Support has been strong at $55 (red line, green circles) which was prior resistance.
Symantec (SYMC, $19.06, up $0.03)
October 20 calls (SYMC111022C00020000, $0.75, flat)
Entry Price: $0.93 (6/21/11)
Exit Target: $2.00
Stop Target: None
Action: Symantec will announce earnings on Wednesday. Shares reached a high of $19.55 last week which has been strong resistance (black line, orange circles) over the past few months. Support has been strong at $18.65 (red line, green circles) and our price target is $22 for Symantec over the next 3-6 months.
Rediff.com India (REDF, $11.33, up $0.51)
October 15 calls (REDF111022C00015000, $0.75, up $0.15)
Entry Price: $1.25 (6/01/11)
Exit Target: $2.50
Stop Target: $1.00
Action: The company reports earnings on Tuesday and is testing near-term support (red line, green circles). With earnings due out, shares will either challenge resistance (black line) near $14 on a beat-and-raise or plunge on an earnings miss.
MGM Resorts International (MGM, $15.80, up $0.22)
September 17 calls (MGM110917C00017000, $0.65, up $0.05)
Entry Price: $0.70 (5/13/11)
Exit Target: $1.40
Stop Target: None
Action: MGM cleared and closed above $15.75 on Friday which has been strong resistance (red line, black circle). The 52-week high is $16.95 (blue box) which will also be the next area of resistance (green line) if $15.75 holds this week. Support is strong at $14.50 (orange line).
Other 2011 Portfolio OPEN positions (6): 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)
Seattle Genetics August 22.50 calls (from June 2011)
Seattle Genetics September 20 calls (from May 2011)
Global Payments August 55 calls (from July 2011)
WATCH LIST SECTION
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.
Amgen (AMGN, $55.22, down $0.26)
August 55 calls (AMGN110820C00055000, $1.35, down $0.15)
Thoughts: The $55 level continues to act like a magnet for Amgen and is solid support (red line, black circles). The company reports earnings on July 29, before the bell, and there is a chance for a run to $57 (green line) if Wall Street likes what it hears. If not, a drop to $54 or under is in order.
Mead Johnson Nutrition (MJN, $69.08, down $0.69)
November 80 calls (MJN111119C00070000, $0.65, down $0.15)
Thoughts: Shares broke $70 last week and hit a 52-week high of $70.08. We think shares can trade north of $80 and looked poised to make a run to $100. The stock is in a bullish channel (green lines) and has been bouncing off the bottom of the uptrend (red circles) since its mid-March lows. Short-term support is at $68 (black line).
Quality Systems (QSII, $90.79, up $1.04)
September 100 calls (QSII110917C00100000, $1.00, up $0.10)
Thoughts: We listed these options last Monday at $x and they surged % for the week.
As you can see, shares made a nice bounce off support (red line, black circles) and are on the cusp of hitting blue-sky territory and all-time highs. The 52-week high is $92.38.
RealD (RLD, $18.08, down $0.19)
August 17.50 puts (RLD110820P00017500, $1.60, down $0.20)
Thoughts: RealD is right at support (black line, blue circles) and appears like it could test its next wave at $16 (red line, green circles). The 52-week low for the stock is $15.63, technically.
Polycom (PLCM, $30.69, up $1.76)
August 32.50 calls (PLCM110716C00032500, $0.70, up $0.10)
Thoughts: Shares made a nice reversal on Friday off support (black line) which was prior resistance (red circles). Shares could be headed to new highs if $30 holds but are right at the next wave of resistance (green line).
Williams-Sonoma (WSM, $38.78, up $0.64)
August 39 calls (WSM110716C00039000, $1.50, up $0.25)
Thoughts: Resistance is at $39 (black line, blue circles) and a break above $40 would be bullish. The 52-week high is $45.48 so we will be watching for a break above this level as confirmation for a breakout.