October 2011 | Members

MEMBERS AREA

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.

1:00pm

VMWare (VMW, $89.50, down $3.58)

November 105 calls (VMW111119C00105000, $1.35, down $0.15)

Entry Price:  $0.85 (10/13/11)
Exit Target: $1.70 (closed at $1.70 on 10/17/2011)

Return:  100%
Stop Target: 85 cents

Action:  This trade is now CLOSED.  We wanted to keep this trade open but we did the right thing by locking in a triple-digit return.  While there could be continued upside, earnings announcements are tricky.  We would have kept the trade open had we only been up a little but we already got rewarded before the risk comes out.


Rockwell Automation (ROK, $62.65, down $3.36)   

November 70 calls (ROK111119C00070000, $1.15, down $0.70)

Entry Price:  $1.10 (10/13/11)
Exit Target: $2.20

Return:  5%
Stop Target:  $1.15

Action:  Our stop of $1.15 has come into play so let’s close this position and take a small profit.  There are other trades we want to get in but we are disappointed with the pullback as the trade was up over 65% heading into today’s session.


SanDisk (SNDK, $46.48, down $0.31)

November 50 calls (SNDK111119C00050000, $1.45, down $0.05)

Entry Price:  $1.30 (10/13/11)
Exit Target: $2.60

Return:  12%
Stop Target: 65 cents

Action:  We plan to stay in this trade as long as $44 holds.  There is short-term resistance at $48 and the 52-week high for SanDisk is $53.61.  The company announces earnings on Thursday.  We are looking for a beat-and-raise on their conference call which could lead to a breakout and blue-sky territory.


Intuit (INTU, $52.56, down $0.45)

November 55 calls (INTU111119C00055000, $1.15, down $0.10)

Entry Price:  $0.95 (10/12/11)
Exit Target: $1.20

Return:  21%
Stop Target: 75 cents

Action:  Close the trade at current levels.  Let’s lock in profits to clear some room for some high beta names – or some puts in case the market continues lower and falls back into its trading range.    


O’Reilly Automotive (ORLY, $69.30, down $0.52)

November 75 calls (ORLY111119C00075000, $0.50, down $0.05)

Entry Price:  $0.55 (10/10/11)
Exit Target: $1.10
Return:  -9% 
Stop Target:  None

Action:  Shares have traded above $70 so we are going to keep this one open.  These are “cheap” out-of-the-money calls and we are looking for new highs for the stock.


Potash (POT, $49.18, down $1.52)

November 52.50 calls (POT111119C00052500, $1.30, down, $0.55)

Entry Price:  $1.00 (10/6/11)
Exit Target: $2.00
Return:   25% 
Stop Target:  $1.05, raise to $1.25 (HARD STOP)

Action:  Our HARD STOP of $1.25 was hit this morning so this trade is officially close.  We will be back to trade Potash, shortly.


Seattle Genetics (SGEN, $20.16, down $0.71)

November 17.50 puts (SGEN111119P00017500, $0.80, up $0.10)

Entry Price:  $0.60 (10/5/11)
Exit Target: $1.20

Return:  33%
Stop Target: None

Action:  Continue to hold and wait for the break below $20.    
 

Rambus (RMBS, $16.18, down $0.43)

November 16 calls (RMBS111119C00016000, $3.40, down $0.40)

Entry Price:  $2.40 (9/26/11)
Exit Target: $5+
Return:  42% 
Stop Target:  $2.00

Action:  Continue to hold.


Spreadtrum Communications (SPRD, $21.07, down $0.54)

January 25 calls (SPRD120121C00025000, $1.70, down $0.20)

Entry Price:  $1.50 (9/9/11)
Exit Target: $2.80
Return:  13%
Stop Target:  75 cents

Action:  Continue to hold.


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.

Symantec October 20 calls (from June 2011)
Rediff.com India October 15 calls (from June 2011)
Qualcomm October 65 calls (from July 2011)
Clean Energy October 15 calls (from August 2011)
JDSU Uniphase January 20 calls (from August 2011)
                     January 16 calls (from August 2011)
Lufkin Industries December 80 calls (from September 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.

We will update this section in the morning.

************************************

11:00am (EST) 

VMWare (VMW, $92.22, down $0.86)

November 105 calls (VMW111119C00105000, $1.70, up $0.20)

Entry Price:  $0.85 (10/13/11)
Exit Target: $1.70

Return:  100%
Stop Target: 85 cents

Action:  Despite shares being down over 1%, these options are getting a bid as the company reports after the bell.  Let’s remove the risk of this event and lock in profits.  Close the trade at current levels.

******************************

9:00pm (EST) continued…

The Dow jumped 166 points, or 1.5%, to settle at 11,644.  The blue-chips made a strong run past resistance at 11,200 and 11,350 (green line, brown circles) which is now short-term support.  We said to look for a close above 11,600 (blue line, black circles) by week’s end which now opens the door for a test to 11,800 and possibly 12,000 (orange line, green circles) which is home of the 200-day moving average.  The Dow started the week at 11,103 and managed to gain 541 points, or 4.9%.  This brought the blue-chips back into the green for 2011 as the index is now up 67 points, or 0.6%, YTD.

The S&P 500 advanced 21 points, or 1.7%, to finish at 1,224 – point 58.  The index made a strong push past resistance at 1,200 (blue line, orange circles) on Wednesday and held on Thursday which was key.  We were looking for a close above 1,225 on Friday but its close enough for government work.  The next area of resistance lies at 1,250 (green line, black circles) and there will be a battle at 1,275 (orange line, green circles) and the 200-day MA.  If these levels are achieved then the bulls could be looking for a run to 1,300 by Christmas.  The S&P started Monday at 1,155 and added nearly 70 points, or 6%, for the week.  For the year, the index is still showing a loss of 33 points, or 2.6%.

The Nasdaq soared 48 points, or 1.8%, to settle at 2,667.  Tech rebounded back above 2,500 (blue line, brown circles) on Monday and never looked back.  We mentioned last week there was a chance the bulls could push resistance at 2,600 (green line, orange circles), which is now short-term support, and they did so with ease.  The next test will come at 2,700-2,750 (purple line, red circles).  For the week, the Nasdaq surged 189 points, or 7.6%, after starting Monday’s session at 2,479.  For 2011, Tech is now up 27 points, or 0.6%.

The S&P Volatility Index (^VIX, 28.24, down 2.46) fell 8% on Friday and back below 30 (orange line, purple circles) after starting the week at 36.  We knew on Wednesday when the VIX traded down to 29.79 the bulls could end the week with a bang.  A move down near 22.5 (green line, black circles) is possible on a full-fledged rally but a break back above 30 would mean we could be still stuck in a trading range.  The bears will be looking to get back near 40 (blue line, black circles) if support levels start to fall.

Last week was the start of 3Q earnings season but this week will be the heart as over half of the Dow’s components will be reporting and a quarter of the S&P 500 companies will announcing their numbers.

We got a lot of clues from last week to stay long and strong and we said on Friday that this Monday is usually bullish.  However, we also know this is options expiration week so anything and we mean anything, can happen.  Everything is looking bullish and we have done well over the past few weeks by being a contrarian as the pros and talking heads were calling for a pullback.  However, the price action was clearly visible on the break above resistance and there were people who got caught on Friday shorting into the weekend.

We also said on a breakout the chase could be on as fund managers try to make up for the double-digit losses from the 3rd quarter and will be trying to play catch-up for the year.

We mentioned at the beginning of the month that statistically, October, which has been known to be the month of big crashes, averages gains of 0.6% for the month.  Well guess what?  We may have already seen the October crash which happened on the 4th.

The bounce since has been phenomenal to say the least.  We will still keep an eye on our downside targets but the trend is still up for now.  We could see a slight pullback after this week as Europe’s uncertainty gets closer but let’s enjoy the ride first.  We should know something by the first week of November on if “the plan” is going to work or not.  If there are no speed bumps, the bulls should cruise to new highs by year-end but if there is, or Europe’s debt doesn’t get resolved – the bears could push new lows.


MEMBERS AREA

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.


VMWare (VMW, $93.08, up $2.47)

November 105 calls (VMW111119C00105000, $1.50, up $0.45)

Entry Price:  $0.85 (10/13/11)
Exit Target: $1.70

Return:  76%
Stop Target: 85 cents

Action:  There is short-term resistance at $95 (black line, green circles) but if shares get a pop on better-than expected numbers, we could see $100+ (blue line, purple circles) stock price.  The 52-week high is north of $111 (burgundy circle).

Rockwell Automation (ROK, $66.01, up $2.55)

November 70 calls (ROK111119C00070000, $1.85, up $0.55)

Entry Price:  $1.10 (10/13/11)
Exit Target: $2.20

Return:  68%
Stop Target:  55 cents, raise to $1.15

Action:  We got our close above $65 (green line, black circles) on Friday and then some.  There is short-term resistance at $70 (blue line, brown circle) but we are expecting a run to $80 (purple line, orange circles).


SanDisk (SNDK, $46.79, up $0.86)

November 50 calls (SNDK111119C00050000, $1.50, up $0.20)

Entry Price:  $1.30 (10/13/11)
Exit Target: $2.60

Return:  15%
Stop Target: 65 cents

Action:  We got into this trade on Thursday after the break above $44 (black line, green circles).  There is short-term resistance at $48 (blue line, red circles).  The 52-weel high for SanDisk is $53.61 and the company announces earnings on October 20.  We are looking for a beat-and-raise on their conference call which could lead to a breakout and blue-sky territory.

Intuit (INTU, $53.01, up $1.02)

November 55 calls (INTU111119C00055000, $1.25, up $0.25)

Entry Price:  $0.95 (10/12/11)
Exit Target: $1.20

Return:  32%
Stop Target: 75 cents

Action:  The break above $52 (black line, green circles) on Friday was beautiful and represented resistance.  We have a near-term price target of $54-$55 (blue line, orange circles) for Intuit but there is a chance shares could push $60.  The 52-week high is $56.46 (burgundy circle) and if taken out would also represent an all-time high.  Usually this leads to a nice run afterwards as there is no overhead resistance.  Earnings announcement is due out in mid-November.

O’Reilly Automotive (ORLY, $69.82, up $1.11)

November 75 calls (ORLY111119C00075000, $0.55, up $0.10)

Entry Price:  $0.55 (10/10/11)
Exit Target: $1.10
Return:  0% 
Stop Target:  None

Action:  Shares traded to a high pf $69.85 on Friday and we were looking for a close above $70 (black line, green circles).  The 52-week high is $72 (orange line, blue circle) and we could see a breakout once $70 is cleared.

Potash (POT, $50.70, up $1.49)

November 52.50 calls (POT111119C00052500, $1.85, up $0.35)

Entry Price:  $1.00 (10/6/11)
Exit Target: $2.00
Return:   85% 
Stop Target:  $1.05, raise to $1.25 (HARD STOP)

Action:  We got our close above $50 (green line, orange circles) Friday.  There is short-term resistance at $52 (blue line, black circles) but we are expecting a run to $54-$55 (brown line, green circles) which would get these options to $2.50 or more depending on how fast we get there.  We have set a stop in place to protect profits and will likely raise it as shares move up.

 Seattle Genetics (SGEN, $20.87, down $0.02)

November 17.50 puts (SGEN111119P00017500, $0.70, down $0.05)

Entry Price:  $0.60 (10/5/11)
Exit Target: $1.20

Return:  17%
Stop Target: None

Action:  If shares break above $21.50 (orange line, green circles) we will probably close the trade.  We are looking for a break below $20 (black line, blue circles) and shares hit a low of $20.50 last week.

Rambus (RMBS, $16.61, down $0.05)

November 16 calls (RMBS111119C00016000, $3.80, down $0.05)

Entry Price:  $2.40 (9/26/11)
Exit Target: $5+
Return:  58% 
Stop Target:  $2.00

Action:  Rambus made a big run past resistance at $16 (orange line, purple circles) on Thursday as shares reached a high of $16.94 on Friday.  This area should serve as short-term support.  We will likely get called away from this name as well as the options are well in-the-money and we still think Rambus will test $19-$20 – shortly.

One curveball could be in play, however, as the company does announce earnings on Thursday.  The books have been improving as Rambus seems to have turned the corner and could be a growth play.  If they miss expectations there could be a pullback to $14 (black line, green circles) but we doubt this will be the case.

Spreadtrum Communications (SPRD, $21.61, up $0.36)

January 25 calls (SPRD120121C00025000, $1.90, up $0.20)

Entry Price:  $1.50 (9/9/11)
Exit Target: $2.80
Return:  27%
Stop Target:  75 cents

Action:  Shares started the week just below $19 (black line, orange circles) and surged 15% for the week.  We are looking for a breakout above $22 (green line, blue circles) which represents “blue-sky territory”.

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.

Symantec October 20 calls (from June 2011)
Rediff.com India October 15 calls (from June 2011)
Qualcomm October 65 calls (from July 2011)
Clean Energy October 15 calls (from August 2011)
JDSU Uniphase January 20 calls (from August 2011)
January 16 calls (from August 2011)
Lufkin Industries December 80 calls (from September 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.


Qualcomm (QCOM, $54.98, up $1.67)

November 60 calls (QCOM111119C00060000, $0.70, up $0.25)

Thoughts:  The break above $52 (black line, purple circles) was bullish.  If Qualcomm can break $55 (green line, orange circles), then we may use the options for a quick run to $58 (blue line, black circles).  This is our new favorite trade for this week and we would buy the options up to $1 on the move above double nickels.

Baidu (BIDU, $137.60, up $4.63)

November 160 calls (BIDU111119C00160000, $3.00, up $0.75)

Thoughts:  We can expect a run to $140 (blue line, green circles) after the break above $130 (black line, orange circles).  Shares could be setting up for a run to $150 (brown line, purple circles).


First Solar (FSLR, $56.23, down $0.62)

November 70 calls (FSLR111119C00060000, $1.50, down $0.25)

November 40 puts (FSLR111119P00040000, $1.15, flat)

Thoughts:  If shares move above $60, the November 70’s could be used for a quick trade but we just don’t trust this stock.


Here is the chart we profiled in August and as you can see we should have went with October puts:

Blue Nile (NILE, $41.24, down $0.20)

November 45 calls (NILE111119C00045000, $1.70, down $0.30)

Thoughts:  We liked the break above $40 (black line, green circles) and we think shares can run to $45 (orange line, blue circles).  Support is at $37 (green line).

iRobot (IRBT, $29.60, up $0.73)

November 30 calls (IRBT111119C00030000, $1.70, up $0.20)

Thoughts:  Shares made a nice break out of the trading range (blue box) when $28 was cleared and appear headed to $30 (green line, black circles).  If $30 is taken out then look for a run to $34 (orange line, purple circles).

Vivus (VVUS, $8.58, up $0.10)

March 10 calls (VVUS120317C00010000, $1.90, up $0.10)

December 10 calls (VVUS111217C00010000, $0.40, down $0.05)

Thoughts:  Vivus made it back to over $8 (green line, blue circles) on Monday and closed above this level all week as shares went out at the highs on Friday.  There is strong resistance at $9 (orange line, black circles) while support is at $7.50 (purple line, orange circles) should shares retreat below $8 again.