We knew the bulls would have a hard time making something out of nothing following Wednesday’s headwinds in the market place. Although the bears’ won yesterday’s session, all 3 major indexes held support with the Dow and S&P 500 still showing a gain for the week. Tech had a hard time getting out of Apple’s (AAPL, $398.62, down $23.62) way as shares fell nearly 6% and closed below $400.
The Dow dropped 72 points, or 0.6%, to end at 11,504 while the S&P 500 fell 16 points, or 1.3%, to finish at 1,210. The Nasdaq tanked 53 points, or 2%, to settle at 2,604.
There were some stocks that showed strength while others continued to get hammered.
Green Mountain Coffee Roasters (GMCR, $69.80, down $12.31) shares fell off a cliff after our midday update yesterday and we have been monitoring the stock on our Watch List all week. We have played options in the past on this name and we said the chart was pointing at a trip to $75, possibly $65, if $80 didn’t hold.
We were looking at a November “strangle” trade for Green Mountain Coffee but the premiums were just too expensive. However, we should have hopped on the October 80 puts (GMCR111022P00080000, $10.35, up $8.80), which soared 567% after opening at $1.65 and trading down to 88 cents, as soon as $80 was taken out yesterday. Wow.
First Solar (FSLR, $51.07, down $4.84) continues to break down like a rented mule and we said when shares fell below $100 the drop back in August could be nasty. The stock hit a fresh 52-week low of $50.88 and it gets even scarier if shares fall below $50. More specifically, a drop below $47.50 could lead to the $20’s. Yikes!
First Solar is also on our Watch List as strangle option trade but the options were juiced-up and we didn’t want to pay the extra premium. In fact, all of the options are expensive due to the volatility so we may have to sit this one out as well.
Some of our trading course members emailed us and thanked us for the good chart work but we are disappointed we didn’t catch these tigers by the tails to make them official recommendations. However, we are working on a 17-trade win streak since mid-August but the action is getting choppy as the bulls look to break out of the current matrix.
Of course, the bears are doing all they can to keep the action inside the trading range and we are setting up for some nice action here over the next few weeks. We have one foot and one toe on the bulls’ side while we wait for a clear signal but we also know the bears’ attacks can be brutal.
This Friday is option expiration for the October chains so expect continued volatility.
Our portfolio is fairly light and we are in a perfect position to benefit the next move up, or down. We do have a few open call positions that are holding up well and we also have a current put trade in place for a stock we are expecting to drop.
Futures are pointing towards a slow start despite some good earnings reports which we will cover at lunch. Dow futures are up 2 points to 11,446 while the S&P futures are higher by a point to 1,207. The Nasdaq 100 futures are showing a decline of 3 points and are at 2,316. Subscribers, check the Members Area for the fresh updates.