October 2011 | Members

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 “Profit 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.

1:30pm (EST)

Skyworks Solutions (SWKS, $19.99, down $0.40)

January 25 calls 2012 (SWKS120121C00025000, $0.85, down $0.10)

Entry Price:  $0.80 (10/31/11)
Exit Target: $1.60
Return:  6%
Stop Target:  None

Action:  Skyworks announces earnings this Thursday and we think they could surprise to the upside.  Estimates are for 53 cents a share on $400 million in sales.  The high estimate by the 17 analysts who follow the stock is 54 cents so there is a lot of room for shares to be “upgraded” if the company can come in with a number north of 55 cents.   

We went with the January options to allow some momentum to build on a better-than-expected earnings beat but there is risk to the mid-teens if Skyworks comes up short.


Alcoa (AA, $11.02, down $0.55)

November 12 calls (AA111119C00012000, $0.16, down $0.14)

Entry Price:  $0.18 (10/28/11)
Exit Target: $0.36 (closed half at $0.32 on 10/28/11)
Return:  33%
Stop Target:  None

December 13 calls (AA111217C00013000, $0.14, down $0.09)

Entry Price:  $0.15 (10/28/11)
Exit Target: $0.36
Return:  -7%
Stop Target:  None

Action:  If shares dip below $11, we would like to see $10.50 hold.


Vivus (VVUS, $9.26, up $0.06)     

December 10 calls (VVUS111217C00010000, $0.55, flat)

Entry Price:  $0.50 (10/28/11)
Exit Target: $1.00
Return:  10%
Stop Target:  None

March 12 calls 2012 (VVUS120317C00012000, $1.65, flat)

Entry Price:  $1.55 (10/28/11)
Exit Target: $3.10
Return:  6%
Stop Target:  75 cents

Action:  Continue to hold.


Taiwan Semiconductor Manufacturing (TSM, $12.64, down $0.10)

December 12.50 calls (TSM111217C00012500, $0.65, down $0.10)

Entry Price:  $0.50 (10/26/11)
Exit Target: $1.00
Return:  30%
Stop Target:  50 cents

Action:  We would like to see $12.50 hold today.


Pepsico (PEP, $63.25, up $0.05)

January 65 calls 2012 (PEP120121C00065000, $1.00, up $0.05)

Entry Price:  $0.70 (10/24/11)
Exit Target: $2.40
Return:  43%
Stop Target:  None 

Action:  Continue to hold.


Qualcomm (QCOM, $52.06, down $1.17)

November 57.50 calls (QCOM111119C00057500, $0.40, down $0.10)

Entry Price:  $0.95 (10/18/11)
Exit Target: $1.50-1.90
Return:  -58%
Stop Target:  None

Action:  The company will announce earnings on Wednesday and we are looking for a break above $55 on better-than-expected results.


Potash (POT, $47.91, down $2.06)

November 52.50 calls (POT111119C00052500, $0.40, down $0.35)

Entry Price:  $1.20 (10/18/11)
Exit Target: $1.80-$2.40
Return:  -67%
Stop Target:  None

Action:  Continue to hold but we may drop coverage until there is a rebound.


Rambus (RMBS, $17.80, down $0.06)

November 16 calls (RMBS111119C00016000, $3.15, flat)

Entry Price:  $2.40 (9/26/11)
Exit Target: $5+ (closed half at $3.05 on 10/20/11)
Return:  29% 
Stop Target:  $2.45

Action:  Continue to hold.           


Spreadtrum Communications (SPRD, $25.88, flat)     

January 25 calls 2012 (SPRD120121C00025000, $3.40, flat)

Entry Price:  $1.50 (9/9/11)
Exit Target: $2.80 (closed half at $2.90 on 10/27/11)
Return:  110%
Stop Target:  $2, raise to $2.50

Action:  Continue to hold.  


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.

JDSU Uniphase January 20 calls (from August 2011)
                     January 16 calls (from August 2011)
Lufkin Industries December 80 calls (from September 2011)

Seattle Genetics November 17.50 puts (from October 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.

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10:30am (EST)

NEW TRADE!!!

Skyworks Solutions (SWKS, $19.79, down $0.50)

Buy to OPEN January 25 calls (SWKS120121C00025000, $0.80, down $0.15)

Action:  Use limit orders up to 85-90 cents but do not pay over 95 cents to establish positions.  Volume is pretty brisk in these calls so let’s go with the flow.

The company announces earning this Thursday and we think they could surprise to the upside.  We are going to go with the January options to allow some momentum to build on a better-than-expected earnings beat but there is risk to the mid-teens if Skyworks comes up short.

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9:00am (continued)

The Dow added 23 points, or 0.2%, to settle at 12,231.  The blue-chips made a strong run past resistance at 12,200 (orange line, purple circles) which was our upper-end target from last week.  The next run by the bulls could get the index to 12,600 (black line, green circles) over the near-term and the July highs.  Support is at 12,000 and the 200-day MA should there be a pullback but we have penciled in 11,900 (green line, black circles) if things get stretched.  The Dow started Monday at 11,808 and managed to gain 422 points, or 3.6%, for the week.  The index is now up 654 points, or 5.6%, YTD.

The S&P 500 gained a half-point on Friday, or 0.04%, to finish at 1,285.  The index made a strong push past resistance at 1,250 (blue line, green circles) on Thursday and we mentioned a test to 1,275 and the 200-day MA could be in play last week.  The bulls will try to clear 1,300 (black line, orange circles) next with a chance at 1,325 if the momentum lasts.  If these levels are achieved then the bulls could be looking for a run to 1,350 (purple line, brown circles) by Thanksgiving or Christmas.  The S&P was at 1,238 to start the week and advanced 47 points, or 3.8%, by the end of Friday’s session.  For the year, the index is now showing a gain of 28 points, or 2.2%.

The Nasdaq slipped a little over a point, or 0.05%, to settle at 2,737.  Tech rebounded and made a run at 2,750 (purple line, black circles) before finishing just below this level to end the week.  The next test comes at the July highs and 2,850 (blue line, brown circles).  Support is at 2,600 (green line, orange circles).  For the week, the Nasdaq surged nearly 100 points, or 3.8%, after starting Monday’s session at 2,637.  For 2011, Tech is up 85 points, or 3.2%.

The S&P Volatility Index (^VIX, 28.24, down 2.46) fell 15% on Thursday after hovering near 30 (orange line, purple circles) for much of the week.  We have been mentioning a possible move down to 22.5 (green line, black circles) on a continued rally and a reading below 20 could be in the cards if the market rallies thru year-end.

With 3Q earnings winding down, we were surprised to see some weakness in some of the higher echelon stocks.  Amazon.com (AMZN, $217.32, up $10.54) dipped below $200 after falling nearly $30 on Wednesday but made a nice recover by Friday.  3M (MMM, $81.00, down $0.41) fell $5 after they announced but also recovered on Thursday’s big pop.

Things weren’t all bad though as F5 Networks (FFIV, $107.63, up $1.91) and Caterpillar (CAT, $96.85, up $0.58) said some good things.

There will be some big names reporting earnings but with the market will more likely focus on economic news this week while keeping an eye on Europe’s developments.  While Wall Street knows their problems weren’t solved overnight, it seems traders are putting the euro-zone crisis on the side burner for now but will still be watching to see if things start to boil over again.

We mentioned in our Daily that the “Super Committee” will be in the spotlight here at home and their plans on reducing the deficit need to be in place before Thanksgiving.  This could become another circus like the one we saw in August but maybe the politicians learned their lesson.  Nah…

If by chance, the Super Committee does show some serious spending cuts and things go smooth then expect the market to challenge new highs for the year sometime in December.  There is still plenty of headline risk for the market and there could be a skeleton or two that sneaks out of the closet but for the most part, we don’t see a double-dip recession coming with 75% of the companies reporting, beating earnings.


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 “Profit 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.


Alcoa (AA, $11.57, up $0.37)

November 12 calls (AA111119C00012000, $0.30, up $0.10)

Entry Price:  $0.18 (10/28/11)
Exit Target: $0.36 (closed half at $0.32 on 10/28/11)
Return:  72%
Stop Target:  None

December 13 calls (AA111217C00013000, $0.23, up $0.07)

Entry Price:  $0.15 (10/28/11)
Exit Target: $0.36
Return:  53%
Stop Target:  None

Action:  Shares made a nice break past resistance at $10.50 (black line, green circles) and will look to challenge $12 (orange line, brown circles) this week.  Longer-term $14 (purple line, black circle) will be in play as long as $10.50 holds.

Vivus (VVUS, $9.20, down $0.03)

December 10 calls (VVUS111217C00010000, $0.55, up $0.05)

Entry Price:  $0.50 (10/28/11)
Exit Target: $1.00
Return:  10%
Stop Target:  None

March 12 calls 2012 (VVUS120317C00012000, $1.65, up $0.10)

Entry Price:  $1.55 (10/28/11)
Exit Target: $3.10
Return:  6%
Stop Target:  75 cents

Action:  Vivus made a break above resistance at $9 (orange line, black circles) on Thursday’s big move in the market so we can’t get too excited as it could have beena tide that lifts all boats.  However, if $9 can become new support, we are good to go.  The next area of resistance lies at $10 (green line, purple circles) and if $9 doesn’t hold there is risk down to $8 (blue line, brown circles).  Vivus reports earnings on Monday.

Taiwan Semiconductor Manufacturing (TSM, $12.74, down $0.18)

December 12.50 calls (TSM111217C00012500, $0.75, down $0.10)

Entry Price:  $0.50 (10/26/11)
Exit Target: $1.00
Return:  50%
Stop Target:  50 cents

Action:  Shares made a strong break above $12.50 (black line, purple circles) and the 52-week high is $14 which we expect to challenge over the next 2 months.  There will be a test at $13.50 (orange line, green circles) but at $14, the options would be worth at least $1.50 so there is a chance we could make 200% with this trade.

 Pepsico (PEP, $63.20, up $0.88)

January 65 calls (PEP120121C00065000, $0.95, up $0.10)

Entry Price:  $0.70 (10/24/11)
Exit Target: $2.40
Return:  36%
Stop Target:  None

Action:  Shares appear to be making a run at $64 (black line, orange circles) and if cleared could challenge $67 (blue line, brown circles) by year-end.  A drop below support at $62 (purple line, green circles) would force us out of the trade.

Qualcomm (QCOM, $53.23, down $0.09)

November 57.50 calls (QCOM111119C00057500, $0.50, down $0.05)

Entry Price:  $0.95 (10/18/11)
Exit Target: $1.50-1.90
Return:  -47%
Stop Target:  None

Action:  The company will announce earnings on Wednesday and we are looking for a break above $55 (Orange line, purple circles) on better-than-expected results.  If Qualcomm disappoints, shares could easily fall below $52 (black line, green circles) and into the $40’s again.

Potash (POT, $49.97, down $0.93)

November 52.50 calls (POT111119C00052500, $0.75, down $0.50)

Entry Price:  $1.20 (10/18/11)
Exit Target: $1.80-$2.40
Return:  -38%
Stop Target:  None

Action:  Potash dipped below $50 (black line, blue circles) on Friday despite strong earnings last week.  If shares can reach $54 ( over the next 3 weeks this trade will be a double as the options would be worth at least $2.50.  A break below $48 (green line) would spell trouble.

Rambus (RMBS, $17.86, down $0.19)

November 16 calls (RMBS111119C00016000, $3.15, down $0.20)

Entry Price:  $2.40 (9/26/11)
Exit Target: $5+ (closed half at $3.05 on 10/20/11)
Return:  29% 
Stop Target:  $2.45

Action:  Shares are at multi-year resistance and if they can clear $18 (black line, orange circles), then we could see a quick run to $22 (green line, brown circles).  However, if the company gets a favorable ruling in their ongoing litigation case then we could see shares easily challenge $$26-$30.  Support is at $16 (purple line, blue circles).

Spreadtrum Communications (SPRD, $25.88, up $0.52)

January 25 calls (SPRD120121C00025000, $3.40, up $0.40)

Entry Price:  $1.50 (9/9/11)
Exit Target: $2.80 (closed half at $2.90 on 10/27/11)
Return:  110%
Stop Target:  $2, raise to $2.50

Action:  Spreadtrum had another strong week and added 13% while hitting all-time highs in the process.  Shares started the week just above $22 (green line, blue circles) which was resistance and should act as short-term support should shares retreat below $24 (orange line).  The beauty of this trade is the stock is at all-time highs so there is no overhead resistance.

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.

JDSU Uniphase January 20 calls (from August 2011)
January 16 calls (from August 2011)
Lufkin Industries December 80 calls (from September 2011)

Seattle Genetics November 17.50 puts (from October 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.


MGM Resorts (MGM, $12.02, up $0.30)

November 11 calls (MGM111119C00010000, $1.35, up $0.20)

Thoughts:  Shares surged 17% for the week and easily cracked resistance at $11 (orange line, purple circles) which is now short-term support.  Headwinds are at $13 (black line, purple circles) and the 200-day MA but this is a going to be a $15 stock in 2012.  If $11 should fall, multi-year support is strong at $10 (blue line, brown circles).  MGM will report earnings on Thursday.

Newpark Resources (NR, $9.23, down $0.11)

December 10 call (NR111217C00010000, $0.45, flat)

March 10 calls (NR120317C00010000, $1.05, flat)

Thoughts:  Newpark jumped 11% for the week and cleared another wave of resistance which was at $9 (brown line, green circles) and will now serve as short-term support.  The next test comes at $9.50-$10 (blue line, purple circles) which represents multi-year highs.  A run to $15 is possible over the next 3-6 months.  Backup support is strong at $8 (orange line, black circles).

U.S. Bancorp (USB, $26.03 $0.19)

December 26 calls (USB111217C00026000, $1.10, down $0.20)

Thoughts:  The break above $25.50 (black line, green circles) was bullish and we are looking for shares to challenge $27+ (purple line, blue circle) on continued strength.

Las Vegas Sands (LVS, $48.13, up $2.73)

December 55 calls (LVS111217C00055000, $0.75, up $0.25)

January 55 calls (LVS120121C00055000, $1.50, up $0.60)

Thoughts:  We profiled strangle trade that did incredible well last week but it wasn’t an official recommendation.  Shares were up 6% on Friday on good earnings and appear ready to challenge $50 after the break above $46 (black line, green circles).  There is a chance shares could soar to $60 if $55 (purple line, orange circle) is cleared.  We are looking at adding the December 55 calls or the January 55’s.

SkullCandy (SKUL, $17.46, up $0.46)

December 17.50 calls (SKUL111217C00017500, $1.30, up $0.30)

Thoughts:  Possible short-squeeze coming if shares can clear $18 (black line, purple circles) and then $20 (orange line, green circles).

SanDisk (SNDK, $53.38, up $1.37)

December 60 calls (SNDK111119C00052500, $0.95, up $0.35)

January 60 calls 2012 (SNDK120121C00060000, $1.60, up $0.30)

Thoughts: The break above $50 (black line, green circles) was bullish and should serve as support.  Shares could easily make a run to $60-$65 if overhead resistance at $55 is cleared.