April 2012 | 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 a “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.

1:35pm (EST)

Caterpillar (CAT, $103.26, down $2.61) 

May 90 puts (CAT120519P00090000, $0.95, up $0.25)

Entry Price:  $0.90 (4/9/12)
Exit Target: $1.80
Return:  6%
Stop Target:  None

Action:  We are looking for a drop below $100 this week.

 

Tiffany & Company (TIF, $67.18, down $0.40)

May 62.50 puts (TIF0519P00062500, $0.95, up $0.15)

Entry Price:  $1.05 (4/9/12)
Exit Target: $2.10
Return:  -10%
Stop Target:  None

Action:  We believe shares could test $60 which gets the put options to $2.50. 

 

Acuity Brands (AYI, $54.38, down $2.06)

May 50 puts (AYI120519P00050000, $1.10, up $0.30)

Entry Price:  $0.55 (4/5/12)
Exit Target: $1.10
Return:  100%
Stop Target:  None

Action:  Our near-term target is for a drop below $50.

 

Lululemon Athletica (LULU, $75.60, down $1.46)

May 67.50 puts (LULU120519P00067500, $1.00, up $0.15)

Entry Price:  $1.05 (4/4/12)
Exit Target: $2.10
Return:  -5%
Stop Target:  50 cents

Action:  We would like to see a close below $75 today.   

 

C.H. Robinson Worldwide (CHRW, $63.85, down $1.27)

May 60 puts (CHRW120519P00060000, $0.90, up $0.20)

Entry Price:  $0.65 (4/4/12)
Exit Target: $1.30
Return:  38%
Stop Target:  None 

Action:  The 52-week low is $62.30 and our-near-term target is a test down to $60, possibly $55.

 

BroadSoft (BSFT, $38.57, down $1.20)

May 35 puts (BSFT120519P00035000, $1.90, up $0.30)

Entry Price:  $1.35 (4/2/12)
Exit Target: $2.25
Return:  41%
Stop Target:  $1.20

Action:  The break below $40 and the uptrend line was bearish.  Our near-term target is $35 and a break below the 200-day at $34 would really get interesting.

 

Apache (APA, $94.37, down $1.50)

April 92.50 puts (APA120421P00092500, $1.30, up $0.45)

Entry Price:  $0.90 (3/29/12)
Exit Target: $1.80 (closed half at $1.40 on 4/9/12)
Return:  560%
Stop Target:  90 cents (HARD STOP)

Action:  We closed half of the trade earlier today to lock-in profits.  We have set a Hard Stop of 90 cents on the other half of the trade.

 

Potash (POT, $44.09, down, $1.04)

April 42.50 puts (POT120421P00042500, $0.45, up $0.20)

Entry Price:  $0.55 (3/29/12)
Exit Target: $1.10
Return:  -18%
Stop Target:  None

Action:  Our near-term target is $43 but shares could test $40 if the market continues to pullback.

 

First Solar (FSLR, $20.27, down $0.71)

May 19 puts (FSLR120519P00019000, $1.90, up $0.30)  

Entry Price:  $0.75 (3/28/12)
Exit Target: $1.50
Return:  153%
Stop Target:  $1.20, raise to $1.30 (HARD STOP)

Action:  We closed the April 23 put options for a 171% gain and as much as we wanted to leave it open we felt it was best to lock-in profits.  We are hoping multi-year support at $20 cracks but if it doesn’t the time premium will get zapped on the April options which is we cashed out.  The May options will continue to surge on a drop below $20 but we have raised the Hard Stop in case shares hold support.

   

Arena Pharmaceuticals (ARNA, $3.18, up $0.11)  

May 3.50 calls (ARNA120519C00003500, $1.00, up $0.10)  

Entry Price:  $0.85 (3/26/12)
Exit Target: $1.70 (closed half at $1.10 on 3/14/12) 
Return:  24%
Stop Target:  70 cents (Hard Stop) 

Action:  Arena will meet with the Endocrinologic and Metabolic Drugs Advisory Committee in early May to discuss the safety and efficacy of its obesity drug, Lorcaserin.  We expect a good outcome from the committee which will make a recommendation to the FDA for a meeting scheduled in June.  Support has been solid at $3 and there is further help at $2.40.  A break above $3.50 would be bullish for another leg higher.

 

Other 2012 Portfolio OPEN positions (8):  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 2012 Portfolio link in the Members Area to view ALL open/ closed trades.

 

Acme Packet April 40 calls (from February 2012)   

Dendreon May 22 calls (from January 2012)     

Silver Wheaton April 42 calls (from March 2012)

U.S. Oil Fund April 45 calls (from February 2012)  

Sony April 22 calls (from February 2012)  

magicJack VocalTec April 30 calls (from March 2012)  

E*Trade Financial July 12 calls (from March 2012) 

Bank of America January 12.50 calls 2013, July 12 calls (from March 2012)  

 

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 with some new ideas.

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11:35am (EST)

Apache (APA, $94.05, down $1.82)

April 92.50 puts (APA120421P00092500, $1.40, up $0.55)

Entry Price:  $0.90 (3/29/12)
Exit Target: $1.80
Return:  56%
Stop Target:  None

Action:  Close HALF of the trade at current levels to lock in 50+% gains.  The April options expire in 11 days so let’s take some off the table as we look to establish new positions in other names with longer expiration dates.   

 

First Solar (FSLR, $20.56, down $0.42)

April 23 puts (FSLR120421P00023000, $2.90, up $0.30)

Entry Price:  $0.70 (3/15/12)
Exit Target: $1.40 (closed half at $0.90 on 3/21/12)
Return:  171%
Stop Target:  $2.00 (HARD STOP)

Action:  Close the other half of the April put option trade to lock-in triple-digit profits.  We still have the May put options to ride the stock lower.

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10:15am (EST)

NEW TRADES!!!

Caterpillar (CAT, $103.48, down $2.39) 

Buy to OPEN May 90 puts (CAT120519P00090000, $0.90, up $0.20)

Action:  Use limit orders up to $1.00.

 

Tiffany & Company (TIF, $66.59, down $0.99)

Buy to OPEN May 62.50 puts (TIF0519P00062500, $1.05, up $0.25)

Action:  Use limit orders up to $1.10 but do not pay over $1.15 to establish positions. 

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9:00am (EST)

The Dow fell 15 points, or 0.1%, to finish at 13,060 on Thursday.  The blue-chips reached a high of 13,297 on Monday but the close below 13,200 was the first wave of broken short-term support.  The next important test comes at 12,800-12,750 if the 13,000 level fails  today and from there 12,600.  A move back above 13,200 would keep the chance of hitting 13,500 in play.  For the week, the Dow fell 152 points, or 1.2%, after starting the week at 13,212.  Year-to-date, the blue-chips are up 843 points, or 6.9%.   

 

The S&P 500 slipped a point, or 0.06%, to end at 1,398.  The index traded to a high of 1,422 on Monday and nearly cracked our 1,425-1,450 target but we may have seen a top for now if there isn’t a rebound today or this week.  The next areas of support will come in at 1,375 and then 1,350.  A break below these levels would be ugly.  The S&P 500 started Monday at 1,408 and lost 10 points, or 0.7%, for the week.  For the year, the index is up 141 points, or 11.2%.   

 The Nasdaq added 12 points, or 0.4%, to settle at 3,080.  We mentioned earlier Tech kissed a high of 3,128 but a run to 3,250 probably won’t happen if 1Q earnings come in weaker-than-expected.  The low for the week came on Wednesday when the index touched 3,052.  This area has been tested numerous times over the past few weeks and a break below this level could quickly lead to a test down to 3,000-2,950 which is a 3%-4% drop from current levels.  A test down to 2,850 would be a 7% decline.  Tech was at 3,091 before Monday’s opening bell but finished the week lower by 11 points, or 0.4%.  For 2012, the index is up 475 points, or 18.3%.

The S&P Volatility Index ($VIX, 16.70, up 0.26) fell to a low 15.02 on Monday’s rally but reached a high of 17.74 on Wednesday’s selloff.  We have been warning of a move above 17.50 as a possible sign for a pullback and a close above this level would be bearish.  A move into the 20’s could be coming if there is no rebound on Monday. 

The Russell 2000 gave back 2 points and closed at 818 on Thursday.  The index raced to a high of 840 on Monday and hit 841 on Tuesday but fell shy of 850.  The break back below 830 on Wednesday wasn’t a good sign and 810 will be crucial in holding on a pullback.  We said there could be a chance for a rally up to 875-900 if the money rotated out of large-cap stocks and into the smaller caps but we this wasn’t the case.  A break below 800 could be in the cards if there is further weakness.  The Russell dropped 12 points for the week, or 1.5%, after starting Monday’s session at 830.  The index is up 78 points, or 10.4%, for the year.         

 

First-quarter earnings get underway on Tuesday with Alcoa (AA, $9.63, down $0.18) stepping up the plate.  It’s hard to get excited about a $10 stock leading off the parade but there are some notable companies reporting this week that could add to the market’s pains or gains.  The two key names will be Google (GOOG, $632.32, down $2.83) and JPMorgan Chase (JPM, $44.34, down $0.07).

Google can easily move 50 points and will weigh on Tech while JP Morgan will lead the direction of the financial stocks.  If these two companies miss Wall Street’s expectations or lower estimates going forward, the market will likely continue testing lower levels of support.

If Googs and JP are somehow able to beat estimates AND raise guidance for the quarter and year, then maybe the expected pullback we get on Monday’s open will hold.  If not, things could get nasty.

For those of you who get nervous when the market is pulling back or if there is a correction, don’t be.  We always remind our subscribers that you can make just as much, if not MORE, when the market is going down.  Stocks like to take the steps higher but when things get sketchy they tend to take an elevator down.

While we should get the pullback we have planned on, we still have to guard for a snap-back rebound because the Fed could be in play again.  Many believe the Fed wasn’t going to act on another round of quantitative easing because the economy was “recovering” but the latest headlines are painting a different picture.

The important clues to watch for will be the major support levels we have just covered.  If they hold, and the Fed does do something, then the pullback could be mild.  If the bears gather enough momentum and crack several layers of support while the Fed sits idle, then we will be on the verge of a trend change.

It’s not often one can time a market pullback perfectly, but we have come pretty close and our put options trades should pay off in spades today.

As we head to press, futures look like this:  Dow (-123), S&P (-15), Nasdaq (-29).  We could have a busy day with Profit Alerts and New Trades so stay on your toes. 

 

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 a “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.

 

Acuity Brands (AYI, $56.44, down $1.06)

May 50 puts (AYI120519P00050000, $0.80, up $0.30)

Entry Price:  $0.55 (4/5/12)
Exit Target: $1.10
Return:  45%
Stop Target:  None

Action:  Shares could be on the verge of waterfalling down to $50, or worse.  The break below the 50-day MA was nasty and the Thursday’s drop of 2% gets $54 in play.  From there a test down to the 200-day MA could be in store.

Lululemon Athletica (LULU, $77.06, up $1.76)

May 67.50 puts (LULU120519P00067500, $0.85, down $0.25)

Entry Price:  $1.05 (4/4/12)
Exit Target: $2.10
Return:  -24%
Stop Target:  50 cents

Action:  We took a risk shorting a stock in a strong uptrend but shares appear to be topping.  We would like to see a move back below $75 to start then $70.  From there, $65 and $60 could come into play.    

C.H. Robinson Worldwide (CHRW, $65.12, down $0.40)

May 60 puts (CHRW120519P00060000, $0.70, flat)

Entry Price:  $0.65 (4/4/12)
Exit Target: $1.30
Return:  8%
Stop Target:  None 

Action:  The 52-week low is $62.30 and our-near-term target is a test down to $60, possibly $55.

BroadSoft (BSFT, $39.77, up $0.75)

May 35 puts (BSFT120519P00035000, $1.60, down $0.20)

Entry Price:  $1.35 (4/2/12)
Exit Target: $2.25
Return:  19%
Stop Target:  $1.20

Action:  The break below $40 and the uptrend line was bearish.  Our near-term target is $35 and a break below the 200-day at $34 would really get interesting.

 

Apache (APA, $95.87, down $1.67)

April 92.50 puts (APA120421P00092500, $0.85, up $0.20)

Entry Price:  $0.90 (3/29/12)
Exit Target: $1.80
Return:  -6%
Stop Target:  None

Action:  We wanted to leave this one open for another week after getting our close below $96.50 and you will see why after looking at the chart.  The options do not expire until next Friday or 12 days and we are looking for a drop below $94 which would easily get $90 into play.  This would give the options a price of at least $2.50.   

Potash (POT, $45.13, down, $0.43)

April 42.50 puts (POT120421P00042500, $0.25, flat)

Entry Price:  $0.55 (3/29/12)
Exit Target: $1.10
Return:  -55%
Stop Target:  None

Action:  We were looking for a close below $45 on Thursday and we nearly got there.  Our near-term target is $43 but shares could test $40 if the market continues to pullback.

First Solar (FSLR, $20.98, down $0.75)

May 19 puts (FSLR120519P00019000, $1.60, up $0.30)  

Entry Price:  $0.75 (3/28/12)
Exit Target: $1.50
Return:  113%
Stop Target:  $1.20 (HARD STOP)

April 23 puts (FSLR120421P00023000, $2.60, up $0.50)

Entry Price:  $0.70 (3/15/12)
Exit Target: $1.40 (closed half at $0.90 on 3/21/12)
Return:  150%
Stop Target:  $2.00 (HARD STOP)

Action:  Shares traded down to $20.50 on Thursday and a drop to the mid-teens is just around the corner.  We will probably close the April options this week. 

E*Trade Financial (ETFC, $10.66, down $0.03)

July 12 calls (ETFC120721C00012000, $0.40, down $0.05)

Entry Price:  $0.70 (3/27/12)
Exit Target: $1.40
Return:  -43%
Stop Target:  None 

Action:  Shares held their 200-day MA for the week and there is further help at $10 and the 50-day MA ($9.85).  Resistance is at $11-$11.50 going forward.   

 Arena Pharmaceuticals (ARNA, $3.08, up $0.05)

May 3.50 calls (ARNA120519C00003500, $0.90, flat)  

Entry Price:  $0.85 (3/26/12)
Exit Target: $1.70 (closed half at $1.10 on 3/14/12) 
Return:  18%
Stop Target:  70 cents (Hard Stop) 

Action:  Arena will meet with the Endocrinologic and Metabolic Drugs Advisory Committee in early May to discuss the safety and efficacy of its obesity drug, Lorcaserin.  We expect a good outcome from the committee which will make a recommendation to the FDA for a meeting scheduled in June.  Support has been solid at $3 and there is further help at $2.40.  A break above $3.50 would be bullish for another leg higher.

Bank of America (BAC, $9.23, up $0.03)

January 12.50 calls 2013 (BAC130119C00012500, $0.45, flat)

Entry Price:  $0.65 (3/21/12)
Exit Target: $1.30+
Return:  -31%
Stop Target:  None 

July 12 calls (BAC120721C00012000, $0.15, flat)

Entry Price:  $0.35 (3/21/12)
Exit Target: $1.00
Return:  -57%
Stop Target:  None 

Action:  Shares tested a low of $9.11 last Wednesday and support is at $8.50, followed by $8.25.  We would like to see a move back above $10 this week which has been strong short-term resistance.

Other 2012 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 2012 Portfolio link in the Members Area to view ALL open/ closed trades.

 

Acme Packet April 40 calls (from February 2012)   

Dendreon May 22 calls (from January 2012)     

Silver Wheaton April 42 calls (from March 2012)

U.S. Oil Fund April 45 calls (from February 2012)  

Sony April 22 calls (from February 2012)  

magicJack VocalTec April 30 calls (from March 2012)  

 

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.

 

Sears Holdings (SHLD, $62.19, down $0.83)

May 45 puts (SHLD120519P00045000, $0.95, up $0.05)

Thoughts:  Shares peaked at $85 in mid-March and we knew then they were overpriced.  We are looking for a drop to $55, possibly $45 if investors start dumping the stock.  There could be a gap to fill a lower levels as well.


Apollo Group (APOL, $36.27, down $0.31)

May 37 puts (APOL120519P00037000, $1.90, up $0.10)

August 30 puts (APOL120818P00030000, $0.95, up $0.05)

Thoughts:  This is a 15-year chart for Apollo but the monthly bars don’t really show the huge gaps down shares have been making.  We think shares could test $20 over the next 6-12 months.

Caterpillar (CAT, $105.87, down $0.39) 

April 100 puts (CAT120421P00100000, $0.70, flat)

May 95 puts (CAT120519P00095000, $1.30, up $0.05)

Thoughts:  We were hoping for one last run back to $110 but resistance has been strong at $107.50 over the past few weeks.  We still feel a break below $100 could be coming. 

MGM Resorts (MGM, $13.60, up $0.05)    

January 17.50 calls 2013 (MGM130119C00017500, $0.90, up $0.10)

Thoughts:  Short-term support has been strong at $13.50 and the 200-day MA at $11.97 is trending up.  Shares tested $14 and the 50-day MA for much of the week but had trouble clearing this level given the market’s pullback.  Our-near-term target is $15-$16 on a move above this level, $20 by year-end.   

 

Scientific Games (SGMS, $11.88, down $0.01)     

July 12.50 calls (SGMS120721C00012500, $0.80, flat)

Thoughts:  Given the huge jackpots across the country recently, online lottery sales have surged which means Scientific Games will probably beat estimates.  The company will report their quarterly earnings in late May so these options would cover the expected earnings “surprise”.  

Shares traded to a high of 12.29 last Tuesday and held their 50-day moving average for the week.  Our 2012 price target is $15 and we are looking for $11 to hold on a pullback.  A close above $12.50 would be bullish.