9:00am (c0ntinued…)

The Dow added 46 points, or 0.4%, to settle at 12,460 on Thursday.  We have mentioned all week there was a chance for a run to 12,500-12,600 and yesterday’s high was pegged at 12,555.  The bulls were up 141 points at one point but lost their grip on a triple-digit gain after hitting the second wave of resistance.  The bears would love to knock 100+ points off the blue-chips today which would put the index near 12,350 and back under the first layer of resistance.

The S&P slipped a fraction of a point to close at 1314.99.  The index reached a peak of 1,329 at the open but failed to hold the 1,325 level into the close.  The low was 1,312 and the bears will target a close below 1,310-1,300 today.  A close above 1,325-1,334 would be bullish going into next week.

The Nasdaq fell 14 points, 0.5%, to end at 2,831.  Tech traded to a high of 2,873 but needed to clear 2,875 as they attempt another run at 2,900.  The bears will try to get the action back under 2,825-2,800 by the closing bell.

The wild price swings we have seen over the past few weeks only confirm what we have been preaching and that is volatility would be picking up.  The S&P Volatility Index ($VIX, 21.72, down 0.44) has been on a wild ride this week and traded down to 20.74 yesterday after pushing 28 on Monday.  The bulls will target a close below 20 while the bears will be eyeing 22.50.   

Futures are showing a lower start for today’s action and look like this: Dow (-50); S&P 500 (-5), Nasdaq 100 (-6).

 

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.

 

iShares Russell 2000 (IWM, $75.94, down $0.50)

July 70 puts (IWM120721P00070000, $1.15, up $0.05)

Entry Price:  $1.20 (6/6/12)
Exit Target: $2.40
Return:  -4%
Stop Target:  60 cents

Action:  The iShares finished at their lows for the day after making a run to $78 at the open.  The bears were able to hold resistance and we are expecting a test to $70 or worse over the next 6 weeks.

 

Veeco Instruments (VECO, $33.52, down $1.43)

July 30 puts (VECO120721P00030000, $1.30, up $0.20)

Entry Price:  $1.00 (6/6/12)
Exit Target: $2.00
Return:  30%
Stop Target:  50 cents

Action:  Shares ended a dime off their low as the options reached a peak of $1.35.  We would love to see a close below $33 today which should get the $30 level back into play next week.   

 

Illinois Tool Works (ITW, $55.86, up $0.57) 

July 50 puts (ITW120721P00050000, $0.65, down $0.15)

Entry Price:  $1.05 (6/4/12)
Exit Target: $2.10
Return:  -38%
Stop Target:  None

Action:  Shares made a run to $56.49 and we were looking for resistance to hold at $57.50.      

 

Constant Contact (CTCT, $20.41, down $0.58)

July 17.50 puts (CTCT120721P00017500, $0.55, up $0.05)

Entry Price:  $0.55 (5/24/12)
Exit Target: $1.10
Return:  0%
Stop Target:  None

Action:  Resistance is at $22 and shares traded to a high of $21.28 before ending at their low for the session.  We would like to see a close below $20 today.

 

First Solar (FSLR, $12.84, down $0.47)         

July 10 puts (FSLR120721P00010000, $0.53, up $0.03) 

Entry Price:  $0.62 (5/23/12)
Exit Target: $1.20
Return:  -19%
Stop Target:  65 cents

Action:  We got our close below $13 yesterday.  If shares can resume their downtrend, a break below $11.50 should get us to single-digits by mid-July.

 

Best Buy (BBY, $19.70, down $0.19)   

July 16 puts (BBY120721P00016000, $0.30, up $0.05)

Entry Price:  $0.85 (5/21/12)
Exit Target: $1.70
Return:  -65%
Stop Target:  None

Action:  Shares traded down to $18.19 yesterday after Best Buy’s Chairman and co-founder, Richard Schultz, resigned and is looking to unload his 20% ownership stake in a company he started.  Some analysts tried to spin the news by saying the company could go private.  We doubt an acquiring company will pay a premium for a bunch of showroom stores with a broke business model.  If the bears can get a close below $18, which is multi-year support, there will be a freefall to $15, or worse. 

 

Apollo Group (APOL, $34.30, down $0.51)

August 27 puts (APOL120818P00027000, $0.60, flat)

Entry Price:  $0.90 (5/10/12)
Exit Target: $1.80
Return:  -33%
Stop Target:  45 cents

Action:  Interest rates on student loans are set to DOUBLE on July 1.  On Wednesday, the Vice President said Congress wouldn’t accept the latest proposals on ways to pay for extending low interest rates on student loans.  Our government is likely to drop the ball on a bubble they created by handing out a trillion dollars to people who were out of work and decided online colleges were going to get them the training for a real job.

We are sure you have seen the commercials with TV models lounging in their PJ’s saying how easy it is to get approved for a loan and go to school.  Yeah, a good school is supposed to be hard and many of these “students” used this money to pay rent, buy groceries, or put gas in their cars.  If the rates double, more defaults will occur.    

 

Arena Pharmaceuticals (ARNA, $6.42, down $0.03)  

July 3 calls (ARNA120723C00003000, $3.60, flat)

Entry Price:  $1.00 (4/30/12)
Exit Target: $2+ (closed half on 6/5/12 at $3.40)
Return:  250%
Stop Target:  $3 (Hard Stop on other HALF)

Action:  We have a price target of $10+ if there is no delay with their obesity drug, Lorcaserin, which could go to market by the end of the year if all goes well with their upcoming meeting with the FDA.

 

Other 2012 Portfolio OPEN positions (3):  These are trades that are still open in the portfolio but are down over 50%.  They have longer expiration dates and 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 if the options expire.  Click on the 2012 Portfolio link in the Members Area to view ALL open/ closed trades.

 

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

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

RealD June 10 puts (from May 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 but these are the trades we are watching as new candidates.

 

FactSet Research Systems (FDS, $105.18, down $1.42)

July 90 puts (FDS120721P00090000, $0.75, flat)

September 85 puts (FDS120922P00085000, $1.45, up $0.20)

Thoughts:  Shares traded to a high of $108 before retreating.  A break below $100 could lead to $90 or worse.  The bid/ask prices are still too wide to play.

 

Coinstar (CSTR, $61.01, down $1.84)   

July 52.50 puts (CSTR120721P00052500, $0.80, up $0.10)

July 55 puts (CSTR120721P00055000, $1.25, up $0.20)

Thoughts:  A close below $60 would get us interested in Coinstar again.

 

KLA-Tencor (KLAC, $45.94, down $0.59)

July 44 puts (KLAC120721P00044000, $1.20, up $0.15)

Thoughts:  Watch for now.

 

Newmont Mining (NEM, $50.69, down $1.01)

July 55 calls (NEM120721C00055000, $0.90, down $0.35)

September 60 calls (NEM120922C00060000, $0.90, down $0.30)

Thoughts:  Continue to watch for now.

 

Apache (APA, $83.48, down $0.11)

July 72.50 puts (APA120721P00072500, $0.95, down $0.10)  

Thoughts:  We mentioned shares could get a quick run back to $85.  Apache tested $85.47 before fading.   

 

Schlumberger (SLB, $64.43, down $0.16)

July 57.50 (SLB120721P00057500, $1.15, down $0.05)

August 55 puts (SLB120818P00055000, $1.30, down $0.10)

Thoughts:  Shares easily look like they are headed below $60 but there could be a bounce to $65 over the near-term. 

 

PowerShares QQQ (QQQ, $62.27, down $0.25)

July 60 puts (QQQ120721P00060000, $1.15, up $0.05)

Thoughts:  Watch for now.

 

Potash (POT, $38.60, down $0.47)       

July 37 puts (POT120721P00037000, $1.25, up $0.10)

July 35 puts (POT120721P00035000, $0.70, up $0.05)

Thoughts:  We nearly pulled the trigger on this trade after shares held resistance at $40.  The July 37’s traded down to 95 cents before rebounding while the July 35’s kissed 53 cents.