9:00am (EST) continued…

The Nasdaq popped 18 points, or 0.7%, to end at 2,778.  Tech kissed a low of 2,749, which was just below the 2,750 level we have been mentioning as near-term support, before rebounding to a peak of 2,782.  The brick wall at 2,800 will need some heavy artillery to clear and the world is well-aware the U.S. markets are banking on some QE3 news from Ben Bernanke on Thursday.

We found it amusing that some of the big name pros were talking technical jargon yesterday and pointed out the bear flag on the S&P last week.  It’s good to know we are still a week ahead of them as we mentioned the breakdown out of the bear flag last Wednesday.

Our best guess is there could be a rally through the end of the week which would be perfect as we want higher prices so that the put options on our Watch List become cheaper.  We also realize, for whatever reason, there could be a huge dead-cat bounce or a continuation rally if the bulls break a few layers of resistance which is when we will turn our focus back to call options.

The beauty is that we remain light on our portfolio holdings and we are letting the action come to us.  We still have over a half-dozen active trades but we were stopped out of another put option recommendation on Tuesday.

No worries, the trade was our 19th-straight winning option trade since mid-April, and we have CLOSED 35-outta-36 winners since late March.  Yikes, we have been that scary good.   

We mentioned that a few of the Fed officials would be speaking last night and both of them were against QE3, or new monetary stimulus.  The fancy words they used were a hint that the U.S. central bank is not preparing to ease current monetary policies but futures remained positive throughout the night.     

We have added a few more candidates to our Watch List which is bulging at the seams as we have a number of new trades on deck that could be triggered this week.  

 

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 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.

 

Illinois Tool Works (ITW, $54.20, down $0.21)  

July 50 puts (ITW120721P00050000, $1.10, down $0.05)

Entry Price:  $1.05 (6/4/12)
Exit Target: $2.10
Return:  5%
Stop Target:  None

Action:  Yesterday’s low was $53.49 and we have been looking for a close below $53.50.  Shares could fall below $50 on further weakness by mid-July which should get these options to $2+ but there could be a bounce up to $55-$57.50 if the market remains bullish.  

 

RealD (RLD, $11.61, up $0.41)

June 10 puts (RLD120616P00010000, $0.10, down $0.10)

Entry Price:  $0.35 (5/31/12)
Exit Target: $0.70
Return:  -71%
Stop Target:  None

Action:  The drift higher yesterday crushed our premiums and we only have 9 days left before these options expire.  This was an earnings trade and we should have went with July options to give the breakdown more time to develop.  There is still a chance the put options come back to hand us a profit but we will need shares to fall below $10 by next Friday.  We will leave the trade open but we are moving it to the Hold section.  We will bring back coverage if shares approach single-digits but conservative trades might want to take the dime to limit losses.  

 

Coinstar (CSTR, $59.29, up $1.23)   

July 52.50 puts (CSTR120721P00052500, $1.20, down $0.60)

Entry Price:  $1.05 (5/30/12)
Exit Target: $2.10 (closed at $1.20 on 6/5/12)
Return:  14%
Stop Target:  $1.20 (Hard Stop)

Action:  This trade was closed yesterday as the options traded down to $1.15 before the closing bell.  This triggered our $1.20 Hard Stop so everyone should be out of the position. 

This was our second trade on Coinstar in less than a month and while our first trade made over 100% we can’t be too upset making a double-digit gain in a week.  We would love to see a rally back towards $62.50-$65 again which is where we will look to go short (again).       

 

KLA-Tencor (KLAC, $44.97, up $0.32)

July 42 puts (KLAC120721P00042000, $1.00, down $0.25)

Entry Price:  $0.85 (5/30/12)
Exit Target: $1.70 (closed half on 6/1/12 at $1.30)
Return:  35%
Stop Target:  90 cents (Hard Stop)

Action:  The puts traded down to 99 cents so our Hard Stop wasn’t triggered.  If it is hit today, we will be out of the other half of the trade for a 30% profit.

 

Constant Contact (CTCT, $20.84, up $0.83)

July 17.50 puts (CTCT120721P00017500, $0.65, down $0.10)

Entry Price:  $0.55 (5/24/12)
Exit Target: $1.10
Return:  18%
Stop Target:  None

Action:  We will stick with the trade as long as $22 holds.  We have a near-term target of $18 and a mid-July target of $15.

  

First Solar (FSLR, $12.65, up $0.37)         

July 10 puts (FSLR120721P00010000, $0.65, down $0.15) 

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

Action:  Continue to hold for now.  

 

Best Buy (BBY, $19.17, up $0.95)

July 16 puts (BBY120721P00016000, $0.35, down $0.15)

Entry Price:  $0.85 (5/21/12)
Exit Target: $1.70
Return:  -59%
Stop Target:  None

Action:  Shares reached a peak of $19.25 and resistance at $20 should hold if there is further strength this week.  Our near-term price target is for a test down to $15 and our breakeven point is $15.15.  Longer-term we have a price target of $12.50 for shares of Best Buy.   

 

Apollo Group (APOL, $32.69, up $0.27)

August 27 puts (APOL120818P00027000, $0.90, down $0.10)

Entry Price:  $0.90 (5/10/12)
Exit Target: $1.80
Return:  0%
Stop Target:  45 cents

Action:  Shares are testing resistance at $32.50 which was prior support.  The 52-week low for Apollo is $30.93 and we are expecting shares to test $30 over the next week or two.  Our longer-term price targets are $25 and $20.   

 

Arena Pharmaceuticals (ARNA, $6.27, down $0.17)  

July 3 calls (ARNA120723C00003000, $3.30, down $0.30)

Entry Price:  $1.00 (4/30/12)
Exit Target: $2+ (closed half on 6/5/12 at $3.40)
Return:  235%
Stop Target:  $3 (Hard Stop on other HALF)

Action:  Our Hard Stop of $3.40 was hit on HALF of the trade yesterday.  We lowered the HS to $3 on the other half afterwards to give the trade a little wiggle room and the options made a low of $3.10 yesterday. 

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.

 

Other 2012 Portfolio OPEN positions (2):  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)

 

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, $104.27, up $1.90)

July 85 puts (FDS120721P00085000, $0.55, down $0.20)

September 85 puts (FDS120922P00085000, $1.40, down $0.10)

Thoughts:  Shares are trapped between a technical picture that looks bullish and bearish.  A move above $106 could get shares to new highs for the year while a break below $100 could lead to $90 or worse.  The bid/ask prices are wide meaning traders are also unsure on direction.

 

Men’s Wearhouse (MW, $34.92, down $0.21)

June 31 puts (MW120616P00031000, $0.65, up $0.10)

June 37 calls (MW120616C00037000, $0.60, down $0.10)

Thoughts:  Earnings are out today.

 

Veeco Instruments (VECO, $34.75, up $1.51)

July 30 puts (VECO120721P00030000, $1.05, down $0.40)

October 22 puts (VECO121020P00022000, $1.00, down $0.65)

Thoughts:  Watch for now.

 

Facebook (FB, $25.87, down $1.03)

August 38 calls (FB120818C00038000, $0.30, down $0.10)

August 20 puts (FB120818P00020000, $0.95, up $0.15)

August 28 calls (FB120818C00028000, $2.15, down $0.50)

August 28 puts (FB120818P00028000, $4.50, up $0.60)

Thoughts:  We are just waiting and being patient. 

 

Newmont Mining (NEM, $51.35, down $0.20)

July 55 calls (NEM120721C00055000, $1.25, down $0.10)

September 60 calls (NEM120922C00060000, $1.25, down $0.10)

Thoughts:  Nearly 7,000 contracts traded on the July 55’s yesterday.  The break above the 50-day MA was clearly bullish for Newmont Mining and the 200-day MA is north of $58.  We believe shares can make a run back to $60, possibly $65 by mid-September.

 

Apache (APA, $81.15, up $1.59)

July 72.50 puts (APA120721P00072500, $1.55, down $0.50)  

Thoughts:  Our near-term target is for a test down to $75 and longer-term a move below $70 could be in mix.  However, we could get a quick run back to $85.   

 

Schlumberger (SLB, $62.24, up $0.03)

July 57.50 (SLB120721P00057500, $1.75, down $0.20)

August 55 puts (SLB120818P00055000, $1.95, down $0.15)

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, $61.12, up $0.25)

June 62 puts (QQQ120616P00062000, $1.50, down $0.40)

July 58 puts (QQQ120721P00058000, $1.10, down $0.25)

Thoughts:  Watch for now.

 

iShares Russell 2000 (IWM, $74.60, up $0.95)              

June 75 puts (IWM120616P00075000, $1.60, down $0.85)   

July 67 puts (IWM120721P00067000, $1.00, down $0.25)

Thoughts:  Watch for now.

 

Potash (POT, $38.21, down $0.77)       

July 35 puts (POT120721P00035000, $0.95, down $0.30)

July 33 puts (POT120721P00033000, $0.55, down $0.20)

Thoughts:  Near-term there could be a test to $35, longer-term, $30.