9:00am (EST) continued…
The Dow surged 155 points, or 1.4%, to finish at 12,651 on Thursday. The blue-chips tested a low of 12,497 before rebounding to push highs not seen since mid-May. The index reached a peak of 12,698 and we said if the 12,600 level was cleared there could be a run to 12,800 this week.
The S&P 500 added 14points, or 1.1%, to settle at 1,329. The index kissed 1,333 after hitting a bottom of 1314 but stayed within our breakout or breakdown targets of 1,350 and 1,310-1,300, respectively.
The Nasdaq popped 18 points, or 0.6%, to end at 2,836. Tech tested a low of 2,807 before bouncing to a high of 2,842. Support at 2,800 has been strong for the bulls while 2,850 has been a hard level to crack and hold.
The Russell 200 closed at 762, up 10 points. The S&P Volatility Index peaked at 24.81 before fading 11% to close at 21.68 and below the 22.50 level.
Much of yesterday’s action was rumor-based and unconfirmed which caused much of the volatility and today could be just as wild. Here is a chart to ponder ahead of the weekend as everyone seems bullish all of a sudden:
Futures are pointing towards a slightly higher open this morning. Dow futures are up 20 points to 12,626 while the S&P futures are up a point to 1,327. The Nasdaq 100 futures are advancing 4 points to 2,539.
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.
Facebook (FB, $28.29, up $1.05)
July 24 puts (FB120721P00024000, $0.60, down $0.20)
Entry Price: $0.65 (6/14/12)
Exit Target: $1.05-$1.30
Return: -8%
Stop Target: None
Action: Shares stayed just below $28 until the final 15 minutes of trading before closing above this level. There is risk up to $30 but we believe shares will be below $25 by mid-July.
FedEx (FDX, $86.84, up $0.79)
July 77.50 puts (FDX120721P00077500, $1.00, down $0.20)
Entry Price: $0.92 (6/12/12)
Exit Target: $1.95
Return: 9%
Stop Target: 45 cents
Action: FedEx traded up to $87.44 and there is risk up to $90. We would like to see a close below $85.50 today and we are looking for a test down to $80 or worse by mid-July.
Potash (POT, $37.91, down $0.11)
July 35 puts (POT120721P00035000, $0.80, down $0.05)
Entry Price: $0.75 (6/11/12)
Exit Target: $1.50
Return: 7%
Stop Target: None
Action: Shares made a high of $38.36 yesterday but closed below $38. We are looking for a drop below $37.50 today, $35 by mid-July.
iShares Russell 2000 (IWM, $76.20, up $0.86)
July 70 puts (IWM120721P00070000, $0.95, down $0.35)
Entry Price: $1.20 (6/6/12)
Exit Target: $2.40
Return: -21%
Stop Target: 60 cents
Action: The Russell iShares nearly recovered all of Wednesday’s losses and there is risk up to $78. We would like to see a move below $75 into the weekend.
Veeco Instruments (VECO, $32.77, down $0.22)
July 30 puts (VECO120721P00030000, $1.25, flat)
Entry Price: $1.00 (6/6/12)
Exit Target: $2.00
Return: 25%
Stop Target: 50 cents
Action: Veeco dropped to a low of $32.11 at the open before trading up to $33.19. Shares still closed below $33 and we would like to see a finish below $32 today.
Illinois Tool Works (ITW, $54.08, down $0.44)
July 50 puts (ITW120721P00050000, $0.80, up $0.25)
Entry Price: $1.05 (6/4/12)
Exit Target: $2.10
Return: -24%
Stop Target: None
Action: Shares made a low of $53.60 on Thursday and we said we are looking for a drop below $53.50 this week or next. Once there, this should lead to a quick trip to $50 or below.
First Solar (FSLR, $13.45, down $0.39)
July 10 puts (FSLR120721P00010000, $0.40, flat)
Entry Price: $0.62 (5/23/12)
Exit Target: $1.20
Return: -35%
Stop Target: None
Action: We would like to see a close below $13 today. These are cheap options on a volatile stock so try not to get frustrated as we wait for a drop to single-digits.
Apollo Group (APOL, $32.95, up $0.13)
August 27 puts (APOL120818P00027000, $0.80, down $0.05)
Entry Price: $0.90 (5/10/12)
Exit Target: $1.80
Return: -6%
Stop Target: 45 cents
Action: We said a close below $33 would get $30 in play so let’s see how it plays out. If this level is taken out shares could fall to the low $20’s. For those of you who haven’t pulled the trigger on this trade, do so before it’s too late.
Arena Pharmaceuticals (ARNA, $8.08, up $0.01)
July 3 calls (ARNA120723C00003000, $5.20, down $0.10)
Entry Price: $1.00 (4/30/12)
Exit Target: $2+ (closed half on 6/5/12 at $3.40)
Return: 330%
Stop Target: $4.50 (HARD STOP on other half)
Action: The calls traded down to $4.80 yesterday as shares of Arena fell to a low of $7.52. We raised the Hard Stop on the other half to $4.50. There is heavy short-interest in this stock so expect volatility over the next few weeks as we get closer to Arena’s date with the FDA.
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. For those of you just joining us, the company will meet with the FDA on June 27.
Other 2012 Portfolio OPEN positions (4): 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.
RealD June 10 puts (from May 2012) – unless shares fall off a cliff, this trade will expire today. We hate losing trades as much as you do and we should have went with the July options which would have given this trade more time to play out.
E*Trade Financial July 12 calls (from March 2012)
Bank of America January 12.50 calls 2013, July 12 calls (from March 2012)
Best Buy July 16 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.
Salesforce.com (CRM, $129.36, up $2.03)
July 100 puts (CRM120721P00100000, $0.980, down $0.10)
Thoughts: We are expecting a test to $120 over the near-term, $100 if support at $125 fails.
Advanced Auto Parts (AAP, $70.66, up $0.12)
July 65 puts (AAP120721P00065000, $0.95, up $0.10)
Thoughts: We nearly pulled the trigger on this trade as shares traded to a high of $72.68 while the options reached a low of 70 cents. Shares of AAP are quickly breaking down and we believe a drop below $60 is coming.
Freeport-McMoRan Copper & Gold (FCX, $33.90, up $0.55)
July 30 puts (FCX120721P00030000, $0.70, down $0.15)
August 29 puts (FCX120818P00029000, $0.90, down $0.15)
Thoughts: Shares look like they could test $30 over the near-term and the mid-$20’s by August is a good possibility. The 52-week low is $28.85.
Coinstar (CSTR, $62.80, down $0.47)
July 55 puts (CSTR120721P00055000, $0.75, up $0.05)
July 57.50 puts (CSTR120721P00057500, $1.25, up $0.15)
Thoughts: Shares tested a high of $64.07 before fading.
KLA-Tencor (KLAC, $47.31, down $0.13)
July 44 puts (KLAC120721P00044000, $0.60, flat)
September 37 puts (KLAC120922P00037000, $0.60, flat)
Thoughts: We would like to see a quick pop to $50 which is where we might start half positions.
Apache (APA, $86.01, down $3.04)
July 72.50 puts (APA120721P00072500, $0.65, down $0.35)
Thoughts: We are still waiting for another break below $80 before possibly going short.
Schlumberger (SLB, $65.38, up $1.43)
July 57.50 (SLB120721P00057500, $0.80, down $0.30)
August 55 puts (SLB120818P00055000, $1.05, down $0.30)
Thoughts: Shares are right at resistance but could test $67 on fluff. We like the July 57.50’s if $65 holds over the next day or two.
PowerShares QQQ (QQQ, $62.36, up $0.23)
July 60 puts (QQQ120721P00060000, $1.05, down $0.10)
Thoughts: Watch for now.
