9:00am (EST) continued…

The Dow jumped 92 points, or 0.7%, to settle at 12,627.  The blue-chips traded to a high of 12,646 which was just outside of Friday’s 12,640 close which means the index is still down for the week.  The 200-day MA is at 12,371 while the 50-day is at 12,710.  We have been saying a break below 12,350 would be bearish while a close above 12,800 would be bullish going into July and the MA’s continue to adjust to our targets.

The S&P 500 added a dozen points, or 0.9%, to end at 1,331.  The index traded to a peak of 1,334.40 but needs to trip 1,335 before a run to 1,350 can be confirmed.  The 200-day MA is at 1,298 while the 50-day is at 1,341.  A move below 1,300 would get 1,275-1,250 in play while a close above 1,350 would be bullish.

The Nasdaq advanced 21 points, or 0.7%, to close at 2,375.  Tech kissed 2,882 and stayed in the green all session long but fell short of the 2,900 level.  The 200-day MA is at 2,790 while the 50-day MA is at 2,900.  We are still expecting a drop below 2,800 to 2,750 by mid-July.

 

If we take out the June 4 lows, the charts show a trading range that has taken place since the start of May.  The major indexes are still in BEARISH patterns so we are just waiting for the other shoe to drop.  There is a slim chance the market will crack another layer of resistance but volatility is slowly picking up and the 7-week trading range we have been in could be history by this time next week. 

Futures a showing a red open and look like this:  Dow (-77); S&P 500 (-7), Nasdaq (-14).

 

Do not risk more than 5% of your trading account on any one trade but do try to take ALL of the trades.  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.

9:00am (EST)

PowerShares QQQ (QQQ, $62.90, up $0.38)

August 59 puts (QQQ120818P00059000, $0.80, down $0.05)

Entry Price:  $0.75 (6/27/12)
Exit Target:  $1.50
Return:  7%
Stop Target:  None  

Action:  We wanted to get back in the QQQ’s because we are expecting a breakdown below $60.

 

AOL (AOL, $27.31, up $0.06)

August 24 puts (AOL120818P00024000, $0.60, flat)

Entry Price:  $0.53 (6/26/12)
Exit Target:  $1.00
Return:  13%
Stop Target:  None

Action:  AOL will announce what it plans to do with the $1 billion it made off the sale of its patents this week which could be good or bad depending on how Wall Street reacts.  There are reports AOL will do a share repurchase program, not a dividend, which would be bad news for shareholders which could cause them to dump the stock.  AOL’s top brass believes the best way to invest the money they made off Microsoft is to do a share buyback plan.

We are looking for a test to $26 over the near-term and then $24.   

 

Consumer Discret Select Spider (XLY, $43.11, down $0.06)

August 41 puts (XLY120818P00041000, $0.65, flat)

Entry Price:  $0.80 (6/25/12)
Exit Target:  $1.60
Return:  -19%
Stop Target:  None

Action:  There is risk to $45 but we are expecting a test to $40 over the next week or two; mid-$30’s by August.   

 

Coinstar (CSTR, $67.43, up $1.90)   

July 60 puts (CSTR120721P00060000, $0.55, down $0.20)

Entry Price:  $0.90 (6/25/12)
Exit Target:  $1.80
Return:  -39%
Stop Target:  40 cents

Action:  We are looking for a drop below $60 over the next week or two but shares are within spitting distance of new 52-week highs.  

 

iShares Dow Jones US Real Estate (IYR, $62.00, up $0.39)

August 57 puts (IYR120818P00057000, $0.70, flat)

Entry Price:  $0.85 (6/25/12)
Exit Target:  $1.70
Return:  -18%
Stop Target:  40 cents

Action:  We would like to see a close below $60 this week.

 

KLA-Tencor (KLAC, $48.11, up $0.65)

August 43 puts (KLAC120818P00043000, $0.85, down $0.15)

Entry Price:  $0.90 (6/25/12)
Exit Target:  $1.80
Return:  -6%
Stop Target:  45 cents

Action:  There is risk up to $50 but we have a $40 price target by mid-August. 

 

Illinois Tool Works (ITW, $51.59, up $0.06)

July 50 puts (ITW120721P00050000, $0.75, flat)

Entry Price:  $1.05 (6/4/12)
Exit Target:  $2.10
Return:  -29%
Stop Target:  None

Action:  We would like to see a close below $50.50 today.

 

Apollo Group (APOL, $35.93, up $0.12)

August 27 puts (APOL120818P00027000, $0.30, flat)

Entry Price:  $0.90 (5/10/12)
Exit Target:  $1.80
Return:  -67%
Stop Target:  45 cents

Action:  Resistance at $36 is holding up.  The Department of Education (DOE) said it will conduct a review on Apollo’s verification process for federal student financial aid programs.  The probe will start July 16 and they have already informed Apollo the “verification codes” from 2010-2011 are misreported.      

 

Arena Pharmaceuticals (ARNA, $11.39, up $2.54)  

July 3 calls (ARNA120723C00003000, $8.50, up $2.50)

Entry Price:  $1.00 (4/30/12)
Exit Target:  $2+ (closed half on 6/5/12 at $3.40, closed a quarter on 6/22/12 at $6.75, closed a quarter on 6/27/12 at $9)
Return:  464%
Stop Target:  $2 (Hard Stop on remaining quarter position)

Action:  Arena traded up to $13.50 while the options reached a peak of $10 once trading resumed.  We wanted to keep the trade open just to see what happens as the options still have 3 weeks before they expire but our targets were hit.  We will continue to watch the stock for another opportunity but for now we felt it was best to lock-in gains.

On our 20 contract trade, we sold half at $3.40 and a quarter at $6.75 which netted $3,400 (10 contracts x $3.40) and $3,375 (5 contracts x $6.75).  The remaining 5 contracts were sold at $9, or $4,500.  The total cost of the trade was $2,000 and the profit was $9,275 which gave us a 464% return.   

 

Other 2012 Portfolio OPEN positions (8):  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)

Best Buy July 16 puts (from May 2012)

First Solar July 10 puts (from May 2012)

FedEx July 77.50 puts (from June 2012)

Potash July 35 puts (from June 2012)

iShares Russell 2000 July 70 puts (from June 2012)

Facebook July 24 puts (from June 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.

 

Freeport-McMoRan Copper & Gold (FCX, $32.14, up $0.53)

August 29 puts (FCX120818P00029000, $1.00, down $0.05)

Thoughts:  We still believe Freeport will fall below $30 so we have added these option as a rollover trade after getting stopped out on the August 31’s yesterday.

 

Netflix (NFLX, $66.49, down $0.31)

August 50 puts (NFLX120818P00050000, $1.20, flat)

July 60 puts (NFLX120721P00060000, $1.10, up $0.05)

Thoughts:  If shares fall below $65 a quick test to $50 could be in the cards.  We like the puts we have listed but the premiums are a little juiced which could keep us on the sidelines.

 

iShares Dow Jones Transportation Average (IYT, $90.17, up $0.49)

August 83 puts (IYT120818P00083000, $1.20, down $0.20)

July 86 puts (IYT120721P00086000, $1.05, flat)

Thoughts:  Resistance has held up well at $95 and a drop below $90 would be bearish. 

 

Schlumberger (SLB, $61.47, up $1.80)              

August 55 puts (SLB120818P00055000, $1.10, down $0.50)

Thoughts:  If these options trade below a buck we might pick them up.