August 2012 | Members

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.

12:40pm (EST)

Amgen (AMGN, $82.97, down $0.41)

September 85 calls (AMGN120922C00085000, $0.85, down $0.25)

Entry Price:  $0.80 (8/20/12)
Exit Target:  $1.50
Return:  6%
Stop Target:  None

Action:  The options opened at $1.02 and traded down to 78 cents.  We were trying to get in at 75 cents when we sent out the trade Alert but we had to pay 80 cents.  We think Amgen can push $90 on a break above $85.  We will exit the trade if shares dip below $80.

 

Netflix (NFLX, $65.07, up $1.38)

September 70 calls (NFLX120922C00070000, $1.75, up $0.40)

Entry Price:  $1.15 (8/20/12)
Exit Target:  $2.30
Return:  52%
Stop Target:  60 cents

Action:  Shares did a back test to support and we were able to get in before the suit-and-ties profiled it on CNBC’s Fast Money.  They were bullish on the stock which has given our options a pop.

 

Fusion-io (FIO, $28.77, up $0.39)

September 30 calls (FIO120922C00030000, $1.30, up $0.20)

Entry Price:  $1.00 (8/17/12)
Exit Target:  $1.50-$2.00
Return:  30%
Stop Target:  None

Action:  We have a near-term target of $30 for shares of Fusion-io and a break above this level could lead to a test to $33-$34.  Near-term support is at $26 and the 200-day MA of $25.50.

 

MGM Resorts (MGM, $10.60, up $0.08)

September 10 calls (MGM120922C00010000, $0.80, up $0.05)

Entry Price:  $0.70 (8/17/12)
Exit Target:  $1.05-$1.40
Return:  14%
Stop Target:  None

Action:  Shares have traded up to $10.77 today.  The next wave of resistance will come at $11.50 and the 100-day MA.  MGM will soar once an online poker bill is passed.

 

Pepsico (PEP, $73.21, down $0.18)

September 75 calls (PEP120922C0007500, $0.20, down $0.05)

Entry Price:  $0.15 (8/16/12)
Exit Target:  $0.30
Return:  33%
Stop Target:  None

October 75 calls (PEP121020C00075000, $0.60, down $0.05)

Entry Price:  $0.50 (8/16/12)
Exit Target:  $1.00
Return:  20%
Stop Target:  None

Action:  Share are testing support which was the prior 52-week high.  We are looking for $73 to hold and we have a near-term price of $75 with a shot at $78-$80 if cleared.

 

Riverbed Technology (RVBD, $20.94, down $0.15)

September 21 calls (RVBD120922C00021000, $1.10, down $0.15)

Entry Price:  $0.90 (8/16/12)
Exit Target:  $1.35-$1.80
Return:  22%
Stop Target:  90 cents

Action:  We have a near-term target of $23-$24 which is short-term resistance but momentum could carry shares to $30. 

 

Other 2012 Portfolio OPEN positions (6):  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.

 

Dow Jones Industrial Average Spiders September 119 puts (from July 2012)

S&P 500 Spiders September 123 puts (from July 2012)

Wynn Resorts September 80 puts (from August 2012)  

Veeco Instruments September 30 puts (from August 2012)

Apollo Group September 24 puts (from August 2012)

 

Bank of America January 12.50 calls 2013 (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.

We will update this section in the morning.

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11:40am (EST)

NEW TRADES!!!

Amgen (AMGN, $82.72, down $0.66)

Buy to OPEN September 85 calls (AMGN120922C00085000, $0.75, down $0.35)

Action:  Use limit orders up to 80-85 cents but do not pay over 90 cents to establish positions.

 

Netflix (NFLX, $63.22, down $0.47)

Buy to OPEN September 70 calls (NFLX120922C00070000, $1.15, down $0.20)

Action:  Shares did a back test to support and we like the options at current prices.  Use limit orders up to $1.20-$1.25 but do not pay over $1.30 to establish positions.  We are also taking HALF positions because the stock can be volatile.

 

Current Trades

SanDisk (SNDK, $42.12, down $0.43)

September 43 calls (SNDK120922C00043000, $1.20, down $0.25)

Entry Price:  $0.89 (8/14/12)
Exit Target:  $1.35-$1.80 (closed half at $1.45 on 8/16/12)
Return:  52%
Stop Target:  $1.25 (HARD STOP)

Action:  The options opened at $1.45 but shares are slipping which has triggered our $1.25 Hard Stop on the other half of the trade.  Our average closing price was $1.35 so the position made us 52%.

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The Dow gained 25 points, or 0.2%, to settle at 13,275 on Friday.  The blue-chips traded in a tight range through midweek but made higher highs and higher lows until Thursday’s pop.  The low for the week was Monday’s dip to 13,112 but the bulls pushed a high of 13,281 on Friday.  We said there was a good chance the Dow would test May’s high of 13,338 and a close above 13,350 would be super bullish.  If there is “fluff” we could see a run to 13,500-13,600 this week or next and depending on how September goes, we could see the Dow at 14,000.  From there, the blue-chips could push 14,500-14,600 by yearend.  A close below 13,000 would simmer the rally.  The Dow started Monday at 13,208 and was up 67 points, or 0.5%, for the week.  For the year, the blue-chips are up 1,058 points, or 8.7%.

This is a 10-year chart for the Dow:

Here is last week’s chart of the Dow:

The S&P 500 added 3 points, or 0.2%, to finish at 1,418.  The index tested a low of 1,397 to start the week but was able to close above the 1,400 level which is now short-term support.  There was a tight range of 10 and 7 points for 2 days afterwards but Thursday’s pop to 1,417 confirmed the bulls were going to push the April high of 1,422.  We mentioned at the beginning of the month there was a chance the S&P would push 1,425 and a close above this level gets 1,450 in play over the next couple of weeks.  From there a surge to 1,500 could come in September with a year-end target of 1,550-1,560 if everything goes smoothly.  A close below 1,375 would be bearish.  The S&P 500 was at 1,406 coming into the week and advanced dozen points, or 0.9%, by Friday’s close.  For 2012, the index is higher by 161 points, or 12.8%.

 

Last week’s chart for the S&P 500:  

 

The Nasdaq jumped 14 points, or 0.5%, to end at 3,076.  Tech made a brief trip below short-term support at 3,000 on Monday when it traded down to 2,999 but had cleared 3,025 by Wednesday’s close and 3,050 on Thursday’s finish.  We said last week once this level was cleared the Nasdaq had a chance of pushing 3,100-3,150 and the March 27 high of 3,134.  If September is going to be one to remember the bulls could rally to 3,225-3,250 on positive news from Europe with a year-end target of 3,375-3,400.  If there is a setback, the index could fall to 2,925-2,900, initially.  The Nasdaq was at 3,020 before Monday’s opening bell and tacked on 56 points, or 1.8%, for the week.  For the year, the index is up 471 points, or 18.1%.

Here is last week’s chart for Tech:

 

The Russell 2000 jumped 7 points, or 0.8%, to close at 819.89.  The small-caps opened the week at 801.48 but were down over 1% after kissing 791 shortly afterwards on Monday.  The index closed at 799 for the session and Tuesday’s low of 794.81 was a higher low although the close for the day was 796.  Wednesday’s action was a clue there could be further upside as the Russell added 1% to finish at 804.  We said the bulls would need 810 to print as a hint for a bullish run to 825 and we got that with Thursday’s 813 close and Friday’s pop.  There is a good possibility the momentum lasts to 830 and the May 1 high over the near-term with a shot at 850-860 in September.  This would set the stage for a year-end rally to 900.  If there is a pullback to 800-780 on disappointment by the Fed or Europe, things could get ugly in a hurry.  The Russell 2000 started the week at 801.55 and surged 18 points, or 2.3%, before the weekend.  YTD, the index is higher by 79 points, or 12.2%.

Here is last week’s chart for the Russell 2000:

 

The S&P Volatility Index ($VIX, 13.85, down 0.45) fell another 6% on Friday and held 15 after starting the week at 14.74.  On Monday, with the market down nearly 1%, the VIX traded lower throughout the day to close at 13.70, down a point, or 7%.  We said in our Daily this was an unusual sign and either meant the VIX was head to 10 or the market had topped.  Friday’s low was 13.30 and a 52-week low.  Although the VIX is at scary levels, the 10-year chart shows how long the VIX can trade between 15-10.  The bulls should have no worries until the bears push 15 again and then 17.50.  

 

Last week’s chart of the VIX:

We said the key last week to an extended rally would be how Apple (AAPL, $648.11, up $11.77), Amazon.com (AMZN, $241.17, down $0.38), Google (GOOG, $677.14, up $4.27), and Netflix (NFLX, $63.69, down $0.62) traded (see last week’s aforementioned August 10 Nasdaq chart and comments).

Apple gained $18 for the week and hit fresh 52-week highs in the process while Goog’s added $17 and did the same.  Amazon is pushing its 52-week high of $246 and Netflix gained nearly $4 for the week after hitting $65.52 on Friday.

We did a back test on the S&P 500 for 5, 10, and 20-years just to confirm what could be a troubling sign now that the indexes have just one last resistance level to clear before a bull jailbreak.  We like to show the 50-day, 100-day and 200-day moving averages (MA) and when you go out a few years they turn into monthly averages.  Most technicians get really excited when a “Golden Cross” forms on a stock or an index and they occur when the 50-day (or month) crosses over the 200-day (or month).  This is usually a bullish signal the market or stock is going higher in the coming weeks or months.

On the flip side, a “Death Cross” occurs when the opposite happens, or when the 200-day MA falls below the 50-day MA.  This is usually a bearish signal that means a correction is coming.

The 10-year chart we showed you earlier on the S&P 500 shows a possible Death Cross could be forming in the coming weeks.  This type of signal is often bearish but they can be bullish as the breakdown can be weeks or months away but it is something we are watching closely. 

Trading ranges also produce bigger breakouts or breakdowns in a stock or the market, in general.  We warned of a tight trading range with a possible push to the top and with support moving up on higher highs and higher lows we are almost there.  The good news with the possible Death Cross forming on the S&P is that they have been less bearish over the past 20 years.  However, last year when the U.S. lost its triple-A credit rating while the zombies jawboned, the Death Cross was the kiss of death for the S&P 500.

The other warning sign we are seeing on this 2-year chart is the possibility of a “triple-top” which is forming on the S&P 500 but a break to new highs would nullify this chart pattern. 

We added a few call option trades to the Daily last week because we felt a test to the top of the trading range was coming with the possibility of the indexes testing new highs.  With Wall Street traders away until the end of the month winding down summer vacations, volume will continue to be low and the pros will run the risk of coming back off vacation with the market at new highs.  They will have a hard time telling their clients why their funds are under performing with the market pushing higher ground.  This could force many of them back into the market as they panic, feeling they are missing the rally.

The Fed will meet on August 31 and we should get some kind of “final” word on Greece by mid-September.  Let’s talk about Europe first.

The market’s pop on Thursday was due to German Chancellor Angela Merkel’s comments that the country was committed to maintaining the euro.  This echoed European Central Bank (ECB) President Mario Draghi’s comments last month which started the recent rally.

This week, Greek Prime Minister, Antonis Samaras, will meet with Merkel on Friday and French President, Francois Hollande, over the weekend.  When Greece got its SECOND bailout, their austerity agreements were for two years.  There is talk Samaras wants to stretch the austerity to 4 years.  However, word is he won’t “formally” request an extension until October which is when the European Union leaders meet again. 

The market is expecting the ECB to announce a new bond buying program by the end of the month but it may not come until September 12 which is when Germany is expected to vote on the constitutionality of the ESM bailout fund.

This could get dangerous if Germany plays hardball but many seem to believe Greece will continue to stay in the eurozone for now. 

While the Fed has kept the door open to further quantitative easing (QE), we believe the Fed won’t act in September.  Bernanke is expected to give a “Changing the Monetary Policy” speech at the end of the month and perhaps this week’s FOMC minutes will provide some clues.  Still, we don’t believe the recent economic data has been weak enough to prompt additional stimulus from the Fed.  If it does happen, we would guess it could come in mid-September and nearly a year to the day when Big Ben last initiated a stimulus package.  (This was right after the U.S. lost its triple-A rating because Congress couldn’t agree on anything).

The bottom line is that the Fed will not show its hand or fire its possible last bullet until it gets reassurance from Europe that they are on the right path.  Last year, Big Ben acted more aggressive than expected.  This year, he could act less aggressive but Bernanke has made a name for himself with his unconventional ways of new stimulus packages so anything is possible.

The bulls appear to be taking the market by the horns and we would expect higher prices until the end of the month.  We doubt the bulls have made this trip not to test new highs but the bears will be waiting at some point.  It may or may not come in September, or even this year, depending how Europe goes but the bears will be back at some point.  Until then, the trend is your friend…until it ends.

As we head to press, futures are showing a slightly mixed open this morning.  Dow futures are down 30 points to 13,217 while the S&P 500 futures are off a 2 points to 1,415.  The Nasdaq 100 futures are up 3 points to 2,778.      

 

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.

 

Fusion-io (FIO, $28.38, up $0.15)

September 30 calls (FIO120922C00030000, $1.10, up $0.25)

Entry Price:  $1.00 (8/17/12)

Exit Target:  $1.50-$2.00
Return:  10%
Stop Target:  None

Action:  We have a near-term target of $30 for shares of Fusion-io and a break above this level could lead to a test to $33-$34.  Near-term support is at $26 and the 200-day MA of $25.50.

MGM Resorts (MGM, $10.52, up $0.15)

September 10 calls (MGM120922C00010000, $0.75, up $0.10)

Entry Price:  $0.70 (8/17/12)

Exit Target:  $1.05-$1.40
Return:  7%
Stop Target:  None

Action:  Shares were up 9% for the week and cleared $10 on Wednesday’s close which should serve as support over the near-term.  A move above $10.50 could indicate a possible trend change and the next wave of resistance will come at $11.50 and the 100-day MA.  MGM will soar once an online poker bill is passed.

Pepsico (PEP, $73.39, down $0.19)

September 75 calls (PEP120922C0007500, $0.25, down $0.05)

Entry Price:  $0.15 (8/16/12)

Exit Target:  $0.30
Return:  67%
Stop Target:  None

October 75 calls (PEP121020C00075000, $0.65, down $0.05)

Entry Price:  $0.50 (8/16/12)
Exit Target:  $1.00
Return:  30%
Stop Target:  None

Action:  Pepsico reached new 52-week highs last week after pushing past $73 on Thursday.  We have a near-term price of $75 with a shot at $78-$80 if cleared.

Riverbed Technology (RVBD, $21.09, up $0.39)

September 21 calls (RVBD120922C00021000, $1.25, up $0.10)

Entry Price:  $0.90 (8/16/12)

Exit Target:  $1.35-$1.80
Return:  39%
Stop Target:  90 cents

Action:  Friday’s high was $21.29 while the options reached $1.43.  We have a near-term target of $23-$24 which is near-term resistance but momentum could carry shares to $30. 

SanDisk (SNDK, $42.55, down $0.15)

September 43 calls (SNDK120922C00043000, $1.45, down $0.15)

Entry Price:  $0.89 (8/14/12)

Exit Target:  $1.35-$1.80 (closed half at $1.45 on 9/16/12)
Return:  71%
Stop Target:  $1.25 (HARD STOP)

Action:  Shares traded down to $42.11 on Friday while the low for the options was $1.33.  We have a near-term target of $45 and a move above this level could lead to a test to $50.  Support is at $37.50 but if shares continue to slip our $1.25 Hard Stop will likely trigger which would automatically take us out of the other half of the options.

   

Other 2012 Portfolio OPEN positions (6):  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.

 

Dow Jones Industrial Average Spiders September 119 puts (from July 2012)

S&P 500 Spiders September 123 puts (from July 2012)

Wynn Resorts September 80 puts (from August 2012)  

Veeco Instruments September 30 puts (from August 2012)

Apollo Group September 24 puts (from August 2012)

Bank of America January 12.50 calls 2013 (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.

 

Netflix (NFLX, $63.69, down $0.62)

September 70 calls (NFLX120922C00070000, $1.35, down $0.25)

Thoughts:  Shares could challenge $70 if the uptrend holds and a break above this level could lead to $75.  Friday’s action was slightly bearish which means $62.50 could be tested first.

Harris Group (HRS, $46.35, up $0.35)

September 45 calls (HRS120922C00045000, $1.40, flat)

September 50 calls (HRS120922C00050000, $0.10, flat)

Thoughts:  Harris Group hit a 52-week high of $46.43 on Friday.  Shares could make a run at $50 but resistance at $46 has been hard to crack twice this year.  Bullish to $60?

Amgen (AMGN, $83.38, up $0.28)

September 85 calls (AMGN120922C00085000, $1.10, flat)

October 87.50 calls (AMGN121020C00087500, $1.10, flat)

Thoughts.  A move above $84-$85 could push shares towards $90.  A break below $80=$79 would be bearish.

Taiwan Semiconductor Manufacturing (TSM, $14.40, down $0.05)

January 15 calls (TSM130119C00015000, $0.70, flat)

Thoughts:  We are waiting for a close above $14.75 before possibly going long.

Buffalo Wild Wings (BWLD, $74.22, down $0.38)

September 80 calls (BWLD120922C00075000, $0.50, down $0.20)

September 65 puts (BWLD120922P00065000, $0.50, up $0.05)

Thoughts:  In late July, the stock fell from $78.90 to $70.43 the day after the company reported earnings and traded down to $68.71 intraday.  The recovery high was $75.01 which is near-term resistance.  This is the level we will need to watch for a bullish breakout and buy calls. A move below $70 would suggest we use put options for a possible test down to $65-$60.  If shares can clear their 50-day MA there is a chance for a quick run to $80. 

Broadcom (BRCM, $35.83, down $0.19)

September 36 calls (BRCM120922C00036000, $1.05, down $0.15)

September 32 puts (BRCM120922P00032000, $0.25, down $0.05)

Thoughts:  The 52-week high is $39.66.  We would wait until shares clear $36 before going long and on a break below $34 we might look to go short.

Ingersoll-Rand (IR, $46.40, up $0.10)

September 42 puts (IR120922P00042000, $0.30, down $0.25)

September 46 calls (IR120922C00046000, $1.50, down $0.05)

Thoughts:  Shares continue to appear headed to $50.   

 

Akamai Technologies (AKAM, $37.55, down $0.26)

September 34 puts (AKAM120922P00034000, $0.25, down $0.05)

September 38 calls (AKAM120922C00038000, $1.30, down $0.10)

November 45 calls (AKAM121117C00045000, $0.80, down $0.10)

January 45 calls (AKAM130119C00045000, $1.40, down $0.10)

Action:  We said a close above $37 could lead to a test of the 52-week high of $39.14.  If shares make a move past $40 it would represent blue-sky territory and a possible push to $45-$50.  A drop below $34 would be bearish and could lead to a test of $30.  We have also listed the January and November 45 calls on a possible run to $50-$55 and would give us an additional 2-4 months to play a breakout.

KLA-Tencor (KLAC, $53.34, up $0.03)

September 55 calls (KLAC120922C00055000, $0.85, flat)

September 50 puts (KLAC120922P00050000, $0.55, flat)

Thoughts:  Shares look headed to double-nickels ($55) and a blue-sky breakout could be in the mix.  A move below $52 would reverse the recent uptrend.