11:30pm (EST)

 

1.  Market Summary 

2.  Taser (TASR) Has a Hot New Product    

3.  Earnings

4.  Weekly Wrap Portfolio Update 

5.  Week Ahead

 

(To view the charts, please log into the Members Area and go to the Weekly Wrap Premium section.)

 

= = = = = = = = = = = = = = =

 

1.  Market Summary   

“The first clue we were looking for last week was the close on Monday.  The bears had won 3-straight Friday/ Monday’s but that streak was snapped as the Dow and S&P 500 were up 0.5%, on average, Monday.  This past Friday was negative but the blue-chips were up and the VIX closed lower.  The Monday win was only the second in 4 months for the bulls and if this Monday is negative then we can still use the closes as clues money is still moving out of the market.

Shares of Alcoa (AA, $9.09, up $0.02) were up for the week but we wanted to see a close past $9.20 as indication the company might report better-than-expected earnings.  Alcoa has beaten Wall Street’s estimates the last 2 quarters, and they still might, but after opening higher, shares finished lower for the session back in July.  They will confess on Tuesday after the bell.

 

As far as the overall 3Q earnings picture, the suit-and-ties are looking for quarterly earnings to decline by 2%.  The biggest sectors that could drag down results are the oil and gas companies.  Many of the pencil-pushers have said overall earnings would be up 2%, if not for their weaker-than-expected results.  However, there were some big Tech names that have already warned which makes this a treacherous earnings season to trade.

In some cases, the bar has been lowered from the previous quarter so companies could surprise to the upside.  There will also be a few high profile companies who didn’t warn over the past week or two that could miss by a penny or three.  These companies could see their stock prices hammered if they miss estimates by a mile and investors’ wonder why they didn’t warn.

We have also said the Financial stocks needed to show some strength and over the past few weeks they have.  JPMorgan Chase (JPM, $41.71, down $0.11) and Wells Fargo (WFC, $35.48, down $0.13) will report their numbers on Friday so watch how they trade this week.

The biggest development we saw on Friday was how Apple (AAPL, $652.59, down $14.21) traded.  We profiled 2 sweet option trades for the Daily last week using Apple call options as we said to watch for the $650 level to hold last Tuesday.  Shares made a run to $675 two days later which we said was resistance and where to close the trade at.  The 2 call option trades made 100% and 50%, respectively, in 48 hours.  We are thinking about playing Apple this week but we could be playing it to the downside if $650 doesn’t hold.

Apple is a big component of the market and any weakness trickles down to the major averages just like it does when shares are rallying.  Apple shares make up 20% of the Nasdaq so a test back to $620 would spell trouble for Tech and the market, overall.  If $650 holds and Apple announces the iPad mini this week like we have predicted then shares could push $675 or even $700 again.  Monday could be a big swing day and we will be watching the stock like a hawk at the open.

Europe will be back in the news this week, specifically Greece and Spain.  There were rumors Spain would ask for a bailout over the weekend but they will likely wait a couple of more weeks before doing so.  Greece wants the European Central Bank (ECB) to give them more money or forgive more debt so this situation is only worsening and could be in the headlines this week.

The charts are bullish and if the bulls can hold or advance the flag to start the week, we could see a push towards our upper end price targets.  The fundamentals do not support a further rally but we have to trade what is in front of us and respect the wall of worry.  At the same time, we are preparing for some sort of pullback, perhaps major, and when we will get defensive.

We said last week to respect October’s history but we also know you can’t fight the trend or the Fed which is why we have done well with call options over the past couple of months.  We still have some defensive positions open in our Daily for protection and if the market continues higher we should get called away from a few more trades in our Weekly.

There are still a number of headwinds, both positive and negative, facing the market but by the end of the week, we should see one side emerge from the current 3-week trading range.  The bulls have shown strength all year long but the bears might growl once more before they go in hibernation for the rest of the year.”  (from 10/7/2012 Weekly Wrap/ Monday Morning Outlook)…

The market had its worst week in nearly 5 months as the bears scored a -2+% win.  The downside targets we set last week were all in play on Friday as the bulls held support for the most part.  The pullback lasted all week long as the bears pulled a clean sweep to run their winning streak to 6-straight sessions.  The question is will Wall Street buy the dip or will the bears’ growl grow louder as we head into the heart of 3Q earnings season.

The Dow advanced 2 points, or 0.02%, to end at 13,328 on Friday.  The blue-chips were teetering on 13,600 and we felt the bulls needed to hold this level on Monday if they were going to push our fluff targets from September of 13,800-14,000.  Although the index ended with only a 27 point loss, the close at 13,583 gave us a good feeling 13,350 would be tested.  This level triggered on Wednesday when the Dow closed at 13,344.  We said once this level was breeched to look for a dip to 13,200 and possibly 13,000 which will be this week’s targets.  A close back above 13,500 would confirm we are still in a trading range.  The Dow began the week at 13,610 and fell 282 points, or 2.1%, following Friday’s close.  For the year, the blue-chips are higher by 1,111 points, or 9.1%.

Last week’s chart for the Dow:

The S&P 500 declined 4 points, or 0.3%, and finished at 1,428.  We said the 1,450 level has become a 25-point battle ground and it was tested on Monday when the index traded down to 1,453.  The close below this level on Tuesday at 1,441 was a clear sign that 1,425 was going to come into play.  We said a close below 1,435 would be the all clear signal and we got that with Wednesday’s close of 1,432.  On Friday, the low for the session checked-in at 1,425.53.  This likely gets 1,400 back in the mix with a chance of 1,375 tripping on any panic selling.  The bulls will need to rebound back above 1,450 and then 1,475 before we would trust them again.  The S&P 500 started Monday at 1,460 and was down 32 points, or 2.2%, by the end of the week.  YTD, the index is up 171 points, or 13.6%

Last week’s chart of the S&P 500:

The Nasdaq dropped 5 points or 0.2%, to close at 3,044.  The bulls needed to hold the 3,100 level to start the week if Tech was going to make a run at 3,200-3,250 and they did.  However, on Tuesday, this level failed which opened the door for a flop down to 3,050 as the index got hit for -1+% to settle at 3,065.  Wednesday’s low of 3,046 confirmed our chart work and now gets 3,000 on the radar.  Resistance at 3,100 will be a bear but if cleared, the bigger hurdle will be at 3,150 for the bulls.  The Nasdaq came into the week at 3,136 and was hammered for 92 points, or 2.9%, by the time the weekend hit.  Year-to-date, the index is higher by 441 points, or 16.9%.

Last week’s chart for Tech looked like this:

The Russell 2000 gave back 7 points, or 0.8%, and went out at 823.  The bulls had hopes of pushing 850 on Monday but spent all day in the red as the small-caps closed at 838.  The index needed to hold the 830 level or it faced risk down to 820 last week and Tuesday’s close at 827 got the fat lady singing.  Friday’s low was 821.99.  With the 200-day at 800, this is certainly the bears next target and from there it gets ugly.  A close back above resistance at 830 could stop the bleeding but it might only be temporary.  If not, and the bulls recover, 850 will be an even bigger challenge.  The Russell 2000 was at 842 before Monday’s opening bell and got spanked for 20 points, or 2.4%, following Friday’s close.  For 2012, the index is showing a gain of 82 points, or 11.1%.

The Russell 2000 from last week:

The S&P Volatility Index ($VIX, 16.14, up 0.55) started the week at 14.33 and blew past 15 on Monday which confirmed our feelings volatility could be picking up.  Wednesday’s test to 16.79 was the high for the week and we have been mention a close above 17.50 could cause some nervousness.  More importantly, a pop above the 200-day at 18 could open the sell order floodgates and easily trigger 20.  A close back above 15 would calm things down a little.

 

Alcoa (AA, $8.69, down $0.08) got 3Q earnings season underway and we said to watch how shares trade after the announcement.  Although the stock makes up a small percentage of the Dow, Alcoa fell 4% for the week.  They beat estimates but took a one-time charge that put the quarter in the red and they lowered guidance going forward.

The bulls were banking on the Financial stocks to stop the weekly skid and despite impressive numbers, JPMorgan Chase (JPM, $41.62, down $0.48) and Wells Fargo (WFC, $$34.25, down $0.93) both traded lower on Friday.  JP reported profits of $1.40 a share on revenue of $25.86 billion while Wall Street was looking for $1.21 a share on revenue of $24.42 billion.  Wells Fargo said earnings for the quarter were 88 cents a share on revenue of $21.21 billion versus expectations for 87 cents a share on revenue of $21.47 billion.

The suit-and-ties gave the bulls two strikes for those numbers and this week there will be a number of Financial companies reporting.  This list includes Citigroup (C, $$34.75, down $0.77) on Monday, Goldman Sachs (GS, $120.20, down $1.79) on Tuesday.  American Express (AXP, 57.89, down $0.58) and Bank of America (BAC, $9.12, down $0.22), on Wednesday and Morgan Stanley (MS, $17.31, down $0.55) on Thursday.  If there is no bounce or rebound in the aforementioned stocks, or if the Financial Select Spiders (XLF, $15.81, down $0.22) fall below $15.50, the sector could suffer.  We said a few weeks ago the bulls needed the Banks (and Tech) to show more strength if they were going to push new highs, and so far, that hasn’t happened.

Perhaps the biggest name that will move the market and especially the Dow will be International Business Machines (IBM, $207.80, up $2.04).  The company has executed a nice game plan quarter-after-quarter over the last few years and is near a 52-week peak.  If by chance IBM misses estimates or lowers guidance, we would be shocked but not as much as Wall Street will be.  You can check out all of the companies reporting this week in the Earnings section of the Weekly Wrap.

Shares of Apple (AAPL, $629.71, up $1.61) took a pounding after falling $33 for the week.  We mentioned there was a chance $620 could be tested if $650 failed to hold.  Shares tested $623 on Tuesday and $625 on Friday.  The word on the Street is the company will announce the iPad mini on Tuesday, October 23 and earnings will be released two days later.  If Apple falls below $620, shares could test $600 this week.  If they miss earnings or lower the bar going forward, shares could test $570 and the 200-day MA.  We are looking at buying Apple WEEKLY put options on a break below $620 and call options on a break above $650 down the road.

The Dow closed higher on Friday and on the previous Friday but not by much.  Monday was a down day.  The S&P 500 has traded lower on the past 3 Monday/ Friday’s while the Nasdaq has closed lower 6 straight M/F’s.  Although the Monday/ Friday closes haven’t been a clear signal on a lower market, if you read between the lines, it has been since mid-September and Monday’s have been bearish for 4 months now.

This Friday is October option expiration and it has been bearish for the past 6 years and 7-of-the-last-8.  We talked about the major October stock market crashes a few weeks ago and Friday will be the 25th anniversary of the Monday, October 19, 1987 debacle.  The Dow fell nearly 23%, or 508 points, from 2,246 to 1,738 that day.

We stopped short of saying there will be a full-fledged correction this month but we have said it is possible.  The major indexes gave back 2+% with the Nasdaq giving back 3% last week.  However, a slow and steady drop of 5% from current levels could be damaging and lead to a nasty selloff.  As it stands, the Dow is likely to test 13,000 and the S&P 500 appears to be headed to 1,400.  The Nasdaq looks like it will trip 3,000.  This is only a 2% drop away, on average, for the indexes.

A 5% move over the next few weeks, if it all doesn’t come at once, would equate to Dow 12,600; S&P 500 1,350; and Nasdaq 2,900.  A 5% hit to the Russell 2000 would knock the index back to 780.  The aforementioned downside targets would represent a break below the 200-day moving averages for all 4 major indexes.

This week’s charts and last week’s have been golden and clearly show the breakdown that has transpired.  The break below the lower uptrends lines was a serious blow to the bulls pushing new highs but we often say support and resistance often get “stretched”.  The bulls will need to get off to a quick start by Monday’s close and a gain of 1% or more to start the week would be bullish.

There will be enough earnings news, surprises or misses, that will play a major role in which way the market will move.  We are expecting a 2% drop this week and if earnings are ugly, the 5% drop we reviewed earlier could come into play.  The pressure will be on the bulls to change our mind.

As we head to press, futures are showing a slightly lower open for Monday.  Dow futures are down 15 points to 13,230 while the S&P 500 futures are lower by 2 points to 1,419.  The Nasdaq 100 futures are off by 1 point to 2,709.

 

= = = = = = = = = = = = = = =

 

Key of Technicals Used In Following Articles

2.  Taser (TASR) Has a Hot New Product    

By Michael Bryant

 

“Food, water, and ammunition,” that is what is said for survival in the end of the world as we know it.  But whether the surge in gun sales is due to December doomsday theories, the souring economy, fear of growing crime, need for greater security, or consumers’ concern that President Obama will enact stricter gun laws if he is re-elected, gun makers stocks have been soaring.  Stun gun maker TASER International (TASR, $5.99, up $0.07) is seeing surging sales, with revenues jumping 33% year over year.  Its stock is also up 33% in the past 52 months.  But its stock pales in comparison to other gun makers.  Is this fair?  Does the stock deserve a higher price?

On September 30, 2009, the company issued a warning to law enforcement agencies to aim shots below the chest to avoid controversy whether ECDs affect the heart.  It also stated that repeated blasts can impair breathing and respiration.  Further, it stated that repeated or prolonged stuns of subjects with mental, health, or physical issues can be potentially fatal.  Police officers in at least five states have filed lawsuits against the company claiming they suffered serious injuries after being shocked with the device during training classes.  One police officer suffered spine fractures after being shocked during a demonstration.

However, a study funded by the Justice Department found that the majority of people subjected to Tasers from July 2005 to June 2007 suffered no injury.  Further, a study led by William Bozeman of the Wake Forest University Baptist Medical Center stated that 99.7% of the nearly 1,000 people it studied had either minor injuries, such as scrapes and bruises, or none at all.  To be fair, pepper spray, tear gas, riot guns, and batons have also been reported as contributing to deaths.

AXON Flex (above) is used to take video of what is actually happened in front of the police officer.  This can help resolve lawsuits and also enhance public trust, as the officer is less likely to use excessive force.  Also, about 90% of police work does not happen in front of the cruiser, where many cruisers have dash cams.

On October 2nd, the company received two large orders for a total of 1035 TASER X2s.  Then on October 10th, it received many more orders for its TASER CAMTMHD and AXON Flex with its cloud based EVIDENCE.com secure digital evidence management service.  Below is a list of the orders and the approximate price.

Pima County Sheriff’s Department (AZ) and another agency 1035 TASER X2 electronic control devices

$983,250

Atlanta Police Department (GA)  400 TASER CAMTMHD recorders

$440,000

400 TASER X2 electronic control devices

$380,000

Chesapeake Police Department (VA) 125 AXON Flex systems with a 5-year EVIDENCE.com service plan

$857,375

Hartford Police Department (CT) 42 AXON Flex systems with a 1-year EVIDENCE.com service plan

$99,758

Topeka Police Department (KS) 30 AXON Flex systems with a 3-year EVIDENCE.com service plan

$148,970

Wentzville Police Department (MO)  30 AXON Flex systems with a 1-year EVIDENCE.com service plan

$76,970

Bullit County Sheriff’s Office (KY)  15 AXON Flex systems with a 3-year EVIDENCE.com service plan

$84,485

Aransas Pass Police Department (TX) 12 AXON Flex systems with a 3-year EVIDENCE.com service plan

$71,588

Coushatta Police Department (LA) 10 AXON Flex systems with a 1-year EVIDENCE.com service plan

$38,990

Butts County Sheriff’s Office (GA)  10 AXON Flex systems with a 1-year EVIDENCE.com service plan

$38,990

Danville Police Department (VA) 9 AXON Flex systems with a 5-year EVIDENCE.com service plan

$80,291

Butler Police Department (WI) 7 AXON Flex systems with a 1-year EVIDENCE.com service plan

$33,293

Chula Vista Police Department (CA) 6 AXON Flex systems with a 5-year EVIDENCE.com service plan

$60.194

Prices used were $1,100 for a CAMTMHD recorder, $950 for a X2 electronic control device, $699 for an AXON Flex system, and $20,000 for the 1st year plus $1,200 for each additional year of EVIDENCE.com service plan per device.  That totals to about $3.4 million.

In one recent survey conducted by PoliceOne.com, more than 82% of law enforcement respondents indicated that they see a need for officer-worn cameras.  As video usage expands throughout law enforcement, revenues will grow.  The orders above is only about 12% of the $28.2 million it made last quarter, but there will likely be many more orders during the current quarter.

Most of its sales are to law enforcement and the military.  Its other products include the TASER X26, TASER X3 (a multi-shot ECD that would engage three separate targets), TASER X2, and Shockware (a shield allowing one to hit multiple targets at the same time) as well as accessories and cartilages for law enforcement and the military.  The company also provides TASER XREP, a self-contained, wireless ECD that deploys from a 12-gauge pump-action shotgun for the military and law enforcement.  For civilian protection, it offers TASER C2, TASER X26C, and ADVANCED TASER M26C.  It also offers the X3W for wildlife shooting.

 

In the 2nd quarter, the ECD segment provided $26.9 million (95%) while the video segment provided only $1.3 million (5%) of total revenue.  Going back to the list of October 2nd and 10th orders, that alone is about $1.55 million in video equipment.  Looks like the company may surprise estimates when it reports 3rd quarter earnings on October 25th.

Analysts expect revenue to fall slightly in the 3rd and 4th quarters.  This could leave room for upgrades in revenue estimates.  Such upgrades should cause the stock to rise.

But the company’s yearly stock performance does not match up with other gun makers.  Smith & Wesson Holding (SWHC) stated last month that 2nd quarter earnings, which it will report on December 6th, would beat expectations by as much as 60%.  1st quarter sales were 48% higher than a year ago, and adjusted profits were 245% higher than last year.  This robust growth has helped propel the stock up 250% in the past year.  Rival Sturm, Ruger & Company (RGR) has also done well, reporting 2nd quarter earnings on August 1st that beat analysts’ expectations by 11 cents.  Its stock is up 55% in the past year.  Hunting, fishing, and camping retailer Cabela’s (CAB) is also having a great year, rising 139%.  The graph below compares the price movement of the three stocks over the past year with TASR, which is in blue.

However, we must remember that the company is a stun gun maker, and the other three are traditional gun makers.  One can argue the difference between a stun gun and a real gun, but their main purpose is generally the same: to protect.  Since there are no other pure stun gun makers, we will compare them to the company.  It makes sense that the alternative of a real gun is a stun gun.

From the list of statistics below, the most impressive number is the high 52% gross margin, which is also better than any of the other gun makers.  Debt is zero, a good sign for any smallcap.  The current ratio indicates that it has enough current assets to cover current liabilities.  Institutional ownership is a decent 47%, and short interest is small.  Plus, shorts are covering.

At $5.99, the stock is close to its low target of $5.75 made by the 3 analysts recorded by Thomson/First Call.  Mean target is $7.08, median target of $7.50, and high target is $8.00.  Using a scale of 1.0 as a strong buy and 5.0 as a sell, the average rating of the stock was 1.8, unchanged from a week ago.

 

Current Month

Last Month

Two Months Ago

Three Months Ago

Strong Buy

1

1

1

1

Buy

2

2

2

2

Hold

1

1

1

1

Underperform

0

0

0

0

Sell

0

0

0

0

We like Taser International (TASR, $5.99, up $0.07) at current levels so let’s see how we can play it.  Earnings are due out on October 25 and shares will likely move on the numbers.  This means there is risk over the near-term if the company misses estimates or lowers its forecasts for the upcoming quarters.  The upside would be that they beat estimates, report strong sales, and an upbeat outlook.

The Taser November 5 calls (TASR121117C00005000, $1.10, flat) could be sold at current levels and this would reduce the cost basis to $4.89 if shares were bought at $5.99.  The problem is this would only equate to a 2% return if we are called away at $5.

The December 5 calls (TASR121222C00005000, $1.15, flat) would get us 3% but that is a long-time to wait for a 3% return that includes risk.

We like the December 7.50 calls (TASR121222C00007500, $0.10, flat) but we would only get a dime for them.  While the return would be 27% if we sold the calls and bought the stock, the return would be 25% if we just bought the stock and shares reach $7.50 by Christmas.

The Taser March (2013) 7.50 calls (TASR130316C00007500, $0.25) have a bid/ask of 10/30 cents but this would require a waiting period of 6 months and by then we are hoping shares reach $8-$10.

With our “options” being limited to a low single-digit return no matter how far we go out, it best to buy the stock and wait.  Again, there is risk for a drop below $5 if Taser misses estimates or says something silly we doubt that will be the case.

The plan will be to buy the stock at some point this week and we would like to confirm $6 is going to hold.  After earnings, if shares get a pop and push $7, we could then sell a call option that would give us a return north of 30%, possibly.  We will send out a New trade Alert when we add the stock to our Weekly Wrap portfolio.

As far as the Daily newsletter, we may target the December 7.50 calls as a way to play the earnings announcement and a possible run to $7-$8.  If shares do trade to $8 by mid-December the options would be worth a minimum of 50 cents, or 400%, from current levels.  Since these options could jump in price once we release a possible trade, even if we pay up to 20 cents, the return would be 150% if shares trip $8.

We will wait to list these options in the Daily because the options activity will likely get noticed by the suit-and-ties once we start buying.  We are going to try to pick them up this week if shares can clear $6 and hold.  With directional trading, this of course, would be an all-or-nothing trade if shares are trading under $7.50 by mid-December which is why you shouldn’t bet the ranch with this trade.  It is for speculative accounts only.

We always try to trade in equal amounts for all of our positions in both the Daily and Weekly.  This means we like to keep positions between $1,000-$2,000 per trade and we could even do “HALF” positions to reduce risk.

Here is the short-term chart which shows a a break above $6.10 would be bullish while a drop below $5.80 would be slightly bearish:

Here is the longer-term chart:

Again, we will send out a Trade Alert if and when we take action for the Weekly or Daily.

 

= = = = = = = = = = = = = = =

 

3.  Earnings 

The companies in BOLD, we are looking at as possible trades and we may list call or put options on them in our Daily Newsletter.  If they become official recommendations, we sent out Trade Alerts or include them in our 9am and 1pm updates that come out during the week (Quotes are from 10/12/12 close)

 

Monday

1st Source (SRCE, $22.06 down $0.77), ), Acme United (ACU, $12.06, Flat), Arrow Financial (AROW, $24.74, down $0.30), BancFirst (BANF, $42.74, down $0.89), BJ’s Restaurants (BJRI, $39.99, down $0.49), Cardinal Financial (CFNL, $13.96, down $0.28), Chicopee Bancorp (CBNK, $15.00, Flat), Citigroup (C, $34.75, down $0.77), City (CHCO, $34.74, down $0.72), Community Bank Shares of Indiana (CBIN, $13.39, up $0.06), DNB Financial (DNBF, $15.91, Flat), First Bancorp (FNLC, $17.44, down $0.10), First Community (FCCO, $8.50, Flat), First Financial (THFF, $31.29, down $0.65 ), Flexsteel Industries (FLXS, $19.50, up $0.21), Gannett (GCI, $17.90, up $0.16), ICU Medical (ICUI, $59.21, down $1.19), Lakeland Bancorp (LBAI, $10.59, down $0.18), Monarch Financial (MNRK, $9.75, down $0.03), NB&T Financial (NBTF, $17.00, down $1.15), Newport Bancorp (NFSB, $16.44, Flat), Norwood Financial (NWFL, $31.86, Flat), OmegaFlex (OFLX, $11.51, up $0.11), Packaging Corp. of America (PKG, $35.19, down $0.32), Penns Woods Bancorp (PWOD, $44.13, down $0.34), Pulaski Financial (PULB, $8.15, down $0.08), Republic (RBCAA, $20.49, down $0.60), River Valley (RIVR, $17.60, up $0.85), Seacor (CKH, $86.42, up $0.60), Somerset Hills (SOMH, $8.40, down $0.08), Southwest Bancorp (OKSB, $10.65, down $0.38), Southwest Georgia Financial (SGB, $8.92, up $0.17), Superior Uniform (SGC, $12.01, down $0.04), Travelzoo (TZOO, $20.02, down $3.48), Universal Health Realty Income Trust (UHT, $47.15, down $0.63), Virginia Commerce (VCBI, $8.61, down $0.08), WD-40 (WDFC, $51.73, down $0.18), Westamerica (WABC, $45.41, down $1.15), Wynn Resorts (WYNN, $113.81, up $1.35), Young Innovations (YDNT, $37.56, down $0.70)

 

Tuesday

Apollo (APOL, $28.64, down $0.23), Badger Meter (BMI, $36.87, down $0.12), Banco Latinoamericano de Comercio Exterior (BLX, $22.30, down $0.18), Cathay General (CATY, $17.00, down $0.59), Coca-Cola (KO, $38.23, up $0.12), Commerce Bancshares (CBSH, $39.13, down $1.21), Cree (CREE, $25.11, up $0.15), CSX (CSX, $21.31, up $0.15), Del Frisco’s Restaurant (DFRG, $14.70, down $0.04), Domino’s Pizza (DPZ, $37.70, down $0.04), ESB Financial (ESBF, $13.46, down $0.17), Forest Laboratories (FRX, $36.28, down $0.24), Fortinet (FTNT, $24.26, up $0.35), Frisch’s Restaurants (FRS, $17.13, down $0.63), Fulton Financial (FULT, $10.40, down $0.06), Goldman Sachs (GS, $122.06, up $1.98), Intel (INTC, $24.48, down $0.20), Interactive Brokers (IBKR, $14.15, down $0.18), International Business Machines (IBM, $207.80, up $2.04), Intuitive Surgical (ISRG, $494.58, down $0.06), Ironwood Pharmaceuticals (IRWD, $13.40, up $0.29), Johnson & Johnson (JNJ, $67.97, Flat), Linear Technology (LLTC, $31.51, down $0.26), Manhattan Associates (MANH, $57.15, up $0.32), Marten Transport (MRTN, $17.72, down $0.01), Mattel (MAT, $36.01, up $0.76), Mercantile Bank (MBWM, $17.00, down $0.14), New Oriental Education (EDU, $17.14, down $0.81), Oak Valley (OVLY, $7.53, up $0.09), Omnicom (OMC, $51.73, down $0.29), Parametric Sound (PAMT, $5.59, up $0.31), Pinnacle Financial (PNFP, $18.70, down $0.66), PNC Financial Services (PNC, $62.73, down $1.82), Renasant (RNST, $19.07, down $0.53), Sonic (SONC, $9.69, down $0.12), State Street (STT, $41.38, down $0.64), United Rentals (URI, $32.08, down $0.41), UnitedHealth (UNH, $57.07, down $0.59), W.W. Grainger (GWW, $214.63, down $2.09), Weis Markets (WMK, $40.82, down $0.48), Wintrust Financial (WTFC, $37.88, down $0.91), Wolverine World Wide (WWW, $42.99, down $0.43)

 

Wednesday

AO Smith (AOS, $55.94, down $0.38), Abbott Laboratories (ABT, $69.28, down $0.14), Albemarle (ALB, $52.01, down $0.32), Align Technology (ALGN, $36.56, down $0.34), American Express (AXP, 57.89, down $0.58), Amphenol (APH, $58.57, up $0.07),  Astoria Financial (AF, $10.25, down $0.07), Bank of America (BAC, $9.12, down $0.22), Bank of New York Mellon (BK, $22.84, down $0.55), BlackRock (BLK, $184.31, down $1.48), Boston Private Financial (BPFH, $9.51, down $0.29), Central Valley Community (CVCY, $8.25, up $0.13), Check Point Software (CHKP, $46.05, up $0.62), Comerica (CMA, $30.89, down $0.68), Community Trust (CTBI, $35.46, down $0.38), Core Laboratories (CLB, $103.52, up $0.31), Covanta (CVA, $17.50, down $0.04), Crown Holdings (CCK, $37.22, up $0.09), CVB Financial (CVBF, $11.75, down $0.19), Dover (DOV, $55.33, up $0.08), East West (EWBC, $20.39, down $0.90), eBay (EBAY, $47.85, up $0.36), El Paso Pipeline (EPB, $36.98, up $0.05), Ethan Allen (ETH, $22.24, down $0.12), Exponent (EXPO, $55.67, down $0.14), First Cash Financial (FCFS, $44.83, down $0.36), First Republic (FRC, $33.50, down $0.33), GNC (GNC, $39.57, down $0.39), Greenhill (GHL, $48.55, down $1.67), Halliburton (HAL, $33.80, down $0.17), Harleysville Savings Financial (HARL, $16.50, up $0.05), Heritage-Crystal Clean (HCCI, $17.78, down $0.51), HNI (HNI, $26.10, down $0.11), Horizon (HBNC, $28.44, down $0.11), Kinder Morgan Energy (KMP, $84.34, down $0.85), Kinder Morgan Management (KMR, $77.05, down $0.27), Lam Research (LRCX, $32.46, down $0.25), LaSalle Hotel (LHO, $25.26, down $0.54), Lindsay (LNN, $72.12, down $0.07), M&T Bank (MTB, $96.32, down $2.07), Media General (MEG, $5.27, down $0.03), Mellanox (MLNX, $103.38, up $1.79), Noble (NE, $36.00, up $0.16), Northern Trust (NTRS, $46.29, down $0.76), NVE (NVEC, $58.48, down $1.48), Pacific Continental (PCBK, $8.98, down $0.07), Pepsico (PEP, $70.05, up $0.23), Piper Jaffray (PJC, $25.66, down $0.24), Platinum Underwriters (PTP, $42.32, down $0.05), Preferred Bank (PFBC, $13.52, down $0.33), Quest Diagnostics (DGX, $63.39, down $0.85), RLI (RLI, $68.06, up $0.03), The Savannah Bancorp (SAVB, $9.92, Flat), Select Comfort (SCSS, $31.84, down $0.37), SLM (SLM, $17.00, down $0.31), St. Jude Medical (STJ, $42.59, down $0.10), Stanley Black & Decker (SWK, $70.06, down $1.67), Steel Dynamics (STLD, $12.10, down $0.28), Stryker (SYK, $52.30, down $0.16), SVB Financial (SIVB, $59.03, down $1.84), Taylor Capital (TAYC, $17.05, up $0.05), Textron (TXT, $25.49, up $0.07), U.S. Bancorp (USB, $33.72, down $0.67), Umpqua Holdings (UMPQ, $12.22, down $0.47), UniFirst (UNF, $66.50, down $0.60), Union Bankshares (UNB, $19.76, up $0.25), Werner Enterprises (WERN, $22.56, up $0.39), WNS (WNS, $10.35, down $0.07), WSI Industries (WSCI, $7.65, Flat), Xilinx (XLNX, $32.68, down $0.11)

 

Thursday

Abaxis (ABAX, $36.37, down $0.44), Acacia Research (ACTG, $25.80, down $0.11), Alliance Data (ADS, $137.84, down $0.67), American River (AMRB, $7.85, up $0.34), Associated Banc-Corp (ASBC, $12.79, down $0.42), athenahealth (ATHN, $82.07, down $0.07), B&G Foods (BGS, $28.49, down $0.30), BancorpSouth (BXS, $14.20, down $0.61), Baxter (BAX, $60.69, down $0.27), BB&T (BBT, $32.34, down $0.86), The Blackstone (BX, $14.94, up $0.45), Boston Scientific (BSX, $5.57, down $0.01), Briggs & Stratton (BGG, $18.60, up $0.02), Capital One Financial (COF, $58.21, down $0.68), Cass Information (CASS, $42.16, down $0.32), Cepheid (CPHD, $33.90, down $0.46), Chipotle Mexican Grill (CMG, $290.47, up $4.11), Citizens First (CZFC, $8.00, down $0.15), City National (CYN, $49.59, down $1.96), CoBiz Financial (COBZ, $7.25, down $0.09), Cubist Pharmaceuticals (CBST, $47.00, down $0.04), Cypress Semiconductor (CY, $9.88, down $0.07), Cytec Industries (CYT, $64.79, down $0.57), Danaher (DHR, $55.93, Flat), Diamond Offshore Drilling (DO, $66.58, up $0.35), E*TRADE Financial (ETFC, $9.00, down $0.32), EastGroup (EGP, $53.17, down $0.20), Electronics for Imaging (EFII, $16.72, down $0.12), Emclaire Financial (EMCF, $22.20, down $1.70), Fairchild Semiconductor (FCS, $11.88, down $0.08), Fifth Third Bancorp (FITB, $15.27, down $0.62), First Financial Bankshares (FFIN, $35.34, down $0.91), Flextronics (FLEX, $5.94, down $0.08), Forward Air (FWRD, $30.07, down $0.18), GATX (GMT, $42.89, down $0.08), Genuine Parts (GPC, $61.29, down $0.05), Google (GOOG, $744.75, down $6.73), Hanmi Financial (HAFC, $12.68, down $0.15), Healthways (HWAY, $11.09, up $0.08), Home Bancshares (HOMB, $33.38, down $0.93), Home Loan Servicing Solutions (HLSS, $17.20, up $0.09), Huntington Bancshares (HBAN, $6.93, down $0.22), Independent Bank (INDB, $29.89, down $0.70), Insteel Industries (IIIN, $11.75, down $0.08), KeyCorp (KEY, $8.33, down $0.30), Laboratory Corp. of America Holdings (LH, $92.73, down $0.56), Life Time Fitness (LTM, $44.43, down $0.32), Marriott Vacations Worldwide (VAC, $39.17, up $0.14), Metro Bancorp (METR, $12.88, down $0.30), Microsoft (MSFT, $29.20, up $0.25), Morgan Stanley (MS, $17.31, down $0.55), Myers Industries (MYE, $14.82, down $0.46), National Bankshares (NKSH, $32.05, down $0.30), NCR (NCR, $22.06, down $0.04), NetScout Systems (NTCT, $24.07, up $0.10), Nucor (NUE, $38.58, down $0.43), NVR (NVR, $865.00, up $0.70), OceanFirst Financial (OCFC, $14.22, down $0.03), Orbital Sciences (ORB, $14.18, down $0.08), Penn National Gaming (PENN, $40.82, down $0.38), People’s United Financial (PBCT, $12.04, down $0.18), Philip Morris (PM, $91.70, up $0.86), Polaris Industries (PII, $82.57, up $0.81), Pool (POOL, $41.31, down $0.51), PPG Industries (PPG, $114.23, down $1.23), Premiere Global (PGI, $9.43, down $0.19), Riverbed Technology (RVBD, $21.97, down $0.13), Robert Half (RHI, $25.24, down $0.17), SanDisk (SNDK, $42.28, Flat), Sandy Spring Bancorp (SASR, $18.94, down $0.36), SEI Investments (SEIC, $21.17, down $0.24), Snap-on (SNA, $71.28, down $0.56), Sonoco Products (SON, $30.59, Flat), Southwest Airlines (LUV, $8.84, up $0.13), Travelers Companies (TRV, $68.72, down $0.44), Trinity Biotech (TRIB, $13.81, down $0.25), Ultratech (UTEK, $28.81, down $0.47), Union Pacific (UNP, $121.05, up $0.13), Universal Forest Products (UFPI, $40.70, up $0.30), USG (USG, $21.06, down $0.12), Valmont Industries (VMI, $126.10, up $0.13), Vascular Solutions (VASC, $14.85, down $0.13), Verizon Communications (VZ, $44.62, down $0.58), WESCO (WCC, $56.11, down $0.89), Western Alliance (WAL, $10.48, down $0.12), Westwood Holdings (WHG, $39.45, down $0.50)

 

Friday

Air Products & Chemicals (APD, $82.00, up $0.03), Alliance Financial (ALNC, $45.44, down $0.56), Baker Hughes (BHI, $44.77, up $0.12), Bank of Kentucky Financial (BKYF, $26.88, down $0.30), Bar Harbor Bankshares (BHB, $35.64, up $0.13), CNB Financial (CCNE, $17.44, down $0.27), Cooper Industries (CBE, $73.59, up $0.36), Eastern Virginia Bankshares (EVBS, $5.01, up $0.16), Edwards Lifesciences (EW, $87.10, up $0.92), Farmers Capital Bank (FFKT, $10.10, down $0.30), Federal-Mogul (FDML, $9.46, down $0.17), First Horizon National (FHN, $9.52, down $0.43), First M&F (FMFC, $8.24, down $0.05), First Niagara Financial (FNFG, $8.01, down $0.26), General Electric (GE, $22.48, down $0.03), Honeywell (HON, $60.20, down $0.09), IDEXX Laboratories (IDXX, $95.94, down $0.96), Ingersoll-Rand (IR, $44.31, down $0.07), Kansas City Southern (KSU, $75.15, up $0.71), magicJack VocalTec (CALL, $20.11, down $1.21), ManpowerGroup (MAN, $35.18, down $0.71), McDonald’s (MCD, $92.51, up $0.15), McMoRan Exploration (MMR, $11.86, up $0.53), Memorial Production (MEMP, $19.85, down $0.14), Metrocorp Bancshares (MCBI, $10.24, down $0.04), MicroFinancial (MFI, $8.90, down $0.06), Monro Muffler Brake (MNRO, $36.07, down $0.18), Northwest Bancshares (NWBI, $12.16, down $0.21), PacWest (PACW, $22.10, down $0.69), Parker-Hannifin (PH, $79.40, up $0.22), Popular (BPOP, $18.27, down $0.63), Robbins & Myers (RBN, $59.89, $0.07), Schlumberger (SLB, $72.19, down $0.23), Sensient Technologies (SXT, $36.33, down $0.45), Stepan (SCL, $95.85, down $0.95), Syntel (SYNT, $61.92, down $0.08), TCF Financial (TCB, $11.13, down $0.55), Teche (TSH, $40.42, up $0.97), United Financial (UBNK, $14.49, down $0.10)

 

= = = = = = = = = = = = =

 

4.  Weekly Wrap Covered Call Portfolio Update (Closing prices as of 10/12/12)

Closed Trades for 2012 (24-0, overall):  ARNA +117%, SZYM +11%, BAC +26%, EFTC +8%, SZYM +55%, VVUS +38%, CALL +19%, BAC +20%, SYMC +16%, DAR +20%,TIVO +5%, MGM +22%, ZNGA+13%, SGMS +6%, VVUS +17%, F +8%, AA +7%, CLNE +27%, DNDN +18%, MGM +19%, ACAS +3%, P +9%, BAC +6%, AA +3%.

 

 

TiVo (TIVO, $9.94, up $0.06)

October 10 calls (TIVO121020C00010000, $0.15, flat)

Original Entry Price:  $9.65 (9/19/12)

Lowered Price from Selling Options:  $9.17

Exit Target:  $12+

Return:  8%

Stop Target:  $7

Action:  Shares fell below $10 on Wednesday and touched a low of $9.79.  The close at $9.94 on Friday is dead on the 200-day MA.  A break below $9.60 and the 50-day MA could lead to  test to $9.  We only need shares to be above $10 by Friday’s close to get called away and if we aren’t, we will look to write another call options next week.

We recommended buying the stock at $9.65 on 9/19/2012 and for every 100 shares to sell the October 10 call for 48 cents.  This lowered the cost basis to $9.17.

If shares are called away in mid-October at $10 the trade will make 9%.

 

 Solazyme (SZYM, $10.11, down $0.16)

Original Entry Price:  $12.35 (8/9/12)

Lowered Price from Selling Options:  $11.55

Exit Target:  $15+

Return:  -12%

Stop Target:  $9

Action:  Solazyme also traded below $10 on Wednesday and shares were down 9% for the week.  This opened the door for a test down to $9.50 which we expect to hold.  If not, we will be back with a longer-term chart next week.  A move above $10.50 would be bullish and where we will look to write another call option.  Earnings will be released November 5.

We recommended buying the stock at $12.35 on 8/9/2012 and for every 100 shares to sell the September 12.50 calls for 80 cents.  This lowered the cost basis to $11.55.

 

Vivus (VVUS, $22.86, up $0.92)

Original Entry Price:  $22.70 (7/27/12)

Lowered Price from Selling Options:  $21.35

Exit Target:  $30+

Return:  7%

Stop Target:  $15

Action:  Vivus roared back to life after closing above $20 to start the week.  By Wednesday, shares were pushing $22 and resistance is at $24.  A move above this could get $26 back in play and have us looking a selling the November 25 calls (VVUS121117C00025000, $1.10, up $0.30) to lower our cost basis.  Earnings will be released November 5.

We recommended buying the stock at $22.70 on 7/27/2012 and for every 100 shares to sell the August 24 calls for 95 cents.  This lowered the cost basis to $21.75.

On 9/6/12 we sold the September 24 calls for 40 cents which lowered our cost basis to $21.35.

 

Antares Pharma (ATRS, $3.98, down $0.01)

November 5 calls (ATRS121117C00005000, $0.10, flat)

Original Entry Price:  $4.94 (7/13/12)

Lowered Price from Selling Options:  $3.94

Exit Target:  $8+

Return:  1%

Stop Target:  None

Action:  Shares traded in a tight range all week following the equity offering during the prior week.  The 50-day and 100-day MA’s are serving as support but there is risk down to $3.60-$3.40.  A move above $4.10 would be bullish while a break below $3.90 would be bearish.  We believe shares will reach $6-$8 in the first half of 2013 so we can write another option if we are not called away at $5 in November.  Earnings will be released November 5.

We recommended buying the stock at $4.94 on 7/13/2012 and for every 100 shares to sell the August 5 calls for 70 cents.  This lowered the cost basis to $4.24.

On 9/6/12 we sold the November 5 calls for 30 cents which lowered our cost basis to $3.94.  If we are called away at $5 in mid-November the trade will make 27%.  .

 

Antares Pharma (ATRS, $3.98, down $0.01)

February (2013) 7.50 calls (ATRS130216C0007500, $0.20, flat)

Original Entry Price:  $0.80 (7/13/12)

Exit Target:  $1.60

Return:  -75%

Stop Target:  None

Action:  This is a LEAP call option which has over 5 months before expiration.

 

Pizza Inn (PZZI, $2.56, down $0.06)

Original Entry Price:  $4.50 (2/22/12)

Lowered Price from Selling Options:  No options available

Exit Target:  $9

Return:  -43%

Stop Target:  None

Action:  Shares traded to a low of $2,54 on Thursday and Friday so hopefully this represents a double-bottom.  A break below this level could lead to the low $2’s and where we would consider adding to the position.  Short-term resistance is at $2.80.  Earnings will be released November 7.

Pizza Inn continues to open new pie shops in Texas.  The company’s latest restaurant in Houston was its ninth.  The company recently won the prestigious 2012 Hot Concepts award from the Nation’s Restaurant News and the buzz is growing.  The company is targeting 75 major cities to expand and some will be company owned or franchised.  Insiders are buying shares at these low levels and we feel you should be loading up too while they are still under $3.  We have a 12 to 18-month price target of $10 for Pizza Inn.

 

MGM Resorts (MGM, $10.25, down $0.02)

 

Original Entry Price:  $13.77 (2/2/12)

Lowered Price from Selling Options:  $12.67

Exit Target:  $15

Return:  -19%

Stop Target:  None

Action:  MGM continued it recent trend of lower highs and lower lows after touching a low of $10.07 last week.  A break below $10 will likely lead to a test of the low $9’s while a push back above $10.60 would be bullish.

We recommended buying the stock at $13.77 on 2/2/2012 and for every 100 shares to sell the March 15 calls for 45 cents.  This lowered the cost basis to $13.32.

On 3/20/12 we recommended selling the April 14 calls for $0.65 which lowered the cost basis to $12.67.

 

Newpark Resources (NR, $6.85, down $0.24)

Original Entry Price:  $9.45 (7/27/11)

Lowered Price from Selling Options:  $7.85

Exit Target:  $11

Return:  -13%

Stop Target:  None

Action:  Resistance at $7.20 proved to be a brick wall and the close below $7 on Friday gets $6.60 and the 100-day MA in play.  Earnings are due out on October 25 and we will provide a preview next week on what to expect.

We recommended buying the stock at $9.45 on 7/27/2011 and for every 100 shares to sell the August 10 calls for 50 cents.  This lowered the cost basis to $8.95.

On 9/15/2011 we recommended selling the December 10 calls for $0.85 which lowered the cost basis to $8.10.

On 1/25/2012 we recommended selling the March 12.50 calls for $0.25 which lowered the cost basis to $7.85.

 

Trades on HOLD:  DryShips (DRYS, $2.27, down $0.05), AKS Steel Holding (AKS, $5.20, down $0.16), Rare Element Resources (REE, $4.73, up $0.06), Rambus (RMBS, $4.96, down $0.23), Patriot Coal (PCXCQ, $0.19, up $0.05), OCZ Technology Group (OCZ, $1.47, down $0.39), Bebe Stores (BEBE, $4.24, down $0.04), Scientific Games (SGMS, $7.82, up $0.10)

 

= = = = = = = = = = = = = = =

 

5.  Week Ahead

Economic news could play a role in how the market trades this week starting with Monday’s Retail Sales numbers.  The Empire Manufacturing report will also be released before the bell and boith are due out at 8:30am (EST).  Business Inventories will be out at 10am.

For Tuesday, the Consumer Price Index (CPI) will be in focus at 8:30 followed by Net Long-Term TIC Flows at 9am.  At 9:15am, Industrial Production and Capacity Utilization figures are due out.  The NAHB Housing Market Index will hit the Street at 10am.

On Wednesday, the MBA Mortgage Index wakes us up at 7am with Housing Starts and Building Permits expected at 8:30am.  Crude Inventories will be released at 10:30am.

Thursday action includes Initial and Continuing Claims at 8:30am and they will be closely scrutinized following last week’s “surprising” drop.  This will set the stage for the Philly Fed numbers that are expected at 10am along with Leading Indicators.

Existing Home Sales on Friday will wrap up the week and they will be released at 10am.