December 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 “New Trade” 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.  Closed Trades for 2012: 148-54, or 73% win rate, including the Weekly Wrap which is 26-0).

12:30pm (EST)

NEW TRADE!!!

American Express (AXP, $56.83, up $0.22)

Buy to OPEN January 57.50 calls (AXP130119C00057500, $1.00, up $0.10)

Action:  Use limit orders up to $1.05 but do not pay over $1.10-$1.15 to establish positions.  If shares can reach $60 we will have a nice triple-digit return.

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Special Note:  For those of you who have emailed me personally, please give me an extra day or two to email you back.  I also all emails but I have been swamped from the weekend promotion.  Thanks to all who upgraded and to everyone for their continued support….Rick

 

CURRENT TRADES

TiVo (TIVO, $12.12, up $0.02)  

January 12.50 calls (TIVO130119C00012500, $0.60, up $0.02)

Entry Price:  $0.60 (12/7/12)
Exit Target:  $1.20
Return:  0%
Stop Target:  None 

 

May 14 calls (TIVO130518C00014000, $0.75, flat)

Entry Price:  $0.68 (12/7/12)
Exit Target:  $1.30
Return:  10%
Stop Target:  None

Action:  A close above $12.75 would be bullish for a possible run to $16.  Support has been super strong at $10.  We recommended the January calls to play the near-term possible breakout and we went with the May calls for the possibility of a buyout. 

  

Dunkin’ Brands Group (DNKN, $31.36, down $0.08)

January 32.50 calls (DNKN130119C00032500, $0.60, flat)

Entry Price:  $0.45 (12/4/12)
Exit Target:  $1.00+
Return:  33%
Stop Target:  None

Action:  We are expecting a run to $32.50 this week with a chance of $34 coming into play by yearend.  A close below $30 will force us out of the trade. 

  

Taser International (TASR, $8.24, down $0.03)

January 10 calls (TASR130119C00010000, $0.15, flat)

Entry Price:  $0.15 (11/29/12)
Exit Target:  $0.45
Return:  0%
Stop Target:  None

 

March 10 calls (TASR130316C00010000, $0.35, flat)

Entry Price:  $0.30 (11/29/12)
Exit Target:  $0.50
Return:  17%
Stop Target:  None

Action:  A close over $9 would be bullish for a run to $10.  Support is at $8 followed by $7.50.

 

Vivus (VVUS, $10.98, up $0.44) 

January 15 calls (VVUS130119C00015000, $0.30, up $0.05) 

Entry Price:  $0.65 (11/21/12)
Exit Target:  $1.30
Return:  -54%
Stop Target:  None 

Action:  Vivus traded to a low of $10.32 on Friday and we have mentioned support has been strong at $10.  However, a close below $9.86 and the mid-November low would be very bearish and where we would pull the plug.  We would like to see a close back above $12 over the near-term.  The 50-day MA is at $16.41 and where shares could run to if the stock can clear the hurdle at $12.

 

Rosetta Stone (RST, $12.20, up $0.08) 

January 15 calls (RST130119C00015000, $0.15, flat)

Entry Price:  $0.20 (11/19/12)
Exit Target:  $1.00
Return:  -25%
Stop Target:  None

Action:  We will stick with the trade as long as $11.50 holds.  We would like to see a close back above $12.50 this week.   

  

HealthCare REIT (HCN, $560.00, up $0.25)   

December 60 calls (HCN121222C00060000, $0.65, flat)

Entry Price:  $1.00 (11/19/12)
Exit Target:  $2.00
Return:  -35%
Stop Target:  None 

Action:  We are running out of time with this trade and we will need a close above $60 to start the week.  We have said a close below $58.50 would force us out but support is holding.  Our breakeven target is technically $61 as these call are out-of the money.  The premium will start to take a hit this week which is why we need a pop past $60.

 

Knight Capital Group (KCG, $3.22, down $0.05)

January 2.50 calls (KCG130119C00002500, $0.80, flat) 

Entry Price:  $0.55 (8/21/12)
Exit Target:  $1.10
Return:  45%
Stop Target:  None

Action:  The current buyout offer is $3.50 but we expect a final price north of $4 by mid-January.  This would make these options worth at least $1.50 minimum for a juicy triple-digit return.  Shares will remain in a tight range until another offer surfaces.

 

Other 2012 Portfolio OPEN positions (5):  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.

 

Bank of America January 12.50 calls (2013) (from March 2012) – continue to hold

Solazyme December 12.50 calls (from September 2012) – continue to hold

Lufkin Industries December 45 puts (from November 2012) – half position open

LifeLock December 10 calls (from November 2012) – continue to hold

Monster Beverage January 35 puts (from November 2012) – continue to hold

Apollo Group December 18 puts (from October 2012) – continue to hold

 

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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9:00am (EST)

MEMBERS AREA

The Dow advanced 81 points, or 0.6%, to settle at 13,155 on Friday.  The blue-chips started the week by closing below 13,000 but were able to hold 12,800 as the midweek low came in at 12,923.  The index closed back above 13,000 on Wednesday and came within 43 points of triggering our “All Aboard” bull call at 13,200.  The index is less than a point away from clearing the 100-day MA and will face resistance at 13,350 if it can clear and hold.  The 200-day MA is right at 13,000 and we have said a break below 12,800 would be bearish.  The Dow began the week at 13,025 and added 130 points, or 1%, by Friday’s close.  For 2012, the index is higher by 938 points, or 7.7%.

 

Last week’s 3-year chart for the Dow:

The S&P 500 added 4 points, or 0.3%,to close at 1,418.  The index held 1,400 on Monday and Tuesday but dipped to a low of 1,398 on Wednesday.  Last week’s low of 1,385 occurred on Wednesday and challenged the 200-day MA.  We have warned that a close below 1,375 would be bearish but the bulls easily held both levels.  The S&P was able to clear its 50-day and 100-day MA’s last week which was very bullish and a close above 1,425 could lead to 1,450.  Watch the 1,410 level again this week as a pivot point.  The S&P 500 came into the week at 1,416 and was up 2 points, or 0.1%, for the week.  Year-to-date, the index is showing a gain of 161 points, or 12.8%.   

Here is the S&P chart we drew up last week:

The Nasdaq fell 11 points, or 0.4%, to settle at 2,978.  Tech was weak all week besides Thursday’s pop higher after a low of 2,958 on Wednesday.  We were watching the 2,950 level like a hawk to see of it would hold as support and it did.  The bulls faced an avalanche down to 2,900 if the bears continued their roll and the close above 2,975 was neutral.  The bulls will try again to clear and hold 3,000 but 3,025 will be more important if there is going to be a yearend push to 3,100-3,150.  The Nasdaq started Monday’s session at 3,010 and was down 32 points, or 1.1% points, for the week.  For the year, the index is still up 373 points, or 14.3%.

Here is the 3-year chart for Tech from last week:

The Russell 2000 gained a half-point, or 0.1%, to finish at 822.27.  The small-caps needed to hold 810-800 to start the week and the pullback to 816 on Tuesday and Wednesday appeared to be a short-term double bottom.  The index traded in a tight 10-point range all week with the high of 826 set on Monday’s open.  The dip below the 50-day MA held as the 100-day at 815 and the 200-day MA at 806 are serving as backup.  A break below 800 will be an early warning sign and 790 would signal the time to buy put options.  If the bulls can clear 830 there should be a run to 850 in the coming weeks.  The Russell 2000 was at 821.92 before Monday’s open and was up a third of a point, or 0.04%, by the weekend.  For 2012, the index is showing a gain of 81 points, or 11%. 

Here is the Russell’s chart from last week:

The S&P Volatility Index ($VIX, 15.90, down $0.68) fell 4% on Friday and held 17.50 for the most part.  The VIX kissed a high of 17.53, midweek, but held the downtrend line to keep 15.  A close above 17.50 would get 20 back in play and be a warning sign that volatility could pick up pretty quickly.  A continued rally to the 52-week peak for the S&P 500 and a close below 15 on the VIX could get the low teens back into play.  

Here is the 3-year for the VIX from last week:

The bulls have momentum but a final resolution on the Fiscal Cliff could get stretched until the last minute of 2012.  We have said we would like to see a deal get done by December 21st and that means the zombies will be working overtime.  The December and holiday adjournment for Congress is this Friday, December 14th.  It will likely get extended by a week and why we went on record and said the 21st for a deal to get done.  

Of course, the zombies do not want to hang around past their scheduled time off but it is highly unlikely a deal gets done this week.  The red zombies still do not want to raise taxes and there is talk now the blue zombies are prepared to drive America off the Cliff, if necessary, to get their way.  The Democrats will blame everything on the Republicans and vice-versa but we still expect a compromise, or a kick of the can down the road, before Christmas. 

The zombies can then pat themselves on the back and say how hard they worked on overtime to get a deal done before we do it all over again at some point in 2013.  If there is no deal by Christmas, the market could still rally into yearend as hopes of a last-minute agreement before the December 31st deadline would still be in play.  If the zombies do push us off the Cliff, expect a major pullback in January.

We haven’t talked much about the Friday/ Monday closes in recent weeks because they have been mixed of late.  The bears have been winning the Monday’s and pushing lower prices into Wednesday’s before the bulls rebound to close out the week with Friday wins.  In trending markets, if the bulls are in control you will usually see up Friday/ Monday’s and when the bears are dominating, lower Friday/ Monday’s.  If the bulls are going to make a run they will once again need to start a Monday off strong.  This would signal more money coming into the market.

The other bullish sign we are seeing is the strength in the Financial stocks.  The Financial Select Sector Spider (XLF, $16.02, up $0.13) is nearing its 52-week and multi-year highs after closing above its 50-day MA late in the week.  It’s early, but a run to $20 could be in the cards at some point in 2013.  

We will be watching American Express (AXP, $56.61, up $0.49) and JPMorgan Chase (JPM, $42.56, up $1.09) as a way to play the pop.  The 52-week high for AXP is $61.42 and we may use call options for our Daily to play a possible run to $60.  

The 52-week peak for JPM is $46.49 and there are some cheap options we can play for a run past $45 over the next few weeks.

We correctly predicted Apple’s (AAPL, $533.25, down $13.99) drop to $520 last week as shares kissed $518.63 on Wednesday before bouncing back on Thursday and slipping again on Friday.  We missed a golden opportunity for a quick trade to make 200% on the December call options but we still have the stock on our Watch List.  Apple will need to get in back in gear if it is going to help the bulls rally as it is a big component of the major indexes. 

The talk all week was the “death cross” the stock is headed for unless there is a sudden reversal this week.  This technical term refers to when the 50-day MA falls below the 200-day MA but we doubt the final nail is in Apple’s coffin as better days are ahead.  A close above $550 would be very bullish for a run back to $600 but there could be a retest to $520 on further weakness.  A close below $520 would suggest $500-$475 will come into play.

We said on Wednesday the market faced a make or break moment as further damage by the bears could have fueled additional selling pressure.  The trading range from the mid-October highs and the November lows is still in play as the bulls continue to push the top of the range.  Although trading has been choppy, the bulls are making higher highs and higher lows for the most part that should continue despite the possibility of more negative rhetoric from DC this week.

We gave yearend price targets for the major indexes last week and said we believe the Dow could push new highs by the end of the year.  We are officially making it 13,777.77 as there could be some “fluff” if resistance at the highs is cleared.  If we win the contest we will give the iPad to the second best guess (sly grin).  Our target for the S&P is 1,492 and for the Nasdaq we will go with 3,140.  For the Russell 2000 we have a target of 867

The big event this week will be the Fed meeting on Wednesday.  We mentioned a few weeks ago there was talk of QE4 and it could be bullish or bearish for the market if announced.  The “Operation Twist” quantitative easing Ponzi scheme has run its course as the Fed’s purchase of short-term treasuries to buy long-term treasuries is scheduled to end this month.  QE4 would be the purchase of long-term treasuries but Big Ben could put the pressure back on the zombies.

Bernanke has been vocal in the past for the zombies to get their house in order but with the fragility of the economy in his hands, he will keep the printing presses on (and rates low).  We expect the Fed will continue to add $40-$50 billion a month to the system but Bernanke’s speech on Wednesday at 2:15pm could be crucial as far as market direction for the week.

If Tech and Apple can rebound and the Financial stocks can keep their momentum then the bulls will have something to work with.  A higher Monday close and a framework from the zombies to get a deal done would also add to the momentum.  If these events start to take a negative tone, expect the bears to attack and make a push back to the bottom of the current trading range.

As we head to press, futures are showing a slightly lower open this morning.  Dow futures are down 3 points to 13,140 while the S&P 500 futures are off 2 points to 1,414.  The Nasdaq 100 futures are declining 5 points to 2,630. 

MEMBERS AREA

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 “New Trade” 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.  Closed Trades for 2012: 148-54, or 73% win rate, including the Weekly Wrap which is 26-0).

 

TiVo (TIVO, $12.10, up $0.12)  

January 12.50 calls (TIVO130119C00012500, $0.58, up $0.17)

Entry Price:  $0.60 (12/7/12)

Exit Target:  $1.20
Return:  -3%
Stop Target:  None

May 14 calls (TIVO130518C00014000, $0.75, up $0.22)

Entry Price:  $0.68 (12/7/12)

Exit Target:  $1.30
Return:  10%
Stop Target:  None

Action:  A close above $12.75 would be bullish for a possible run to $16.  Support has been super strong at $10.  We recommended the January calls to play the near-term possible breakout and we went with the May calls for the possibility of a buyout.  

 

Dunkin’ Brands Group (DNKN, $31.44, up $0.42)

January 32.50 calls (DNKN130119C00032500, $0.60, up $0.10)

Entry Price:  $0.45 (12/4/12)

Exit Target:  $1.00+
Return:  33%
Stop Target:  None

Action:  We nearly got our close above $31.50 on Friday.   We are expecting a run to $32.50 this week with a chance of $34 coming into play by yearend.  A close below $30 will force us out of the trade.  

Taser International (TASR, $8.27, up $0.03)

January 10 calls (TASR130119C00010000, $0.15, down $0.05)

Entry Price:  $0.15 (11/29/12)

Exit Target:  $0.45
Return:  0%
Stop Target:  None

March 10 calls (TASR130316C00010000, $0.35, flat)

Entry Price:  $0.30 (11/29/12)

Exit Target:  $0.50
Return:  17%
Stop Target:  None

Action:  A close over $9 would be bullish for a run to $10.  Support is at $8 followed by $7.50.  We got in these options after a brokerage downgrade last week and we recently recommended a 500% winner on TASR.  Our research showed Taser would smash earnings estimates, they did, and we still like the stock.  We have a near-term target of $10-$11 once shares clear resistance.  The company received 4 huge orders last week and we expect more to come by yearend.   

Vivus (VVUS, $10.54, down $0.25)

January 15 calls (VVUS130119C00015000, $0.25, down $0.05)

Entry Price:  $0.65 (11/21/12)

Exit Target:  $1.30
Return:  -62%
Stop Target:  None

Action:  Vivus traded to a low of $10.32 on Friday and we have mentioned support has been strong at $10.  However, a close below $9.86 and the mid-November low would be very bearish and where we would pull the plug.  We would like to see a close back above $12 over the near-term.  The 50-day MA is at $16.41 and where shares could run to if the stock can clear the hurdle at $12.

Rosetta Stone (RST, $12.12, down $0.09)

January 15 calls (RST130119C00015000, $0.15, down $0.05)

Entry Price:  $0.20 (11/19/12)

Exit Target:  $1.00
Return:  -25%
Stop Target:  None

Action:  Friday’s low was $11.86 and we will stick with the trade as long as $11.50 holds.  We would like to see a close back above $12.50 this week.    

 

HealthCare REIT (HCN, $59.75, up $0.16)   

December 60 calls (HCN121222C00060000, $0.65, up $0.05)

Entry Price:  $1.00 (11/19/12)

Exit Target:  $2.00
Return:  -35%
Stop Target:  None

Action:  We are running out of time with this trade and we will need a close above $60 to start the week.  We have said a close below $58.50 would force us out but support is holding.  Our breakeven target is technically $61 as these call are out-of the money.  The premium will start to take a hit this week which is why we need a pop past $60.

Knight Capital Group (KCG, $3.27, down $0.06)

January 2.50 calls (KCG130119C00002500, $0.80, down $0.05)

Entry Price:  $0.55 (8/21/12)

Exit Target:  $1.10
Return:  45%
Stop Target:  None

Action:  The current buyout offer is $3.50 but we expect a final price north of $4 by mid-January.  This would make these options worth at least $1.50 minimum for a juicy triple-digit return.  Shares will remain in a tight range until another offer surfaces.

Other 2012 Portfolio OPEN positions (5):  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.

 

Bank of America January 12.50 calls (2013) (from March 2012) – continue to hold

Solazyme December 12.50 calls (from September 2012) – continue to hold

Lufkin Industries December 45 puts (from November 2012) – half position open

LifeLock December 10 calls (from November 2012) – continue to hold

Monster Beverage January 35 puts (from November 2012) – continue to hold

Apollo Group December 18 puts (from October 2012) – continue to hold

 

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.

 

American Express (AXP, $56.61, up $0.49)

January 57.50 calls (AXP130119C00057500, $0.90, up $0.10)

Thoughts:  The 52-week high is $61.42 and we may recommend these calls if the bulls can clear $57.  Support is just above $55 and where we would place a stop if we do decide to get into this trade. 

 

JPMorgan Chase (JPM, $42.56, up $1.09)

January 44 calls (JPM130119C00044000, $0.65, up $0.15)

Thoughts:  The 52-week peak is at $46.49.  Support is at $40. 

 

Apple (AAPL, $533.25, down $13.99)

December 600 calls (AAPL121222C00600000, $1.45, down $0.85)

January 625 calls (AAPL130119C00625000, $3.75, down $1.45)

Thoughts:  See aforementioned chart.

 

Nuance Communications (NUAN, $21.93, down $0.09) 

December 22 calls (NUAN121222C00022000, $0.45, down $0.05)

January 23 calls (NUAN130119C00023000, $0.45, down $0.10)

Thoughts:  There is a good chance shares trade to $25 once $22.50 and the 50-day and 100-day MA’s are cleared.  Short-term support is at $21.50 followed by $20.

Intel (INTC, $20.16, flat)

January 20 calls (INTC130119C00020000, $0.85, flat)

March 20 calls (INTC130316C00020000, $1.05, flat)

Thoughts:  We said Intel looked poised to pop past $20 and both of these options did really well last week.  A run to $21 could be in the mix over the near-term if $19.50 holds. 

Cree (CREE, $32.74, up $0.04)

December 33 calls (CREE121222C00033000, $0.85, flat)

January 34 calls (CREE130119C00034000, $1.15, flat)

Thoughts:  Shares are near 52-week highs and there could be a push to $40 if momentum sticks.  A close back below $30 would be bearish.

 

MGM Resorts International (MGM, $10.93, down $0.04)

January 10 calls (MGM130119C00010000, $1.20, flat)

March 11 calls (MGM130316C00011000, $0.80, flat)

Thoughts:  Shares surged to $11 on the legalized online gambling hopes after Zynga said it wants to do poker games for cash.  We said last week a close above the 50-day and 100-day MA’s would be bullish.  A close above the 200-day MA, or $11.50 would signal a possible breakout.  This is one of our favorite trades at the moment as the Casino stocks have underperformed all year long.