11:30pm (EST)

 

1.  Market Summary 

2.  Dunkin’ Brands Group (DNKN) Not a Slam Dunk

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.  Please give us an hour to update the charts.)

 

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1.  Market Summary   

“The slow start by the bulls was to be expected as the zombies wandered their way back from the Thanksgiving holidays but it didn’t take long before the finger-pointed started.  We hate talking politics so let’s keep this short.  The red zombies felt the proposal by the blue zombies and Tim Geithner on Friday was a joke. 

The plan called for $1.6 trillion in new revenue, $400 billion in entitlement cuts, $50 billion in infrastructure spending, and the best one of all…the power for the head zombie to increase the debt ceiling whenever he wants.  Of course, Mr. G was laughed out of the room and shortly after a “stalemate” was declared.  The red zombies are against tax hikes and want more spending cuts but they are expected to agree on higher tax rates on the top 2% of America’s wealthy at some point.

We have said a deal would be announced by December 21st because the zombies will not want to work one minute past a 2-week vacation until after the New Year.  If talks continue to stall, and they likely will, as long as the bottom of the uptrend channels hold the bulls should be good to go.  If there is no deal by yearend, then we could see a 5%-10% pullback.    

Wednesday’s action saw the Dow rise and fall 100 points in the same session for the first time all year but it remains to be seen if it was THE bottom.  We called the pullback perfectly in mid-October and we said a few weeks ago the indexes were ready to bounce off the Fibonacci retracement levels following the test to support.  They have recovered a little more than half and a continued rally could lead to a 100% retracement or a test of the 52-week highs.

December is usually a bullish month for the market so history is on the bulls side.  Although the rhetoric is negative, the price actions in the indexes are pointing to a deal getting done.  Over the past 30 years, December has been the strongest month for the market with average gains of 2%.  We also have the “January Effect” in play that will start in mid-December and is usually a time frame where the small-caps outperform the big-cap stocks through January.

Given the time frames of when we expect a deal and the normal bullish setup for the January Effect to play out, we could have a mini, volatile trading range over the next few weeks.  At least that is how we see it until a nice yearend rally takes shape.  Remember, the “Santa Claus” rally doesn’t start until after Christmas and when the slick-talking pros miss the action because they are on vacation so be patient. (from 12/2/2012  Weekly Wrap)…

The market powered higher for the third straight week, although Tech was week, as the bulls held support and continued to climb a “cliff of worry”.  It was another wasted week at the White House as the zombies dragged their feet and got absolutely nothing accomplished.  Some of them even headed out early as nearly all of them are only built for 3 and 4-day work weeks.

Despite the negative talk and the uncertainty of a deal NOT getting done by the politicians, the bears had trouble cracking support as economic news helped keep the faith in an economic recovery.  If only the zombies would get out of the way.  

The end result was a trip back to the top of the trading range we said would occur since the November lows and we can expect more of the same this week.

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 higher open for Monday.  Dow futures are up 6 points to 13,149 while the S&P 500 futures are higher by a point to 1,417.  The Nasdaq 100 futures are advancing 3 points to 2,639. 

 

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Key of Technicals Used In Following Articles

2 .  Dunkin’ Brands Group (DNKN) Not a Slam Dunk

By Michael Bryant

We briefly covered the stock in the Weekly Wrap on July 24, 2011 as it was gearing up for its planned IPO.  It planned to raise between $348 million and $461 million by offering approximately 22.3 million shares, about 22% of the company, to the public at a price range of $16 to $18 per share.  It sold above that range, selling 22,250,000 shares at $19 per share but opened the next day at $25.  For seven months, shares oscillated between $24 and $28.  Then in February, the stock started to take-off, reaching a high near $36 in June.  In March, it had issued its first dividend of $0.15 a share, which was a surprise since it stated in its IPO that it had no plans to issue a dividend anytime soon.  So far, the company has paid out four $0.15 dividends.

In 1950, Bill Rosenberg founded Dunkin’ Donuts in Quincy, Massachusetts.  At 17, he worked for an ice cream truck company.  By 20, he was promoted to assistant manager and then manager.  At 21, he became the branch manager and was eventually promoted to national sales manager.  After World War II, he borrowed $1,000 to add to his $1,500 in war bonds and used his knowledge of food distribution to open his first company.  In 1946, he started Industrial Luncheon Services, a company that delivered meals and coffee break snacks to factory workers around Boston, Massachusetts.  He noticed that 40% of his revenues came from coffee and doughnuts.  He started a retail shop that specialized in those products and began Dunkin’ Donuts.  Upon opening his sixth shop, he decided on the concept of franchising his business as a means of distribution and expansion.

In 1946, Burt Baskin and his brother-in-law Irv Robbins each founded a chain of ice cream shops that eventually combined to form Baskin-Robbins.  Robbins’ father owned The Olympic Store ice cream business in Tacoma, Washington.  Robbins grew up scooping cones in his family’s ice cream store.  Realizing that working there was so much fun, he opened Snowbird Ice Cream in Glendale, California after being discharged from the army in 1945.  When Baskin left the navy a year later, Robbins convinced him to open Burton’s Ice Cream.  By 1948, they combined the five Snowbird and three Burton’s shops into a single enterprise.  Since they were devoting less and less time to each individual store, they decided to franchise the business, becoming the first food company to franchise their outlets.  In 1949, Baskin and Robbins purchased their first dairy to gain control over the production of their ice cream and the 31 flavors.  About 50 years later, Baskin-Robbins became the world’s largest ice cream store chain, with 5,500 outlets around the world.

Baskin-Robbins and Dunkin’ Donuts were individually acquired by Allied Domecq PLC in 1973 and 1989, respectively.  The brands were organized under the Allied Domecq Quick Service Restaurants subsidiary, which was renamed Dunkin’ Brands in 2004.  Allied Domecq was acquired in July 2005 by Pernod Ricard, which later sold Dunkin’ Brands in order to remain a focused global spirits company.  In March of 2006, Dunkin’ Brands was acquired by private equity firms consisting of Bain Capital Partners, The Carlyle Group, and Thomas H. Lee Partners for $2.425 billion in cash.

Dunkin’ Brands operates in four segments: Dunkin’ Donuts U.S., Dunkin’ Donuts International, Baskin-Robbins U.S., and Baskin-Robbins International.  In 2011, Dunkin’ Donuts generated revenues of $453.0 million, or 75% of total revenues, of which $437.7 million was in the U.S. and $15.3 million was international.  In 2011, Baskin-Robbins generated revenues of $150.3 million, of which $41.7 million was in the U.S. and $108.6 million was international.  At the end of 2011, it had 10,083 Dunkin’ Donuts restaurants, of which 7,015 were in the U.S. and 3,068 were international, and 6,711 Baskin-Robbins restaurants, of which 2,457 were in the U.S. and 4,254 were international.  That was up from 9,760 Dunkin’ Donuts restaurants and 6,433 Baskin-Robbins restaurants at the end of 2010.  Sales rose from $7.7 billion to $8.3 billion.

Dunkin’ Donuts has earned the #1 ranking for customer loyalty in the coffee for the sixth year in a row, selling more than 1 billion cups of coffee per year.  It has restaurants in 32 countries worldwide.  For the full-year 2011, Dunkin’ Donuts had global franchise sales of approximately $6.4 billion.

Some stores in New England were built near gas stations, making it convenient for customers to drive in for a cup of coffee and a donut.  In November, the chain signed two multi-store development deals with existing franchise partners to expand its footprint in Wisconsin and Michigan.  These two markets are each projected to produce about $12 billion in revenue for the restaurant industry in 2012.  Then on December 3rd, it signed a multi-unit agreement with Coffee Action West LLC for 21 Dunkin’ Donuts restaurants and three Dunkin’ Donuts/Baskin-Robbins combination units in the Austin, Texas.

Dunkin’ Donuts is aggressively pushing in India, where it plans to have 500 new stores in India over the next 15 years.  The coffee market in India is growing rapidly, and it is competing with Starbucks (SBUX) for a slice of the pie. 

In the donut space, it competes with Krispy Kreme Donuts (KKD), a chain based in Winston-Salem, North Carolina which has a stronghold in the southeast United States.  After starting off with glazed hot donuts, KKD has added more flavors and is starting to look more and more like Dunkin’ Donuts.  KKD now offers hot coffee, iced drinks, and Kool Kreme sundaes, cones, and milkshakes.  However, KKD’s donuts seem sweeter and have more glazed coating than those of Dunkin’ Donuts.

On December 6th, Dunkin’ Brands announced four changes in management.  It appointed Maryanne Knott as Vice President of Tax and Susan Scherer as Regional Vice President of the South Central region.  Ms. Knott, who worked for Deloitte for over 12 years, will oversee its foreign, Federal, state and local tax strategies.  Ms. Scherer, who worked as Division Vice President of Papa John’s International, will provide support to its franchisees and field teams throughout the South Central United States.  Weldon Spangler was promoted to Vice President of Dunkin’ Donuts Operations in the U.S. and Canada.  Jesse Schlueter was promoted to Vice President of Global Learning, where she will lead the Global Learning Team to develop new ways to deliver innovative learning programs for company franchisees, restaurant managers and field employees.  Such high-quality changes in management could provide a catalyst for the stock to move higher.

The biggest risk is rising commodity prices, particularly coffee.  If commodity prices rise, franchises may experience reduced sales, due to decreased consumer demand as a result of higher retail prices, which may reduce franchise profitability.  Any such decline in franchise sales will reduce royalty income, which in turn may affect the parent business.

 

Due to seasonal trends, revenue will likely peak in 4th quarter (12/12) and fall in the 1st quarter of next year (3/13).   4th quarter earnings report will not be released until February 7th before the bell.  Analysts see revenue falling in the 4th quarter, but the company may surprise.  Further, analysts’ earnings estimates seem too bearish.  This means analysts’ may have to upgrade their targets, boosting the stock price up.

As of September 30, 2012, the company owned 10,283 Dunkin’ Donuts restaurants and 6,920 Baskin-Robbins restaurants worldwide.  With the increasing number of restaurants, fee and royalty revenue is up but that is almost the only part of revenue rising over the past two years.  In the 3rd quarter, the company repurchased 15 million shares worth $450 million.

Dunkin’ Brands competes primarily in the QSR (quick service) segment of the restaurant industry and face significant competition from a wide variety of restaurants, convenience stores and other outlets that provide consumers with coffee, baked goods, sandwiches and ice cream.  Their competitors include: 7-Eleven, Burger King, Cold Stone Creamery, Dairy Queen, McDonald’s, Quick Trip, Starbucks, Subway, Tim Hortons, WaWa and Wendy’s, among others.  But as mentioned earlier, Dunkin’ Brands has a high margin and low capex that beats most of its competitors.

Their main competitors are KKD and SBUX.  Thus, we will compare the numbers with each other to see if it is overvalued or undervalued compared to its peers.

At $31.44, the stock is near its low target of $31.00 made by the 17 analysts recorded by Thomson/First Call.  Mean target is $35.47, median target of $35.00, and high target is $40.00.  Using a scale of 1.0 as a strong buy and 5.0 as a sell, the average rating of the stock was 2.2, unchanged from a week ago. 

 

Current Month

Last Month

Two Months Ago

Three Months Ago

Strong Buy

7

7

6

6

Buy

2

2

2

2

Hold

9

8

8

8

Underperform

1

0

0

0

Sell

0

0

0

0

 

 

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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 11/30/12 close)

By Catherine Tierney

 

Monday

ABM Industries (ABM, $19.56, up $0.01), AMREP (AXR, $8.69, up $0.16), BRT Realty Trust (BRT, $6.36, down $0.04), Cubic (CUB, $49.64, down $0.22), Daily Journal (DJCO, $90.00, up $1.02), Ferrellgas Partners LP (FGP, $17.65, Flat), Frequency Electronics (FEIM, $8.16, down $0.04), Gencor Industries (GENC, $7.78, up $0.01), Greif (GEF, $41.44, up $0.11), IDT (IDT, $9.34, up $0.02), Investors Real Estate Trust (IRET, $8.58, up $0.04), Landauer (LDR, $60.48, up $0.80), NASB (NASB, $21.07, down $0.25), Orchard Supply Hardware Stores (OSH, $7.50, Flat), Panhandle Oil and Gas (PHX, $27.59, down $0.61), Prudential of Pennsylvania (PBIP, $6.37, Flat), Rick’s Cabaret (RICK, $8.00, up $0.02), RLJ Entertainment (RLJE, $5.90, down $0.09), Saba (SABA, $7.66, down $0.04), SandRidge Permian Trust (PER, $17.65, down $0.023), Schiff Nutrition (SHF, $41.99, up $0.01), Scholastic (SCHL, $28.38, up $0.02), Stein Mart (SMRT, $7.40, down $0.05), Teavana (TEA, $15.44, down $0.01), Technical (TCCO, $5.60, up $0.20), Triangle Petroleum (TPLM, $6.33, up $0.30), United Bancshares (UBOH, $9.98, Flat), United Security Bancshares (USBI, $5.18, Flat), Urstadt Biddle (UBA, $18.99, up $0.15), Value Line (VALU, $9.34, up $0.02), Williams Controls (WMCO, $15.38, Flat), Winnebago (WGO, $13.68, down $0.19)

 

Tuesday

Asta Funding (ASFI, $8.89, up $0.02), Casey’s General Stores (CASY, $49.82, up $0.25), Dollar General (DG, $46.80, up $0.37), Ecology & Environment (EEI, $11.20, up $0.30), Geospace (GEOS, $78.19, up $0.97), Magellan Health (MGLN, $53.14, up $0.20), National Technical (NTSC, $7.67, down $0.03), Pantry (PTRY, $12.98, down $0.02)

 

Wednesday

Biglari (BH, $358.16, down $4.10), Costco Wholesale (COST, $98.56, up $0.09), INTL FCStone (INTL, $17.99, up $0.12), Joy Global (JOY, $57.43, up $0.98), Monmouth Real Estate Investment (MNR, $10.22, down $0.07), Official Payments (OPAY, $5.18, up $0.07), Restoration Hardware (RH, $36.74, up $0.02)

 

Thursday

Adobe Systems (ADBE, $35.48, up $0.34), American Pacific (APFC, $12.20, up $0.29), CIENA (CIEN, $15.60, down $0.04), Hovnanian Enterprises (HOV, $5.25, up $0.35), Lakeland (LAKE, $5.35, down $0.01), Nordson (NDSN, $63.28, up $0.23), Pier 1 Imports (PIR, $19.86, up $0.10), Southcross Energy (SXE, $23.54, down $0.27), Spartech (SHE, $8.92, down $0.01), Streamline Health (STRM, $5.56, up $0.11), VeriFone (PAY, $32.56, down $0.85)

 

Friday

MGC Diagnostics (MGCD, $5.75, down $0.34), National Healthcare (NHC, $47.55, up $0.85)

 

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4.  Weekly Wrap Covered Call Portfolio Update (Closing prices as of 11/16/12)

Our Closed Trade Track Record for 2012 is 26-0(42-0, overall since 2011):  TASR +25%, 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 +6%.

 

 

Bank of America (BAC, $10.64, up $0.18)

Original Entry Price:  $9.89 (11/27/12)

Lowered Price from Selling Options:  $9.89

Exit Target:  $12+

Return:  8%

Stop Target:  $8, raise to $10.15

Action:  Shares made a solid breakout past $10 which will now try to hold as support.  Last week’s chart showed a tight trading range that was ready to pop and we have a near-term target of $11.  We are in no hurry to sell an option at this point but we have placed a $10.15 stop on the trade should BAC retreat. 

We recommended buying the BAC at $9.89 on 11/27/12.

 

 

CubeSmart (CUBE, $13.90, down $0.12) 

Original Entry Price:  $13.59 (11/27/12)

Lowered Price from Selling Options:  $13.59

Exit Target:  $16+

Return:  6%

Stop Target:  $11

Action:  Shares hit a fresh 52-week high of $14.10 last Thursday and we have a near-term target of $15 for the stock.  In 2013, shares could push $20.  Support is at $13 or the 50-day MA.  We will wait to sell an option and would like to see shares clear $15 before doing so.

 

We recommended buying CUBE at $13.59 on 11/27/12.

 

American Capital (ACAS, $11.88, up $0.17)

Original Entry Price:  $11.90 (11/27/12)

Lowered Price from Selling Options:  $11.90

Exit Target:  $15+

Return:  0%

Stop Target:  $8

Action:  Shares kissed $12 to start the week and the 52-week high of $12.24 was set back in mid-October.  Support is at $11.25, or the 100-day MA on a pullback.

We recommended buying ACAS at $11.90 on 11/27/12.

 

Solazyme (SZYM, $7.33, down $0.09)

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

Lowered Price from Selling Options:  $11.55

Exit Target:  $15+

Return:  -37%

Stop Target:  $5

Action:  We did not get our close above $8 as shares continue to languish near 52-week lows.  This appears to be a bottom but there is risk down to $6.  We like the company’s long-term prospects so we will be patient.  A close back above $8 would be great but shares would still be over 10% away from the clearing their 50-day MA.

We recommended buying SZYM 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, $10.54, down $0.25) 

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

Lowered Price from Selling Options:  $20.90

Exit Target:  $30+

Return:  -50%

Stop Target:  $10

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.  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.

We recommended buying VVUS 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.

On 10/16/12 we sold the October 23 calls for 45 cents which lowered our cost basis to $20.90.

 

Antares Pharma(ATRS, $3.77, down $0.08)

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

Lowered Price from Selling Options:  $3.94

Exit Target:  $8+

Return:  -4%

Stop Target: None

Action:  Support is at $3.60 on further weakness and a close below this level could lead to the low $3’s.  We would like to see a close above $4 and where we will look to sell another call option.  A move above $4.20 would signal a breakout.

We recommended buying ATRS 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%.

 

Scientific Games (SGMS, $8.27, down $0.05)

Original Entry Price:  $11.10 (3/20/12)

Lowered Price from Selling Options:  $11.10

Exit Target: $13

Return:  -25%

Stop Target:  None

Action:  Shares have rebounded nicely from their recent lows to clear the 50-day and 100-day MA’s.  Support is at while the next level of resistance is at $9 and the 200-day MA.

Pizza Inn (PZZI, $3.44, up $0.03)

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

Lowered Price from Selling Options:  No options available

Exit Target: $9

Return:  -24%

Stop Target:  None

Action:  Pizza Inn struggled at $3.40 last week but is holding its 200-day MA.  A close above $3.50 would be very bullish and could easily lead to a run back to $3.75-$4.00 over the near-term.  For those of you who started buying at the $2.50 level, good job.

We recommended buying PZZI at $4.50 on 2/22/12.

 

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

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

Lowered Price from Selling Options:  $12.67

Exit Target:  $15

Return:  -14%

Stop Target:  None

Action:  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.

 

We recommended buying MGM 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, $7.69, down $0.18)

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

Lowered Price from Selling Options:  $7.85

Exit Target: $11

Return:  -2%

Stop Target:  None

Action:  A close above $8 would be great as it represents near-term resistance.  We may close the trade to move on to another trade if we can breakeven or squeak out a profit but we will wait to see if shares can clear resistance.  Support is at $7.50 on a continued pullback and the company recently reported great earnings numbers.

We recommended buying NR 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, $1.69, down $0.06), AKS Steel Holding (AKS, $4.08, down $0.02), Rare Element Resources (REE, $3.25, down $0.02), Rambus (RMBS, $4.74, down $0.15), Patriot Coal (PCXCQ, $0.10, flat), OCZ Technology Group (OCZ, $1.84, down $0.09), Bebe Stores (BEBE, $3.71, flat), Antares Pharma February (2013) 7.50 calls

 

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5.  Week Ahead 

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