The bulls held support at the open and have managed to push the first wave of resistance as we head into the second half of trading. The market is trying to close higher for the second straight Monday and will try to start a new winning streak following last week’s slight pullback.
There is talk progress is being made on the Fiscal Cliff (again) as the red zombies have come up with a new proposal that involves $1 trillion in tax revenue in exchange for $1 trillion in spending cuts from the blue zombies. Although the deadline for the Cliff is December 31st, ours is the 21st as far as if the market will make new highs or have a serious pullback into the New Year. We could see volatility pickup this week as both deadlines draw near but we expect the current trading range to hold with a slight push to the top as we get closer to a deal (or no deal).
Financial stocks are showing strength and Tech is mixed. Small-caps are holding up well and there a few stocks that are getting nice pops today. Bank of America (BAC, $10.86, up $0.28) is at 52 weeks highs and is close to clearing $11. Another favorite stock we like for a possible call option trade, JPMorgan Chase (JPM, $43.16, up $0.35), is also up for the session.
Vivus (VVUS, $12.72, up $1.24) is up over 10% on no specific news and is making a strong rebound off its recent lows. We have provided extensive
coverage on the obesity drug market over the past few years and we have done well trading Vivus and Arena Pharmaceuticals (ARNA, $9.21, up $0.03). We have used covered calls and directional call options to make incredible double-digit and triple-digit gains for our subscribers and both stocks should do well in 2013.
There are some important earnings announcements this week and we may swing the bat on a few short-term options trades to play the possible pops and drops that are likely to come on the news.
Diamond Foods (DMND, $13.85, up $0.02) could be in the single-digits or above $16 come Tuesday’s open as they will confess to Wall Street after the bell. Shares have hit a recent 52-week low of $12.85 and has fallen from a 52-week high of nearly $40.
The December 14 calls (DMND121222C00014000, $0.25, down $0.05) are a cheap way to play a possible move higher while the December 13 puts (DMND121222P00013000, $0.25, down $0.05) could be used to play a drop to $10. Both options could be bought together to create a strangle option trade but the stock will need to move 10% or more for this trade to work some magic.
Although we have played this name in the past, we are going to sit on the sidelines with Diamond Foods this time around.
As we head to press, the Dow is pushing triple-digits and is up 86 points to 13,220. The S&P 500 is higher by 13 points to 1,426 while the Nasdaq is advancing 28 points to 2,999.
Subscribers, check the Members Area for the updates and stay on the alert for possible updates later in the day if we need to take action or if we release a new trade.