9:00am (EST) continued…

The Dow dropped 18 points, or 0.1%, to close at 13,096.  The blue-chips traded up to 13,141 before the floor fell out as the index dipped to a low of 12,964 (down 177 points from peak to trough).  The break below 13,000 was another warning signal the bears could be around this winter instead of hibernating as they showed force in cracking the 50-day MA (Moving Average – 13,078) and 200-Day MA (13,015) before the rebound.

The S&P 500 slipped 2 points, or 0.1%, to settle at 1,418.  The index made a run at 1,425 on the open after reaching 1,422 but eventually traded to a low of 1,401.  The index had closed below its 100-day MA (1,420.60) on Wednesday and traded below its 50-day MA (1,412) on Thursday.  Support at 1,400 and the 200-day MA (1,390) held but there is further risk down to 1,375 if these levels fail.  A close back above 1,425 would be bullish.

The Nasdaq lost 4 points, or 0.1%, to end at 2,985.  There was a push to 2,993 after the open but we said once 3,000 cracked, Tech could test 2,950.  Yesterday’s low was 2,951.  The index is tap dancing between its 50-day MA (2,982) and 200-day MA (2,991) and is still below its 100-day MA (3,036). 

The Russell 2000 fell a little more than a point to finish at 837.  The small-caps kissed 839 at the start of trading and the drift lower to 827 didn’t do any technical damage.  Although we are getting some clues for a possible bear market in January, we have mentioned the Russell is giving of the best clues on market direction and support and resistannce.  The index has managed to stay above all 3 of the MA’s we have talked about and as long as 820 holds, there is still upside potential until the bulls run out of gas. 

The S&P 500 Volatility Index ($VIX, 19.47, down 0.01) ended basically unchanged but did spike above 20, to 20.90.  We said at the start of the week the VIX could pop above 20 but not to get nervous unless there was a close above 20.50.

The Dow Jones Transportation Index ($DJT) closed at 5,265 and was down a double-deuce after testing 5,220  The uptrend channel is still intact but we mentioned it will be important for the Transports to clear and hold 5,400 to confirm the next leg higher for the bulls.

The Cliff headlines were heavier in the afternoon as Tweets and Facebook messages by some of the zombies got Wall Street excited.  Scott Brown must have felt like Charlie Brown after letting the cat out of the bag he was headed back to DC. 

We said this week and next would be very volatile and the whipsaw action is making a lot of traders nervous.  This is not the best environment for “rookies” because emotions can rule the roost as these wild price swings can cause panic and uncertainty.  It is important to stick to your game plan and that is what we always try to do to block out the noise.  They are 2 more trading days before 2012 is up and we expect to be busy while the suit-and-ties are vacationing.

We are looking for a clear trend to emerge so that we can ensure a good start for 2013 but we don’t want to commit new funds too early.  We have stayed lean and nimble as both the top and bottom of the trading range has been tested over the last few weeks.  At some point, a breakout of breakdown is coming and it could be as early as today or next week.

The bears are on a 4-session win streak and it will be important for the bulls to win today and Monday.  Futures are looking like this as we head to press:  Dow (-66); S&P 500 (-8); Nasdaq 100 (-12).

Subscribers, check the Members Area for the updates this morning and stay on your toes as we could have action to take this morning.

 

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: 159-60, or 73% win rate, including the Weekly Wrap that is 28-0).

 

Fossil (FOSL, $90.75, up $1.42)

February 70 puts (FOSL130216P00070000, $1.30, down $0.05) 

Entry Price:  $1.20 (12/26/12)
Exit Target:  $2.40
Return:  8%
Stop Target:  60 cents

Action:  Shares bounced $3.25 of the low of $88.50 to close above $90.  There is risk up to $94-$95 but these options have plenty of time before they expire.  We have a mid-February price target of $65 for Fossil and we wanted some put protection heading into the New Year.  We would like to see a close below $90 today.  

 

iShares Russell 2000 Index (IWM, $83.12, down $0.06)

January 85 calls (IWM130104C00085000, $0.35, flat) 

Entry Price:  $0.70 (12/21/12)
Exit Target:  $1.40
Return:  -50%
Stop Target:  None 

Action:  These are WEEKLY options and we will be closing this trade by Monday’s close unless we are up.  Our breakeven point if we carried the trade into the New Year would be $85.70.  At $86, we should make nearly 50% on the options. 

 

 

Cree (CREE, $33.49, down $0.06)   

January 36 calls (CREE130119C00036000, $0.45, down $0.05)

Entry Price:  $0.65 (12/21/12)
Exit Target:  $1.30
Return:  -31%
Stop Target:  None 

Action:  Support at $33 held and we  would like to see a run past $34 today which should get us back to even.

 

Nuance Communications (NUAN, $22.08, down $0.08)  

January 24 calls (NUAN130119C00024000, $0.20, flat)

Entry Price:  $0.35 (12/18/12)
Exit Target:  $0.70
Return:  -43%
Stop Target:  None 

Action:  Shares held $22 after trading to a low of $21.85.  We would like to see a print of $22.50 today.

 

Southern Copper (SCCO, $37.84, up $0.11) 

January 40 calls (SCCO130119C00040000, $0.25, flat)

Entry Price:  $0.45 (12/14/12)
Exit Target:  $1.00
Return:  -44%
Stop Target:  None

Action:  Shares traded to a high of $38.09 yesterday and we would like to see a close above $38 by the weekend.   

 

Taser International (TASR, $8.65, up $0.02)   

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, $0.50, flat)

Entry Price:  $0.30 (11/29/12)
Exit Target:  $0.50
Return:  67%
Stop Target:  None

Action:  The recent high is $9.26 and we would love to see a finish above $9 today.  If shares can take out their 52-week high we should see $10 come into play.

  

Vivus (VVUS, $13.67, up $0.51) 

January 15 calls (VVUS130119C00015000, $0.60, up $0.15) 

Entry Price:  $0.65 (11/21/12)
Exit Target:  $1.30
Return:  0%
Stop Target:  None

Action:  We would like to see Vivus close above $14 today.  We may have to roll this trade out into March or June but we are hoping we can get a run past $14 by Monday afternoon so we can at least get a small profit while rolling the trade over.

 

Rosetta Stone (RST, $11.96, down $0.36)

January 15 calls (RST130119C00015000, $0.10, flat)

Entry Price:  $0.20 (11/19/12)
Exit Target:  $1.00
Return:  -50%
Stop Target:  None

Action: Support has been strong at $12 but yesterday’s low was $11.62.  We said we would stick with the trade as long as $11.75 holds and we will see where we are at this afternoon before taking acion.

 

Other 2012 Portfolio OPEN positions (2):  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)

Monster Beverage January 35 puts (from November 2012)

 

WATCH LIST SECTION

These trades are NOT recommendations.  They are trades that we like but have not added to the portfolio as an official recommendation because of market conditions or because we are waiting for better entry prices.  We try not to have more than 12-15 open trades at any one time which is why we created a Watch List.  We will not list entry prices because these stocks are on the verge of breaking out or they could sell off but these are the trades we are watching as new candidates.

  

Akamai Technologies (AKAM, $41.02, down $0.23)

January 43 calls (AKAM130119C00043000, $0.50, down $0.10)

May 55 calls (AKAM130518C00055000, $0.65, flat)

 

Thoughts:  We still like the stock to push $45 over the near-term and we believe Akamai will be a takeover target in 2013 which is why we listed the May call options.

 

MGM Resorts International (MGM, $11.71, up $0.12) 

January 12.50 calls (MGM130119C00012500, $0.12, flat) 

March 13 calls (MGM130316C00013000, $0.35, up $0.02)

June 15 calls (MGM130622C00015000, $0.33, up $0.04)

Thoughts:  We are expecting a run past $12 to the upper mid-teens for MGM over the next few months.  Support has been strong at $11.

 

JPMorgan Chase (JPM, $43.63, down $0.33)

January 46 calls (JPM130119C00046000, $0.30, down $0.05)

Thoughts:  The 52-week high is at $46.49 and if shares make a run this level will likely trip with fluff up to $48.  If the Fiscal Cliff is averted, the Financial stocks should continue gathering momentum.  A close below $42 would indicate a trend change.

 

Caterpillar (CAT, $87.66, down $0.01)

January 85 puts (CAT130119P00085000, $1.10, down $0.05)

Thoughts:  Shares could be headed for another trip below $85 after a failed test at $91 again.   

 

Taiwan Semiconductor (TSM, $16.98, up $0.06)

January 17.50 calls (TSM130119C00017500, $0.20, flat)

April 17.50 calls (TSM1304C00017500, $0.70, flat) 

Thoughts:  If the bulls can hold support, shares could push $18-$19 by mid-January.  We have played this name with great results in the past and we like it at current levels.

 

Dunkin’ Brands Group (DNKN, $32.39, up $0.04) 

January 32.50 calls (DNKN130119C00032500, $0.70, flat)

Thoughts:  Near-term support is at $32.50 but there is risk to $31.50.  We still expect shares to make a run past $34.

 

TiVo (TIVO, $12.36, up $0.02)  

January 12.50 calls (TIVO130119C00012500, $0.40, down $0.05)

May 14 calls (TIVO130518C00014000, $0.85, flat)

Thoughts:  We have mentioned Google could acquire TiVo down the road due to litigation issues and with the company’s new high-speed internet rolling out in Kansas, Google has new technology that everyone will crave.  We see Google eventually moving to cable and TiVo would be a perfect fit.  At this point, the May calls are the safer way to play a buyout.  There is risk down to $11.50 if $12 doesn’t hold but we are looking for new highs if support holds.