December 2012 | Members

9:00am (EST) continued…

MEMBERS AREA

The Dow declined 121 points, or 0.9%, to settle at 13,190 on Friday.  We said coming into the to watch for a close above 13,200 which would lead to a push to 13,350.  We got that on Monday as the index closed at 13,235 and traded to a high of 13,365 on Tuesday before closing right on 13,350.  We have mentioned a close above this level could lead to 13,600 but the bulls gave back two levels of support after the close below 13,200 and the 100-day MA.  Friday’s low was 13,122 and a break below 13,100 and the 50-day MA will likely get 13,000-12,800 back into play.  A break below the 13K and the 200-day MA could lead to a nasty January.  The Dow started Monday at 13,135 and advanced 55 points, or 0.4%, for the week.  For 2012, the index is showing a gain of 973 points, or 8%.

 

The S&P 500 sank 14 points, or 0.9%, to close at 1,430.  We has a target of 1,450 for the index last week if 1,425 was cleared and the index started off strong on Monday after closing at 1,430.  Tuesday’s run to 1,448 intraday was just 2 points away from giving us the green light for a yearend run to 1,475-1,500 and the close at 1,446 may have been a warning.  The index made another push to clear resistance Wednesday morning but by the close had given back 11 points to finish at 1,435.  The rebound to 1,443 on Thursday offered hope but Friday’s slam to 1,422 was a reminder how volatile the market could get on no Fiscal Cliff deal.  The S&P still held 1,425 but a dip below its 100-day MA at 1,419 and the 50-day at 1,413 would be bearish and likely lead to 1,400-1,375.  The 200-day is at 1,389.  The S&P 500 started Monday at 1,413 and was up 17 points, or 1.2%, for the week.  For the year, the index is up 173 points, or 13.7%.

The Nasdaq dropped 29 points, or 1%, to settle at 3,021.  We have talked about how a close above 3,025 was more important than 3,000 and Monday’s push to 3,010 was the first step.  We said if cleared 3,050 and the 100-day MA (3,034) would be the next battleground and Tuesday’s close of 3,054 opened the door for a push to 3,100-3,150 by the New Year.  After seeing Wednesday’s 10-point drop and the finish at 3,044, we were teased with Thursday’s close of 3,050.  Friday’s dip to 2,995 was the low for the week but the 200-day MA at 2,991 and the 50-day MA at 2,986 held.  A move below these levels will get 2,950 back on the map and below that it would get nasty.  The Nasdaq came into the week at 2,971 and managed to gain 50 points, or 1.7%, by Friday’s close.  YTD, the index is higher by 416 points, or 16%.

The Russell 2000 faded 4 points, or 0.5%, to finish just below 848.  We mentioned a run to 850 was coming following the prior week’s close above 830 and our yearend target from early December was 867 on “fluff”.  The high for the week came in at 852 on Thursday.  The bulls will need to hold 835 and the 100-day MA at 820 this week on any pullback if they are going to make another run at the 52-week high of 868 that tripped in mid-September.  A close below 810 and the 200-day at 807 would be a trend change.  The Russell 2000 was at 824 on Monday’s open and was higher by 24 points, or 2.9%, by for the week.  The index is showing a gain of 107 points, or 14.4%, for 2012.

The S&P Volatility Index ($VIX, 17.84, up 0.17) closed above 17.50 following Wednesday’s surge from 15.57 to 17.36.  We said last week a break above this level could lead to a test to 20 and Friday’s high was 19.93.  The bulls will try to get under this level to start the week and make another push towards 15 but a close above 20.5 could cause some panic with a push to 25-30 in January.  

This week could be the most crucial week all year for the market as it will likely set the tone for January, and possibly 2013.  Although a Fiscal Cliff deal was not struck before our December 21 deadline, Obama did say he would see everyone back at the White House “next week”, after Christmas.  This means there is hope in what will be a shortened holiday week.  The market is open a half day on Monday, closing at 1pm (EST) and Tuesday, of course.  The rest of the week will be regular trading.    

As we watched Obama give his speech on Friday after the market closed, we had a feeling he would say something to stop the bleeding and offer a bit of encouragement to the bulls. With so many people predicting he wants America to go off the Cliff, it would be hard to imagine the President coming back to DC from Hawaii if a deal is NOT in the works because he wouldn’t waste his time.  If he is a no show, then we can pencil-in a Thelma and Louise.     

The indexes were trending higher off the lows in the second half of trading on Friday so we are expecting a higher Monday with the zombies away for Christmas.  It will be important for the bulls to get some green to start the week or the market could have a negative Friday/ Monday close for the first time since late September.

Despite the drama and volatility, the Financial stocks held up well and ended the week with a nice gain.  The Financial Select Spider (XLF, $16.40, down $0.40) hit a fresh 52-week high of $16.70 and could run to $18 on continued strength.  A close below $16 would be bearish.  American Express (AXP, $57.65, up $0.25) held its 50-day MA and ended Friday’s session with a gain and could still push $60.  JPMorgan Chase (JPM, $44.00, down $0.53) ended lower after falling to $43.34 but easily held it 50-day MA.  A close below $42 would be bearish but we think shares can still make a run at their 52-week high of $46.49.  We will be watching this sector and these targets for market clues again this week.

One sector we haven’t mentioned in a few weeks is the Transports as they are also showing strength.  The Dow Jones Transportation Index ($DJX) closed at 5,340 (down 17) on Friday after trading up to 5,372 midweek.  The 52-week high is 5,424 and is just over 1% away.  If the bulls can clear this level, the market should be challenging 52-week highs.  The 2-year chart below show a run to 5,600 could be in the cards.  If there is a failed test at the first level of resistance (5,400) and no Fiscal Cliff deal, these two negative headlines will be more than enough for the bears to stay on the attack.    

Apple ($519.33, down $2.40) traded to a low of $501 to start Monday’s session but gained $9 by the close.  On Tuesday, shares closed just below $534 but tested $510 on Friday.  If Apple can clear $535 this week, Tech will be in good shape but a close below $500 would be another chip for the bears to play with and will certainly drag the rest of the market lower.

Gold is at a 4-month low after falling to $1,636 last week and closing at $1,657 an ounce on Friday.  There could be a test to $1,600-$1,575 and where would consider buying the yellow metal.  A close above $1,700 again would be bullish.

We have been buying Silver at different prices all year long and we had a feeling the “poor man’s gold” would drop below $30.  Silver touched a low of $29.64 last week and closed at $29.98 an ounce.  We are looking to add to our position at $28-$26 but we may or may not get that chance.  We believe Silver will be at $50 an ounce or higher in a few years. 

For those of you who don’t know how to buy Silver (or Gold) coins, email Cat and she will give you the information.  We believe EVERYONE should own some physical gold or silver for their portfolio.

We could say Friday’s pullback was purely technical and to a degree it was our support targets held for the most part.  The indexes are still being held hostage by the zombies and we highly doubt a deal will be delayed until next Monday which is the last trading day of the year and the deadline for the Fiscal Cliff.

We have a feeling the market could move 4%-5% higher or lower by the end of the year based on this week’s events.  A 4% move for the Dow would get the blue-chips to our 13,777 target while a 4% drop would put the index at 12,600.  The S&P would be at 1,490 and near our 1,492 prediction while a 4% drop would put the index at 1,375.  The Nasdaq would be at 3,150 or 2,900 and we have gone on record with a yearend target of 3,040.  The Russell 2000 would be trading at 885 and new 52-week highs or 815 and below its 50-day and 100-day MA’s.

We closed out 7 more winning trades last week for the Daily and 1 for the Weekly.  We are going into the last week plus a day of trading with a bullish stance and if there is a deal we will likely keep them open going into the New Year.  However, if there is no deal and the bears start to crack lower support levels, we will close out our call options and take profits where we can to start preparing to possibly go short.

As we head to press, futures are showing a lower open this morning.  Dow futures are down 44 points to 13,092 while the S&P 500 futures are lower by 6 points to 1,419.  The Nasdaq 100 futures are showing a decline of 8 points to 2,652.

Special Notice:  The market will be open a half day today and will close at 1pm.  We will be watching our positions and will take action if we need to but we will NOT be doing a Midday update.  If we have Profit Alerts, or if we issue a NEW TRADE, we will send out an update.  There are a few positions we do like so it is possible we add a few more trades today.

 

We will do the final numbers Monday night and we will be back Wednesday morning and the rest of the week at normal times.

 

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: 158-59, or 73% win rate, including the Weekly Wrap which is 27-0).

 

iShares Russell 2000 Index (IWM, $84.19, down $0.35)

January 85 calls (IWM130104C00085000, $0.80, down $0.20)

Entry Price:  $0.70 (12/21/12)

Exit Target:  $1.40
Return:  xx%
Stop Target:  None

Action:  These are WEEKLY options sand we will be closing this trade by Friday. 

Cree (CREE, $33.86, down $0.78)  

January 36 calls (CREE130119C00036000, $0.65, down $0.30)

Entry Price:  $0.65 (12/21/12)

Exit Target:  $1.30
Return:  0%
Stop Target:  None

Action:  If there is further weakness, we would like to see $33 hold but there is risk down to $32.  We are looking for a close above $35 this week and a run to new highs.

Microsoft (MSFT, $27.45, down $0.23)

January 28 calls (MSFT130119C00028000, $0.40, down $0.10)

Entry Price:  $0.42 (12/20/12)

Exit Target:  $0.85
Return:  -5%
Stop Target:  None

Action:  We believe shares will test $28+ on a close above $27.75.  Support is at $26.75 but a break below this level could lead to a test of $25.

Nuance Communications (NUAN, $22.13, down $0.27)  

January 24 calls (NUAN130119C00024000, $0.25, down $0.05)

Entry Price:  $0.35 (12/18/12)

Exit Target:  $0.70
Return:  -29%
Stop Target:  None

Action:  Near-term support is at $22 but there is a chance $20 comes into play on a break below this level.  We have a near-term price of $25 if support holds.  These are “cheap” options we don’t mind holding open.

Southern Copper (SCCO, $37.61, down $0.62)

January 40 calls (SCCO130119C00040000, $0.30, down $0.10)

Entry Price:  $0.45 (12/14/12)

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

Action:  The 52-week high is $39.44 set at the beginning of November and we would like to see a close above $38 to start the week.  We are going to have a tight stop for this trade and may close it if shares fail to hold $37.

Taser International (TASR, $8.69, down $0.06)

January 10 calls (TASR130119C00010000, $0.25, flat)

Entry Price:  $0.15 (11/29/12)

Exit Target:  $0.45
Return:  67%
Stop Target:  None

March 10 calls (TASR130316C00010000, $0.55, flat)

Entry Price:  $0.30 (11/29/12)

Exit Target:  $0.50
Return:  83%
Stop Target:  None

Action:  The recent 52-week high is $9.26 and shares traded to a high of $9.12 on Friday.  The company continues to see new orders and upgrades come in and we would like to see a close above $9 on Monday for a possible push to double-digits by the end of the week.

 

Vivus (VVUS, $13.42, down $0.28)

January 15 calls (VVUS130119C00015000, $0.65, down $0.15)

Entry Price:  $0.65 (11/21/12)

Exit Target:  $1.30
Return:  0%
Stop Target:  50 cents

Action:  Vivus continued its surge higher after hitting $14.71 on Thursday as takeover rumors persist.  We said last week a close back above $12 over the near-term would run to $16 but we are now going to move it to $18.  A close below $11 would suggest the takeover rumors are more talk than action.

Rosetta Stone (RST, $12.45, up $0.08)

January 15 calls (RST130119C00015000, $0.15)

Entry Price:  $0.20 (11/19/12)

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

Action:  We would like to see a close above $12.75 today.  Support has been strong at $12 and we will stick with the trade as long as $11.75 holds.

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) – We may close this trade next Monday if shares aren’t above $11.50.  We have been in the trade since March but we are running out of time.

Monster Beverage January 35 puts (from November 2012) – continue to hold as we could see a break below $50 on further weakness,

 

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, $41.76, down $0.10)

January 44 calls (AKAM130119C00044000, $1.40, up $0.15)

May 55 calls (AKAM130518C00055000, $0.65, flat)

Thoughts:  We were disappointed this trade was stopped out on Friday and we still like the stock to push $45.  We also believe Akamai will be a takeover target in 2013 which is why we listed the May call options.

 

MGM Resorts International (MGM, $11.81, up $0.15)

January 12.50 calls (MGM130119C00012500, $0.18, up $0.03)

March 13 calls (MGM130316C00013000, $0.37, up $0.03)

June 15 calls (MGM130622C00015000, $0.35, up $0.05)

Thoughts:  MGM dipped to a low of $11.27 and although we were stopped out on the January 11’s, we still like the stock.  We have made some incredible gains in years past on the Casino names which is why we have listed some March options as well.

We said shares were on the verge of a breakout after showing you the 2-year chart and the close above $11.50 is very bullish.  Shares traded to a high of $11.85 on Friday which opened the door for a run past $12 to the upper mid-teens.  Support has been strong at $11 with $10 serving backup.

JPMorgan Chase (JPM, $44.00, down $0.53)

January 46 calls (JPM130119C00046000, $0.43, down $0.14)

Thoughts:  We will try to get back into JPM with these call options.  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 could indicate a trend change.

Fossil (FOSL, $92.81, down $1.17)

January 80 puts (FOSL130119P00080000, $0.80, up $0.10)

March 65 puts (FOSL130316P00065000, $1.05, up $0.15)

Thoughts:  Shares traded to a low of $88.65 Friday and these puts got a nice pop.  We are more interested in the March puts because it would give us enough time to plat earnings which are due out in mid-February.  We would like to see shares test $100 before going short.  

Caterpillar (CAT, $87.90, down $1.60)

January 85 puts (CAT130119P00085000, $1.25, up $0.35)

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

Taiwan Semiconductor (TSM, $16.95, down $0.15)

January 17.50 calls (TSM130119C00017500, $0.20, flat)

April 17.50 calls (TSM1304C00017500, $0.70, down $0.10) 

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, $32.83, down $0.21)

January 32.50 calls (DNKN130119C00032500, $0.95, down $0.25)

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, $12.38, down $0.01)  

January 12.50 calls (TIVO130119C00012500, $0.45, down $0.05)

May 14 calls (TIVO130518C00014000, $0.85, down $0.05)

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.