11:30pm (EST)

 

1.  Market Summary 

2.  Apogee Enterprises (APOG) Commercial Construction Comeback Play

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)

 

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1.  Market Summary   

“The zombies decided to work the extra week as we expected and are now set to adjourn from Congress this Friday.  It was refreshing to know Obama has a tripped plan to Hawaii regardless on if a deal gets done or not.  For all the teamwork that was promised during the election, where has it been?  We have know since August 2011 this Fiscal Cliff was coming and during that time nothing was done until after he last minute as the U.S. lost its triple-A credit rating.   

The zombies dragged their feet again last week and while we didn’t believe a deal would get done, we were hopeful just so that we could stop typing the words “Fiscal Cliff”.  We thought Thursday’s late night session between the head Z’s would create some Santa magic for Wall Street but after an hour there was still a stalemate.

Friday’s action was slightly bearish but the indexes are still holding support.  We were looking for a small gain of any kind on Friday just so that we could have said the market closed higher on a Monday and Friday for the first time since October.  This is usually one of the clues we look for when the market is in a trend but with the close, it is easy to say we are still in a choppy, slightly bullish, now bearish market. 

The Financial stocks made a push past resistance to start the week and traded above the $16.20 level.  A push past $16.40 would indicate a breakout while a dip below $15.80 would be the start of a possible new trend lower.  The bulls will need the Financial stocks to pull their weight, along with Tech, if the indexes are going to make a run at the 52-week highs.

We will again watch American Express (AXP, $56.65, down $1.07) for clues on how the Financial stocks are doing.  We were up 40% on the January 57.50 calls (AXP130119C00057500, $0.95, down $0.45) by Wednesday as they had reached a high of $1.40 on the stock’s pop to $58.35.  We were looking for a run to $60, which could still happen, but we locked in profits of 20% as we felt a pullback was coming.  The long-wick candle stick on the daily chart below made us nervous and our instincts served us well as we would be down 5% on the trade if we had left it open.  We still think shares can make a run to $60 but a close below $56 and the 50-day MA could lead to a test down to $53 again.  If so, we will be ready to pounce on put options.

We have been all over Apple’s (AAPL, $509.79, down $19.90) chart like grass on dirt but we haven’t pulled the trigger on a trade yet.  However, we may be getting close.  We mentioned last week a close below $520 would lead to a test to $500 and Friday’s 4% haircut was an eyesore.   

It has always been risky to bet against Apple as far as buying put options because it has been a strong company for many years.  However, in recent quarters that has been some slipups and earnings misses so it could go either way with their next earnings release.  Wall Street will have a wide range of numbers as the suit-and-ties make last minute adjustments and analyze their numbers and supply chains.  Apple will need to knock the cover off the ball and then some as an earnings match won’t be enough.  We will cover more on this story in the coming weeks and there could be some litigation news out this week concerning the company.  Good or bad, the verdict could also have a major impact on the stock.

The Apple December options are risky and the January options may not provide enough time to play a $100 move in the stock but let’s watch them to see how they trade.  The January 600 calls (AAPL130119C00600000, $3.40, down $1.05) were down 23% on Friday and the January 400 puts (AAPL130119P00400000, $1.62, up $0.74) surged nearly 85% after opening at $1.05 and closing at 88 cents on Thursday.  

The Apple February 600 calls (AAPL130216C00600000, $8.85, down $2.35) dropped over 20% on Friday and could also be used on a run back towards $600.  On a drop below $500, the January 400 puts and the February 400 puts (AAPL130216P00400000, $5.10, up $1.70) can be used to play further weakness.  They gained 50% on the stock’s 4% drop.

These options have higher premiums than we normally like to trade but we could take “half” positions to limit our exposure and to play the stock’s next major move.

In review, the game plan is basically the same as last week.  We will be watching Tech and Apple along with the Financial Select Spiders and American Express (and JPMorgan Chase, $42.81, up $0.03).  We are also looking for a miracle by Friday for the zombies to announce a deal.  A higher Monday close would also be a nice start for the bulls.” (from 12/16/2012Weekly Wrap)…

The market closed higher on Monday as Tech and the Financial stocks lead the way higher through midweek.  Head Red Zombie (Boehner) was working on a Plan B that he thought would pass but was quickly shot down by his own members on Thursday and was never voted on.  This led to a volatile night in futures with the S&P 500 down over 50 points at one point.

Friday was the first day of winter and the bears came out in force to celebrate.  The major indexes were down nearly 2% after the zombies let another week pass without a deal getting done on the Fiscal Cliff.  The bulls battled back in the second half of trading and they were having a super week before Friday’s punch in the face.  The good news is that they still won the week.

It was the worst day thus far for December and Head Zombie for the blue side came out after the bell on Friday and talked about the Fiscal Cliff.  His comments were an hour late as traders had already taken positions ahead of the weekend.  The talking heads and suit-and-ties were telling everyone to “sell” because the market is headed for a correction but were seeing things a little different. 

President Obama said that he was disappointed by the antics of the Republicans because he feels he and the Democrats have met them more than halfway to get a deal done.  He also did his best Arnold and said he would be back at the White House after Christmas to get a deal done by January 1, 2013.    

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 for Monday but it is always darkest before dawn.  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:  We will NOT be publishing the Weekly Wrap next Sunday (12/30/12) as Monday, December 31st is the last trading day of the year and the market will be closed next Tuesday for New Year’s day.  The orange lines on the charts above are where we expect the market to be at after the first week of January and this week should be the tell on which direction we go.  We will still be watching the market during regular hours each trading day that it is open and we will send out Profit Alerts if our Hard Stops come into play.  If we sell a call option or take a New Trade we will also send out a New Trade Alert.

For the Daily, we will not publish Monday afternoon but we will send out Alerts, if needed.  We will be back on Wednesday of this week with our regular schedule and twice Daily updates and for next Monday we will do trade updates with a possible quick market summary. 

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Key of Technicals Used In Following Articles

 

2 .  Apogee Enterprises (APOG) Commercial Construction Comeback Play

By Michael Bryant

In 1949, part-time glass installer Harold Burrows teamed up with another glass installer and a car salesman to lease part of an old tire store as an auto glass replacement business on Harmon Place in downtown Minneapolis, forming the first Harmon Glass shop.  Burrows had a feeling that there was room for competition when the businesses he delivered windshields to were too busy to answer their phones.  He was right, and Harmon saw steady demand for replacing windshields of used cars.  It also installed protective screens, or implosion plates, for television sets using the same auto glass supplied by its wholesalers.

Needing more cash for operations, attorney Russell H. Baumgardner made a $10,000 investment in the company and became the majority owner.  Not long later, one of the partners died and the car salesman was forced out for stealing.  Baumgardner then purchased the stock of both former partners, acquiring a 70% ownership in the company.  But since Burrows did most of the work, he sold 20% of his stake to Burrows at a discount, thus starting the company tradition of giving employees a sense of ownership.  In 1952, Baumgardner quit his law practice to become president of the company, which thrived by providing niche markets such as commercial window glazing.

In 1966, it purchased Gopher Glass, raising its total Twin Cities outlets to nine, and branched beyond Minnesota for the first time, opening a store in Des Moines, Iowa.  Rapid growth created organizational problems that led to its remodeling after 3M.  A holding company was formed in 1968 to oversee all operations and was named Apogee, a name from an investment club to which Baumgardner once belonged.  Later that year, it acquired Wausau Metals, an aluminum windows manufacturer in a leveraged buyout.  In 1969, it launched Viracon, one of the first regional glass fabricators for architectural and automotive markets.

During the 1970s and early 80s, it averaged a 23% annual compound growth rate for sales and 21% rate for net earnings.  In 1971, Apogee went public, offering 190,000 shares of over-the-counter (OTC) stock for more than $1.9 million.  Unfortunately, the stock dropped by more than 75% and took almost seven years to recover the loss.  Also that year, it hired contract glazing expert Gerald Anderson, who turned around the company’s contract unit.  In 1974, Viracon Curvlite was formed to make aftermarket foreign-car windshields.  In 1975, it acquired Chicago Dial, a producer of non-glare and other specialty glass.  Dial became its Tru Vue unit, which found a niche in premium, non-glare picture-framing glass.  In 1979, Wausau landed its largest contract ever, a window contract for AT&T’s world headquarters in New York.  In 1983, increased demand by architects for window frames with different colors led to the formation of Linetec, a toll finisher.  In 1988, Viratec Thin Films was formed to develop high-performance glass coatings for consumer electronics. 

In 2007, it acquired Tubelite, which manufactures aluminum storefront, entrance and curtainwall systems for U.S. commercial construction markets.  By 2010, Viracon’s glass was on five of the world’s 10 largest buildings.  Also in 2010, it acquired Glassec, the leading architectural glass fabricator in Brazil.  This acquisition helped the Architectural segment grow despite a flat commercial construction market in the United States.  The market is facing a slow recovery.

The Architectural Products and Services segment designs, engineers, fabricates, installs, maintains, and renovates the glass walls, windows, storefront, and entrances of buildings.  This segment includes Viracon, Harmon, Wausau Window and Wall Systems, Linetec, and Tubelite.  The Large-Scale Optical Technologies segment manufactures glass and acrylic products under the Tru Vue brand name primarily for the custom picture framing market.  This segment sells its products through independent distributors and retailers, as well as directly to museums, and public and private galleries.

The company recently released 3rd quarter earnings on Tuesday December 18th.  Total revenue improved 9% year over year to $190 million, surpassed estimates of $184 million.  Earnings came in at $0.28 per share, up 40% from $0.20 per share a year ago and ahead of estimates of $0.23 per share. The improvement was driven by growth in the Architectural segment, which also saw growth in all of its segments, led by the installation business.  Revenue declined 5% in the Large-scale optical segment with operating income of $6.6 million compared to $7.4 million a year ago.  Cash and short-term investments totaled $75.0 million, compared to $46.4 million a year ago.

Due to seasonal trends, revenue likely peaked in 3rd quarter (11/12) and will fall in the 4th quarter (2/13).   But 4th quarter earnings has a good chance of beating current estimates.  This means there may be future upgrades, boosting the stock price.  The 4th quarter report will not be released until April 13th after the bell.

For the fiscal 2013, the company increased its earnings guidance to $0.62 – $0.67 per share from the previous guidance of $0.56 – $0.64 per share.  It expects revenue growth of 5% – 6% and improved margins resulting from better mix and good operational performance.  Further, the company expects to generate positive free cash flow.

Since March 3, 2007, the stock has underperformed against the S&P 500.  If $100 was purchased in both the stock and the S&P 500, the amount in the stock would be worth $100.96 vs. $116.67 in the S&P 500 today.  This means that the stock could rise another $15.71 to just break even with the S&P 500, assuming that the index stays flat.

Analysts seem to think the stock will rise over the next 52 weeks.  At $23.26, the stock is near but below its mean target of $24.75 made by the 4 analysts recorded by Thomson/First Call.  Median target is $26.25, high target is $31.00, and low target is $15.50.  Using a scale of 1.0 as a strong buy and 5.0 as a sell, the average rating of the stock was 2.3, unchanged from a week ago. 

 

Current Month

Last Month

Two Months Ago

Three Months Ago

Strong Buy

1

1

2

2

Buy

1

1

1

1

Hold

2

2

1

1

Underperform

0

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 12/21/12 close)

By Catherine Tierney

 

Monday

Chimera Investment (CIM, $2.64, down $0.01), DayStar Technologies (DSTI, $1.62, up $0.05), Goot Times Restaurant (GTIM, $2.31, down $0.07), Hauppauge Digital (HAUP, $0.95, down $0.08)

 

Tuesday

Market Closed

 

Wednesday

Dynasil (DYSL, $1.20, up $0.09), Stein Mart (SMRT, $7.25, down $0.35)

 

Thursday

Bioanalytical Systems (BASI, $1.24, up $0.06), WSP Holdings (WH, $1.78, up $0.09)

 

Friday

None worth mentioning

 

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4.  Weekly Wrap Covered Call Portfolio Update (Closing prices as of 12/21/12)

Our Closed Trade Track Record for 2012 is 27-0 (43-0, 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%, NR +2%.

 

 

Bank of America (BAC, $11.29, down $0.23)

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

Lowered Price from Selling Options:  $9.89

Exit Target:  $12+

Return:  14%

Stop Target:  $10.15, raise to $10.75 (Hard Stop)

Action:  Shares were up 7% for the week and hit a fresh $11.52 week peak of $11.52.  BAC cleared the 200-day MA but closed just below this level on Friday.  We still want to wait before selling an option and we also want to protect ourselves if there is a pullback in January or no Cliff deal.  We have set a Hard Stop of $10.75 which gives us a 9% return if there is a pullback and we are stopped out.  Support is at $11 but $10.50 could come into play on a break below this level.  We started loading up on BAC last December at $5.36 a share and we have made 20%, 26%, 6% and now we are up 14%.  We have a price target of $15 for BAC at some point in 2013.

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

 

CubeSmart (CUBE, $14.58, up $0.18) 

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

Lowered Price from Selling Options:  $13.59

Exit Target:  $16+

Return:  7%

Stop Target:  $11, raise to $14 (Hard Stop)

Action:  Shares hit another 52-week high of $14.62 on Wednesday’s open and again on Friday.  We mentioned shares could push $15 once they broke out of their trading range and our price target is $20 for 2013.  The low for the week was $14.07 so we have set a Hard Stop at $14 on a pullback, just in case the market falls off a Cliff.  Support is at $13.60 on a pullback but we would be long gone by then.

 

American Capital (ACAS, $12.34, down $0.06)

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

Lowered Price from Selling Options:  $11.90

Exit Target:  $15+

Return:  4%

Stop Target:  $8, raise to $12 (Hard Stop)

Action:  American Capital also reached a 52-week high of $12.43 last week.  We have a near-term target of $14 if the market holds up.  However, the low on Friday was $12.10 and we have set a Hard Stop of $12 on the position.  Support is at $11.80, or the 50-day MA on a pullback but we will already be out of the trade.

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

 

Solazyme (SZYM, $8.52, down $0.12)

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

Lowered Price from Selling Options:  $11.55

Exit Target:  $15+

Return:  -26%

Stop Target:  $5

Action:  Shares tried to push $9 following last week’s surge to $10 and reached $8.79 on Wednesday and Thursday.  A close below $8 could lead to $7.50 but we are looking for a close above $9 over the next few weeks.

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, $13.42, down $0.028) 

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

Lowered Price from Selling Options:  $20.90

Exit Target:  $30+

Return:  -36%

Stop Target:  $10

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.

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, $3.78, down $0.04)

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

Lowered Price from Selling Options:  $3.94

Exit Target:  $8+

Return:  -4%

Stop Target: None

Action:  Shares tried to clear $4 but faded after reaching a peak of $3.93 midweek.  They closed near support and the bottom of the current trading range.  There is risk down to $3.60 on further weakness but we are expecting to see a close above $4 by the end of the year.   

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, $8.77, up $0.09)

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

Lowered Price from Selling Options:  $11.10

Exit Target: $13

Return:  -21%

Stop Target:  None

Action:  We mentioned last week a close above $8.75 would be bullish and Friday’s high was $8.89.  This is a 1-year WEEKLY chart for the stock and as you can see, a move $9 could lead to a breakout past double-digits.  Support is at $8.

Pizza Inn (PZZI, $3.39, flat)

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:  Another week of a very tight trading range that is leading to a massive breakout (or breakdown).  Shares could be at $3 or $4 based on the velocity of the move and the longer shares stay range bound.

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

 

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

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

Lowered Price from Selling Options:$12.67

Exit Target: $15

Return:  -7%

Stop Target:None

Action:  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.

 

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.

 

Trades on HOLD:  DryShips (DRYS, $1.73, down $0.03), AKS Steel Holding (AKS, $4.43, down $0.12), Rare Element Resources (REE, $3.42, down $0.19), Rambus (RMBS, $5.167, down $0.14), Patriot Coal (PCXCQ, $0.08, flat), OCZ Technology Group (OCZ, $2.04, down $0.04), Bebe Stores (BEBE, $3.97, down $0.01), Antares Pharma February (2013) 7.50 calls

 

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5.  Week Ahead