Weekly Wrap for 2/18/13


11:30pm (EST)


1.  Market Summary 

2. Ocean Rig UDW (ORIG) Has Some Reward

3.  Keryx Biopharmaceuticals (KERX) Could be a Small-Cap Sleeper

4.  Earnings

5.  Weekly Wrap Portfolio Update 

6.  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   

“We are halfway through 4Q numbers that continue to come in ahead of Wall Street’s estimates.  Nearly 70% of the companies that have reported have beaten the suit-and-ties forecasts but let’s not forget the bar was lowered coming into the season.  They have stayed on the sidelines in raising earnings and that could be good news for the bulls come 1Q earnings in April.  If companies continue to come in with better-than-expected numbers, it would be helpful for a continued rallied but this is the last “big” week before the announcements start to slow.

Tech finally showed some strength as Apple (AAPL, $474.98, up $6.76) was up over $20 for the week and may have bottomed (at least temporarily) at $440.  We mentioned a few weeks ago the company’s weight on the indexes and any rally in Apple will help the bulls push new highs on the S&P 500 and Nasdaq.

We have a feeling Apple shares could push $500-$510 before eventually falling back below its 52-week low of $435, to maybe $410-$400.  This would coincide with the pending 5%-10% pullback that will come at some point.  If shares clear $510 then we would expect a rally up to $550 but Apple needs a wow product instead of refreshes or they need to get busy on the acquisition path to push growth again.

As far as a new product, we are hearing Apple is working on a watch-type device that could operate on the same platform as the iPhone.  Then there is the TV which may or may not be in the works for 2013.

As far as marriages, we have mentioned time-and-time again Apple should buy TiVo (TIVO, $13.21, up $0.25) and the no-brainer would be Twitter but two more companies they should go after are American Tower (AMT, $77.06, $1.17) and Akamai Technologies (AKAM, $35.42, up $0.16).

American Tower would be the biggest merger as the company’s market cap is north of $30 billion but they operates as a REIT (real estate investment trust) and it would give Apple a powerful wireless and communication infrastructure or platform to build out it business.  It might take care of the shareholder lawsuit that popped up as Apple could say it needs its $140 billion war chest to make these type of acquisitions.


Akamai just got a 15% haircut after disappointing the Street and missing estimates.  Shares dropped from $41 to $35.  Its market-cap is just over $6 billion and they provide content delivery.


Besides Apple, Merger and Acquisitions (M&A) could fuel a higher rally in 2013 as things pickup and we are starting to see early signs that it could be a great year for M&A deals.  Historic Price-to-Earnings ratio on the S&P 500 have been much higher and companies have loads of cash on their balance sheets.  Plus, money is cheap as dirt to borrow (if you can get a loan) and sooner or later the banks will let go of their purse strings.

The Dow Transportation Index ($TRAN) is approaching 6,000 following last week 54-point pop and is up over 11% for the year.  We have also mentioned this index as a key indicator of bullishness or bearishness and the steps the bulls have been climbing are staggering.  If the bears take the elevator down, it could be a quick trip to 5,400 on any market pullback or correction.  A drop below 5,800 would be a good clue to load up on index put options so keep this in mind down the road.


We continue to see mixed to up Monday/ Friday closes and the last time the S&P finished lower on a M/F was mid-January and that was only by a fraction.  We will have to watch this week’s action because February Friday option expiration has been bearish in recent years and will be here this Friday.  This would mean the bulls need a good start to the week or the odds favor a negative M/F close for the first time in over a month.  The market will be closed the following Monday and ahead of a 3-day weekend so there may be some profit taking.

The bulls are on a 6-week win streak and, although the Dow slipped a little last week, the index traded above its previous week’s high on Friday.  We have given you a few simple clues to watch for to the upside on all of the indexes and we have called this market right for months despite everyone’s fear for a pullback.  We don’t say this to toot our horn but to remind you that it is important to trade your plan no matter what the pros and talking heads are telling you.

We continue to say that calling a market top is never easy but we have been on point since early December as out 4% upper-end targets and fluff targets have triggered.  We could say we are surprised but all of the clues were laid out like bread crumbs and we have marked our trail if and when there is a retreat.

The market is following the same pattern as last year where a lot of the pros were not in the game coming into the New Year.  They were out and called for a pullback through March as money-managers fell behind the curve and played catch up all year.  We always remind our subscribers the pros like to pack it in sometimes a little early to take long vacations and when there was little action before Christmas, most were flat.  Most were worried about the Fiscal Cliff.  And most of them have missed this year’s surge.  There is still a lot of head scratching on Wall Street as to why the market continues higher and there are a lot of money managers and investment newsletters still calling for a correction.  Last year’s market pullback didn’t come until April and while there are some serious headwinds facing us over the near-term, keep this in mind as well.

There has been some bipartisanship between the zombies lately and if they can avoid the March sequester, or looming budget cuts, and come to some type of an agreement, the bulls will have more reasons to push new highs.  The head zombie will be speaking Tuesday in his State of the Union address and although his talk has been brash of late, we are hoping he tones it down a little and talks more about a compromise than kicking the can down the road.

The targets we need to watch for on a possible downside correction are as follows:  (subscribers only)

Otherwise, we mentioned the bulls haven’t come this far not to ring the bell on new 52-week peaks for ALL of the indexes and all that remain are the blue-chips and Tech.  If the indexes get there, great, and we will continue to stay long.  If not, wait for the downside targets to trigger before going short.”  (from 2/10/2013 Weekly Wrap Update)…

The indexes stayed in a tight range all week as the bulls and bears each won some key battles.  The market felt like it ended lower but a deeper look at the numbers reveal the bulls actually won the week.  February has historically been a bearish month for the market with losses of 1% or more, on average, but the mixed week didn’t slow the bulls down as some of the indexes hit fresh 52-week peaks again.

There are warning signs the market could be topping and both the bulls and bears are making good arguments as to why this could be the top, or, if the market will get one last surge higher.  With earnings winding down, the focus will turn towards the zombies and economic news here at home and abroad will start to become more important as GDP numbers around the world continue to fall.

The Dow gained 8 points, or 0.1%, to finish at 13,981 on Friday.  The blue-chips were able to clear and hold 14,000 on Tuesday’s close of 14,018 but gave it back the following session and struggled with resistance the rest of the week.  The index tested a low of 13,906 on Friday which was the low for the week and a level we said to watch for.  Support is at 13,800 but we mentioned it was moving up to 13,850-13,900.  The prior week’s low was 13,852 and Friday’s low held 13,900.  There is still a chance the Dow makes a run at 14,200 and the all-time high of 14,196 but a break below 13,850 will have us looking at using index put options to play a possible pullback.  The Dow started Monday at 13,993 and gave back a 12-pack, or 0.1%, for the week.  Year-to-date, the index is up 877 points, or 6.7%.


The S&P 500 slipped a little more than a point, or 0.1%, to settle at 1,519.79.  The Wall Street pros and talking heads will be watching the 1,500 level to the downside but we have been telling you the game is at 1,510 this month.  This was true on the prior week’s push higher as the bulls hit 1,509.39 before busting through.  Monday’s low was 1513. If 1,510 falls this week then 1,500 comes into play but the truth moment will be 1,495.  This represents a 1% drop from 1,510 to 1,495 and a break below will likely lead to 1,475-1,450 if it doesn’t hold.  We will be aggressive with a short-term put option trade once 1,510 falls.  Of course, the index might not be done setting new 52-week highs if 1,525 triggers on the close.  We have been mentioning for weeks if this level of resistance is cleared there is a chance for a run to 1,550-1,575 and the all-time high of 1,576.  The index kissed 1,524.69 midweek and 1,524.24 on Friday and if 1,525 isn’t cleared this week then the S&P may have made a short-term top.  The index came into the week just under 1,518 and added 2 points, or 0.1%, by Friday’s close.  For 2013, the S&P 500 is higher by 94 points, or 6.6%.


The Nasdaq fell nearly 7 points, or 0.2%, to close at 3,192.03.  The important level to watch for in Tech will be 3,175 which held all week.  The index tested 3,182.10 on Monday and 3,182.39 on Thursday.  If these two levels are taken out, there will likely be a test down to 3,150.  From there, the bears would look to attack 3,125-3,100.  The good news for the bulls is that they were able to push 3,200 and a 52-week high on Friday of 3,206.21.  The bad news is they couldn’t hold this level on a close despite the higher highs.  There is still a possibility the Nasdaq can make a push to 3,250 but if 3,200 isn’t cleared and held this week then Tech could fall back to test lower support levels.  The Nasdaq was right below 3,194 to start the week and declined just 2 points, or 0.1%, after all the noise.  For 2013, Tech has gained 173 points, or 5.7%.


The Russell 2000 was off less than a point, or 0.1%, and went out at 923.15.  This is the secret story on why the market has continued higher and why we remain somewhat bullish as the small-caps posted slow and steady gains all week.  There was a dip to 910.22 on Monday and our clue on when to go short but we said last week to expect a push to 925.  The index reached 924.68 on Valentine’s Day and kissed 927.34 on Friday.  We mentioned last week this level was “just over 1% away and we can’t rule out 930-935 on an overshoot”.  Another 1% gain from here gets the small-caps to 932-933 and we will be watching 916 and then 910 as possible short opportunities.  The Russell 2000 came into Monday’s open at 913.67 and added 9 points, or 1%, for the week.  The index has advanced 73 points, or 8.7%, since the beginning of the year.


The S&P Volatility Index ($VIX, 12.46, down 0.20) was at 13.02 coming into the week and tested a high of 13.42 on Monday.  Thursday’s high was 13.31 and Friday’s low was 12.24.  We have been mentioning since December the VIX could test the low teens and possible trade into the single-digits on a continued rally and the index is going to give us some great clues going forward if there is a pullback.  The VIX finished at 18.02 on the last trading day of 2012 and closed below 15 on the first trading day of 2013.  The slick talking pros have been saying “when the VIX is low it’s time to go” but after testing 14.75 at the beginning of February, this old saying has become just that, old.  We have said not to flinch until the VIX breaks 15 but we can lower that target to 14.75.  The VIX is at 52-week lows but could get even lower on one last surge by the bulls.  Last week’s chart showed a test to 12 coming as the bottom downtrend channel was in play.  There is another channel showing a test to 11-ish which could be a good setup to buy call options on the VIX.


The bulls have been smooth sailing for 7 weeks now but could be approaching chopping waters.  While last week had its good and bad points, the bears seem to be waking up from hibernation although it hasn’t shown up in the overall indexes.  February has always been a tricky month to trade because it is usually the weakest link in the historic 6-month bullish runs from December through April to early May.  Average losses for the month are around 1%, but so far, the bulls are up 1%.

The Dow has gained over 120 points in February while the S&P 500 and Russell 2000 have hit blackjacks (up 21 points).  The Nasdaq is up a Fifty and the S&P Volatility 500 Index is in the low teens.  The current closes on the indexes are exactly where we said they could be nearly a month ago.

Here were our thoughts from our January 21, 2012 Weekly Wrap:

“With some of our fluff targets being triggered, we must now focus on the extended targets we gave you last week:  Dow 14,000; S&P (500) 1,500-1,525; Nasdaq 3,200-3,250; and Russell (2000) 900-925.  There could be a pullback to support or prior resistance levels if Apple, Google and IBM come up lame but we are expecting higher prices for the market through the end of January and possibly into February if we get some more can kicking by the zombies.” (END)

All of these targets were triggered last week and that has us looking for a pullback.  There is still a chance the indexes trade higher from here and into March like they did last year, but it’s rare the market does exactly what you expect or want it to do.

This doesn’t mean we know the exact day a pullback could start or how much it will be, but we can start preparing for one as we wait for the clues.  We will also have to determine if it will be a short-term pullback and one to buy or if it will be a longer-term pullback and one to load up on by using put options.

If there is a further push higher from here, it could come over the next 2 weeks despite some major headwinds approaching.  The S&P 500 made twice the gains last year compared to this year in February so far as the index zoomed 50 points ahead of Presidents Day and added another 1% by the beginning of March.  A week later, the S&P fell from 1,374 to 1,340 that was nearly a 3% dip before clearing 1,400 by the end of March.  The run from 1,340 to 1,410 was over a 4% gain in 3 weeks.

This is how everyone wants the current market to play out over the next few weeks but we worry any “dip” could become a full-blown correction.  The pros (and rookies) are trying to “time” this market but as you can see from all of our aforementioned comments, it is more important to predict where the market will in 2-3 months and not on a daily basis.

The President’s State of the Union address did little to soothe fears on the upcoming sequester cuts that will take place on March 1 which is just 10 days away.  Air Force One took the head zombie down to Florida over the 3-day weekend to golf with Tiger as his A-List grows but the President seems unwilling to cut spending the way the Republicans’ would like.

Some of the water-cooler talk is that the sequester cuts aren’t a big deal and that they should happen.  To us, it is a big deal that could cost the economy well over a million jobs (that will need to be replaced) and the automatic spending cuts could trim the country’s Gross Domestic Product (GDP) by more than a full percentage point.  There is grapevine talk Obama is set to release a $1.5 trillion budget plan but will it gain traction in 10 days is the question.

Our best guess is the Republicans are not going to compromise by March 1 and the question will then be how much pain can they take.  Once the sequester cuts begin, at some point they will have to compromise with the Democrats and Obama to come up with a different deficit reduction plan.  A week or so of seeing the dominoes start to fall will cause some panic and this is when we would expect a “new deal” or compromise.

If the sequester cuts play out like we have planned then we could continue to see a higher drifting market until the end of February then a pullback into the first or second week of March.  There could be a rebound rally to new highs that could last into April but the current budget resolution expires at the end of March and a new one will need to be in place by mid-April.  In May, the Debt Ceiling debate will come back into focus.

We talked about the Monday/ Friday closes last week and we mentioned the bulls needed to get off to a good start if there was going to be a break to new highs.  The S&P fell both Monday and on Friday which makes Tuesday and this Friday even more important.  Although the losses were small, it was the first time in a month the index has fallen on a M/F.

This week, China will be back in the news following a week long layoff and there will be some important economic news here at home we will have to watch for.  The G20 comments suggested there is currently not a currency war but currency worries and the Fed’s Minutes from January will hit mid-week.

We wanted to touch on the metals real quick and we will wrap things up.

Gold has been dropping like a rock and could test $1,550 if the dollar continues to rise and the $1,600 level fails as support.  There may be a buying opportunity if this level holds.  Otherwise, wait for lower prices because it could get another 5%-10% cheaper over the next 6-12 months if $1,550 fails to hold.


As far as Silver, it has dipped below $30 and we would love to see it come back down to $27-$26.  A drop to $23 is unlikely but would represent an incredible buying opportunity and a great way to play a rising dollar and inflation.


With some of the indexes still fighting to reach new 52-week highs, the market does feel as though it is topping out but it will be important we remain patient.

The downside targets we gave you from last week and reviewed this week are still in play as well as some of the upside targets we gave you a month ago.  This means the market’s upside appears to be more limited over the near-term than does the downside but support is holding and something we must respect.

As we head to press, futures are showing a higher open for Tuesday.  Dow futures are up 2 points to 13,950 while the S&P 500 futures are flat at 1,517.  The Nasdaq 100 futures are gaining 2 point to 2,763.


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Key of Technicals Used In Following Articles




2. Ocean Rig UDW (ORIG) Has Some Reward

By Michael Bryant


We have mentioned Ocean Rig UDW (ORIG, $15.93, down $0.48) in past issues of the Weekly Wrap, specifically when it was still part of Dryships (DRYS) and later when it was spun-off.  While we believe the company is still not being fairly valued and could be a buy it does come with a face a few risks.


Dynamic positioning computer systems are programmed to automatically maintain a vessel’s position by using its own propellers and thrusters.  Position reference sensors, wind sensors, motion sensors, and gyro compasses provide information to the computer about the vessel’s position and the magnitude and direction of environmental forces affecting its position.

In 1997, the company started trading on the Oslo Stock Exchange, raising about $400 million.  In early 1998, it raised another $350 million in bond financing.  In 2000, deepwater drill rates were selling at about $130,000 a day.  The company hoped rates would rise back to the 1997 average of $200,000 a day.


In 2007, Ocean Rig generated operating revenues of $209.1 million.  Since December of 2007, Dryships, a Greek drybulk shipper, has been acquiring large stakes of the company.  Then on May 14, 2008, Ocean Rig UDW, a wholly-owned subsidiary of DRYS, acquired the remaining shares of Ocean Rig ASA it did not already own.  The total amount DRYS invested into the company was $1.4 billion.  In September of 2010, it signed a contract to drill four wells off the coast of West Africa starting in the first half of 2011 for a day rate of $450,000.


Large oil fields have been discovered off the coast of Brazil.  This find could mean more contracts for the company.  Three more ultra-deepwater drill ships are currently under construction and due for completion in 2013.  On February 4th of this year, it received $1.35 billion in financing for the construction of those three ships.  Also on that same day, it signed a $217 million contract for offshore drilling in West Africa.  At the end of the third quarter of 2012, Ocean Rig had approximately $4.5 billion of order backlog over the next three years.  It also has one more ultra-deepwater drill ship due for completion in 2015.

On February 14th, DRYS sold 7.5 million shares it owns in ORIG, expecting to raise $126.4 million and cutting DRY’s stake to 59.4% of the company.  The deepwater oil drilling segment is currently witnessing shortages of rigs throughout the world, as the energy companies have raised the level of production.  Thus, it is speculated that the offering is being used to purchase more high quality drill ships.

The company will release 4th quarter earnings on Wednesday, February 20th before the bell.  Analysts estimate the company will earn -$0.34 per share on $235 million.  These estimates are a large fall from 3rd quarter earnings, meaning there may be a better chance to beat estimates than to miss them.  As shown in the graphs below, analysts’ earnings target seems easily attainable from the 3rd quarter.  But revenue may barely meet estimates.


Currently, the company has the 6th largest ultra-deepwater dill fleet and the 5th largest fleet of drillships in the world.  The age of its feet averages 2.7 years, the 3rd youngest in its sector, after Pacific Drilling (PACD) and Seadrill (SDRL).

The company’s two main competitors are Transocean (RIG) and SDRL, the world’s #1 and #2 largest offshore oil drillers by market value and fleet size of ultra-deepwater vessels.  But only 63% of RIG’s and 64% of SDRL’s assets are for ultra-deepwater operations, while 100% of ORIG’s assets are for ultra-deepwater operations.  PACD is the only competitor with 100% of its assets is for ultra-deepwater operations.


At $15.93, the stock is between its low target of $13.00 and its median target of $22.00 made by the 12 analysts recorded by Thomson/First Call.  Mean target is $22.29, and high target is $31.00.  Using a scale of 1.0 as a strong buy and 5.0 as a sell, the average rating of the stock was 2.0, unchanged from a week ago.


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3.  Keryx Biopharmaceuticals (KERX) Could be a Small-Cap Sleeper


Keryx Biopharmaceuticals (KERX, $6.82, down $0.12) is another tiny biotech with a huge potential.


Founded in 1997, it is developing Zerenex (ferric citrate), an oral, ferric iron-based compound that has the capacity to bind to phosphate in the gastrointestinal tract (stomach and intestine) and form non-absorbable complexes.  Zerenex is completed Phase III clinical trials for the treatment of hyperphosphatemia in patients with end-stage renal disease on dialysis in January.  A New Drug Application (NDA) in the U.S. and Marketing Authorization Application (MAA) in the European Union were submitted and are pending approval. The company has sublicense agreement with Japan Tobacco and Torii Pharmaceutical for the development and commercialization of ferric citrate in Japan.  Phase III trials were completed and a Japanese NDA was filed in January.

In the U.S., approximately 600,000 patients have end-stage renal disease (ESRD) and over 400,000 require dialysis.  Worldwide, approximately 2.8 million patients have ESRD, with over 2 million requiring dialysis.  These numbers are projected to continue to rise in the future.  Due to problems ranging from potential toxicity to accumulation with current therapies, there is a need for alternative phosphate-binding agents.

Keryx Biopharmaceuticals has also initiated Phase II trials in November of 2012 for Zerenex to manage serum phosphorus and iron deficiency in anemic patients with Stage 3-5 non-dialysis dependent chronic kidney disease (NDD-CKD).  It is estimated that approximately 10-15% of the U.S. adult population is affected by NDD-CKD.  No phosphate binders are currently FDA approved for NDD-CKD.  Nor are any oral iron agents currently FDA approved to treat iron deficiency anemia in NDD-CKD.

In the short-term Phase 3 efficacy study for Zerenex, it met both primary and key secondary endpoints.  The study was completed in November 2010.  The long-term Phase 3 safety and efficacy study was completed in January 2013, where Zerenex met the primary and all secondary endpoints.

The company will release 4th quarter earnings on Wednesday, February 27th.  Analysts estimate the company will post a loss of $0.08 per share on no revenue.  But surprisingly, they estimate it will not post a loss in the 1st quarter of next year.  In the 3rd quarter, it missed the earnings estimates of -$0.07 by a penny.  It has not made any revenue.  Given that the stock has seen a bump in earnings from 3rd to 4th quarter in the last three years, there is a good chance they beat loss estimates.


On January 29th, the company announced a 55 million public offering of common stock and the underwriters are granted the privilege of buying additional shares within 30 days of the offering.   There could be a surge in buying on February 29th as underwriters can buy additional shares.

However, there have been a number of class action lawsuits filed recently against the company for providing misleading information to investors between June 1, 2009 to April 1, 2012.  Any legal findings could sway the stock in either direction.  We believe that this is not a serious overhang but one that needs to be watched.


At $6.82, the stock is below its low target of $8.00 made by the 8 analysts recorded by Thomson/First Call.  Mean target is $12.63, median target is $14.00, and high target is $15.00.  Using a scale of 1.0 as a strong buy and 5.0 as a sell, the average rating of the stock was 1.5, up from 1.6 a week ago.


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4.  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 2/15/13 close)

By Catherine Tierney



Access Midstream (ACMP, $37.11, down $0.51), Actavis (ACT, $85.24, down $1.25), Alexander & Baldwin (ALEX, $35.12, down $0.02), Allied Motion (AMOT, $7.10 up $0.10), Allison Transmission (ALSN, $23.97, up $0.24), Allscripts Healthcare (MDRX, $11.18, down $0.07), American Assets (AAT, $29.66, down $0.10), American Woodmark (AMWD, $31.75, down $0.81), AmREIT (AMRE, $18.20, down $0.30), Analog Devices (ADI, $46.17, down $0.37), Armstrong (AWI, $56.23, down $0.49), Asbury Automotive (ABG, $36.08, down $0.16), Basic Energy (BAS, $15.98, up $0.44), BJ’s Restaurants (BJRI, $33.16, down $0.42), Bob Evans Farms (BOBE, $42.27, up $0.18), Bruker (BRKR, $16.71, down $0.12), Cedar Fair (FUN, $38.16, up $0.16), CF Industries (CF, $216.67, down $1.19), Chatham Lodging Trust (CLDT, $16.78, up $0.22), Cimarex Energy (XEC, $64.95, down $2.30), Clear Channel Outdoor (CCO, $7.60, up $0.02), Cleco (CNL, $43.78, up $0.08), Computer Task (CTGX, $20.36, down $0.12), Daktronics (DAKT, $12.40, up $0.25), Dell (DELL, $13.81, up $0.10), Demand Media (DMD, $7.91, down $0.12), Diana Containerships (DCIX, $6.48, up $0.02), Dynex Capital (DX, $10.26, up $0.03), EarthLink (ELNK, $6.93, down $0.03), Education Realty Trust (EDR, $10.88, up $0.02), El Paso Electric (EE, $33.55, up $0.03), FelCor Lodging Trust (FCH, $5.34, up $0.03), Fidelity National (FNF, $25.85, down $0.29), Financial Engines (FNGN, $33.94, up $0.03), Franklin Street (FSP, $13.42, up $0.09), FreightCar America (RAIL, $24.05, down $0.35), Fresh Del Monte Produce (FDP, $27.31, up $0.06), Genuine Parts (GPC, $71.44, up $0.65), Gladstone Commercial (GOOD, $19.02, up $0.08), Grand Canyon (LOPE, $25.03, up $0.36), Greenlight Capital (GLRE, $24.78, Flat), Group 1 Automotive (GPI, $66.65, down $0.75), Herbalife (HLF, $38.74, up $0.47), HollySys Automation (HOLI, $13.13, down $0.23), Hyster-Yale Materials (HY, $49.79, down $0.10), icad (ICAD, $6.54, up $0.51), ICON Public (ICLR, $28.43, up $0.47), Kaiser Aluminum (KALU, $64.33, up $0.03), Kona Grill (KONA, $8.98, up $0.27), La-Z-Boy (LZB, $15.42, up $0.27), Marriott (MAR, $41.23, up $0.07), Medtronic (MDT, $47.12, down $0.05), Millennial Media (MM, $14.20, up $1.74), Nabors (NBR, $17.68, down $0.24), NiSource (NI, $26.78, down $0.13), Northeast Utilities (NU, $40.94, up $0.18), Nova Measuring Instruments (NVMI, $9.01, down $0.16), Oil States (OIS, $79.18, down $1.77), OM (OMG, $27.59, down $0.09), Omnicare (OCR, $39.57, down $0.17), Orbotech (ORBK, $9.40, up $0.20), ProAssurance (PRA, $46.55, down $0.11), PS Business Parks (PSB, $73.08, up $0.43), QEP Resources (QEP, $29.89, up $0.07), Qihoo 360 (QIHU, $32.64, up $0.10), Red Robin Gourmet Burgers (RRGB, $36.45, up $0.09), Retail Properties of America (RPAI, $13.63, down $0.06), Rockwood (ROC, $57.50, down $0.50), Rogers (ROG, $47.10, down $0.55), Sealed Air (SEE, $47.10, down $0.55), SJW (SJW, $28.09, up $0.54), Spirit Airlines (SAVE, $19.38, down $0.11), State Auto Financial (STFC, $15.07, down $0.02), Sunstone Hotel (SHO, $11.79, down $0.01), Synta (SNTA, $9.40, down $0.26), Tennant (TNC, $46.74, down $0.77), Terex (TEX, $34.92, down $0.08), Ternium (TX, $22.62, down $0.15), Texas Roadhouse (TXRH, $17.11, down $0.08), Trex (TREX, $44.34, down $0.15), Ultra Clean (UCTT, $6.09, Flat), Unit (UNT, $48.24, down $0.79), United Fire (UFCS, $23.96, up $0.02), Universal American (UAM, $9.83, up $0.12), Vipshop (VIPS, $24.90, down $0.05), Watts Water (WTS, $47.28, up $0.78), Westinghouse Air Brake (WAB, $95.49, down $1.16), Westlake Chemical (WLK, $91.83, up $0.03), Windstream (WIN, $8.93, down $0.16), Wolverine World Wide (WWW, $42.90, up $0.22), Yandex (YNDX, $25.59, down $0.07)



51job (JOBS, $56.03, down $0.13), Acadia Healthcare (ACHC, $25.94, down $0.77), AerCap (AER, $15.16, up $0.05), Almost Family (AFAM, $20.82, up $0.07), Ameren (AEE, $33.13, down $0.01), American Equity Investment Life (AEL, $13.75, up $0.01), American Railcar (ARII, $40.95, down $1.07), Avista (AVA, $26.49, up $0.05), Boyd Gaming (BYD, $6.88, down $0.14), Clean Harbors (CLH, $50.84, down $0.75), Clearwater Paper (CLW, $46.71, down $0.05), Concho (CXO, $96.44, down $0.01), Curtiss-Wright (CW, $36.74, up $0.16), Denny’s (DENN, $5.65, up $0.04), Devon Energy (DVN, $59.25, down $1.41), Dish Network (DISH, $36.93, up $0.09), Drew (DW, $38.47, up $0.10), DTE Energy (DTE, $64.42, up $0.06), Dynamics (DRCO, $7.23, up $0.15), Eaton Vance (EV, $40.71, up $0.25), EchoStar (SATS, $38.89, $0.53), EMC Insurance (EMCI, $26.09, up $0.05), Encore Wire (WIRE, $34.26, up $0.30), Energy Transfer (ETE, $50.04, up $0.07), Energy Transfer (ETP, $46.75, down $0.29), Equity One (EQY, $23.75, up $0.16), Exact Sciences (EXAS, $11.22, up $0.07), EXCO (XCO, $6.30, down $0.15), First Industrial Realty Trust (FR, $16.59, up $0.12), Fleetmatics (FLTX, $24.62, down $0.18), Fluor (FLR, $64.51, down $0.06), Forest Oil (FST, $6.36, down $0.44), Franklin Electric (FELE, $65.89, down $0.18), Garmin (GRMN, $39.14, up $0.17), Geeknet (GKNT, $15.10, up $0.03), Goodrich Petroleum (GDP, $12.26, down $0.50), Healthcare Realty Trust (HR, $25.84, up $0.34), Helix Energy (HLX, $24.15, down $1.22), Heritage-Crystal Clean (HCCI, $15.24, up $0.19), Hersha Hospitality (HT, $5.50, up $0.03), HomeAway (AWAY, $24.77, down $0.56), Horsehead (ZINC, $10.84, down $0.05), HudBay Minerals (HBM, $10.86, down $0.13), Huron (HURN, $34.74, down $0.05), Iconix (ICON, $24.20, down $0.18), InterDigital (IDCC, $44.73, up $0.38), Jack in the Box (JACK, $29.76, up $0.01), KAR Auction (KAR, $21.42, down $0.11), KBR (KBR, $31.61, up $0.05), LaSalle Hotel (LHO, $27.51, up $0.06), Leap Wireless (LEAP, $6.09, down $0.33), LifeLock (LOCK, $9.99, down $0.01), Lithia Motors (LAD, $42.69, down $0.40), Lumber Liquidators (LL, $62.19, down $1.77), Macquarie Infrastructure (MIC, $51.74, up $0.51), Maiden (MHLD, $10.19, up $0.07), ManTech (MANT, $26.02, up $0.06), MedAssets (MDAS, $19.52, up $0.04), The Medicines (MDCO, $30.96, up $0.53), Mercadolibre (MELI, $83.32, down $0.30), MGM Resorts (MGM, $12.88, down $0.41), Neenah Paper (NP, $29.59, up $0.47), Newfield (NFX, $27.15, down $0.96), Newport (NEWP, $14.99, down $0.17), Noranda Aluminum (NOR, $5.80, up $0.01), Orient-Express Hotels (OEH, $10.94, down $0.13), Owens Corning (OC, $42.79, Flat), Polypore (PPO, $42.98, down $1.05), PVR (PVR, $25.53, down $0.27), Quality Distribution (QLTY, $8.59, down $0.09), Quanex Building (NX, $20.45, up $0.16), Questar (STR, $23.55, down $0.18), RealPage (RP, $23.61, down $0.35), Regency Energy (RGP, $23.75, down $0.93), Responsys (MKTG, $6.84, down $0.08), Rubicon (RBCN, $6.00, up $0.12), Sauer-Danfoss (SHS, $55.56, up $0.40), Six Flags (SIX, $65.48, up $0.48), SM Energy (SM, $58.24, down $0.79), SodaStream (SODA, $51.10, down $0.39), Solazyme (SZYM, $8.87, down $0.22), Sonic Automotive (SAH, $24.18, down $0.41), STAG (STAG, $20.58, up $0.28), Starz (STRZA, $18.74, up $0.13), Sunoco (SXL, $60.94, down $0.20), Synacor (SYNC, $5.58, down $0.02), Synopsys (SNPS, $34.54, up $0.21), Tesla Motors (TSLA, $37.04, down $1.26), Boston Beer (SAM, $147.53, up $1.37), The Cheesecake Factory (CAKE, $33.07, down $0.13), Toll Brothers (TOL, $37.08, down $0.42), TOR Minerals (TORM, $12.73, up $0.02), Trinity (TRN, $41.72, down $0.30), Tronox (TROX, $18.68, down $0.30), United (UNTD, $6.34, Flat), USA Mobility (USMO, $11.56, up $0.32), Vantiv (VNTV, $21.14, up $0.27), WageWorks (WAGE, $22.15, down $0.15), Walter (WLT, $37.92, down $1.41), Waste Connections (WCN, $35.92, down $0.15), Williams (WMB, $35.11, down $0.35), Williams (WPZ, $52.83)


Aircastle (AYR, $14.05, up $0.07), American (AIG, $38.35, down $0.86),  AMN Healthcare (AHS, $12.76, up $0.33), Approach (AREX, $24.47, down $0.05), Aruba (ARUN, $22.27, down $0.15), Atlantic Tele-Network (ATNI, $43.64, down $0.06), Atlas (ATLS, $37.71, down $0.49), Atlas Resource (ARP, $22.60, down $0.22), AVG (AVG, $13.04, down $0.02), Balchem (BCPC, $38.84, up $0.31), Bazaarvoice, (BV, $7.49, up $0.04), BioMarin (BMRN, $56.28, up $1.31), Bloomin’ (BLMN, $18.09, down $0.25), Boingo Wireless (WIFI, $8.02, up $0.03), Brady (BRC, $36.10, up $0.36), Builders FirstSource (BLDR, $6.06, up $0.05), Cabot Oil & Gas (COG, $54.31, down $0.65), The Carlyle  (CG, $35.51, up $1.80), CEC (CEC, $32.32, down $0.46), Century Aluminum (CENX, $9.37, down $0.13), Chesapeake (CHK, $20.01, down $0.39), Clayton Williams (CWEI, $39.02, up $0.08), CMS (CMS, $25.77, up $0.02), Coeur d’Alene Mines (CDE, $21.05, down $0.54), Cogent Communications (CCOI, $25.02, up $0.19), Community Health (CYH, $42.29, up $0.16), CoreLogic (CLGX, $28.01, down $0.04), CubeSmart (CUBE, $14.67, down $0.12), Dana (DAN, $17.18, down $0.02), Del Frisco’s Restaurant (DFRG, $16.60, down $0.39), Denbury (DNR, $18.44, down $0.48), eLong (LONG, $16.15, up $0.33), Ensco (ESV, $64.35, down $0.97), EV Energy (EVEP, $54.17, down $1.01), ExactTarget (ET, $23.50, down $0.28), Extra Space (EXR, $38.70, down $0.84), Fifth & Pacific (FNP, $17.08, down $0.10), First American (FAF, $24.58, up $0.23), First Potomac Realty (FPO, $13.62, up $0.10), Flowserve (FLS, $159.95, down $0.02), Hewlett-Packard (HPQ, $16.79, down $0.24), Hittite Microwave (HITT, $65.31, down $0.26), Holly Energy (HEP, $38.30, down $0.99), Hormel Foods (HRL, $36.08, up $0.17), Host Hotels & Resorts (HST, $17.17, up $0.02), HSN (HSNI, $57.93, down $1.23), ICG (ICGE, $12.49, down $0.01), Inland Real Estate (IRC, $9.43, down $0.05), Integra LifeSciences (IART, $46.73, down $0.06), InterMune (ITMN, $9.16, down $0.10), Internap Network (INAP, $8.14, up $0.08), IntraLinks (IL, $6.71, up $0.09), Intuit (INTU, $62.07, up $1.31), IPC The Hospitalist (IPCM, $44.04, down $0.45), Kaydon (KDN, $24.92, down $0.05), Kongzhong (KONG, $6.38, down $0.44), Lawson Products (LAWS, $12.17, up $0.11), Lexington Realty Trust (LXP, $11.16, up $0.16), Libbey (LBY, $18.49, up $0.11), Life Time Fitness (LTM, $42.98, down $0.13), Linn (LINE, $35.93, down $1.40), Marriott Vacations (VAC, $46.81, up $0.17), Marvell (MRVL, $9.35, down $0.17), McGrath Rentcorp (MGRC, $29.29, up $0.06), Medidata (MDSO, $49.21, down $0.42), Merit Medical (MMSI, $13.80, up $0.09), Mohawk Industries (MHK, $107.80, up $0.75), MRC Global (MRC, $32.02, up $0.28), Newmont Mining (NEM, $43.27, down $1.28), Nordson (NDSN, $69.99, down $0.18), Nordstrom (JWN, $55.40, up $0.15), NPS (NPSP, $7.99, up $0.05), OfficeMax (OMX, $10.75, down $0.14), Olympic Steel (ZEUS, $21.50, up $0.74), Onyx (ONXX, $72.94, down $2.07), Orthofix (OFIX, $38.53, down $0.58), Parker Drilling (PKD, $6.01, down $0.10), Patterson (PDCO, $37.22, up $0.14), PBF Energy (PBF, $38.43, down $0.07), Pebblebrook Hotel Trust (PEB, $24.44, up $0.02), PG&E (PCG, $42.72, up $0.29), Public Service Enterprise (PEG, $31.09, down $0.03), Public Storage (PSA, $151.26, down $2.94), Reliance Steel & Aluminum (RS, $72.05, up $0.05), Retail Opportunity (ROIC, $12.90, up $0.01), Rocky Brands (RCKY, $15.53, up $0.09), Safeway (SWY, $20.42, down $0.45), Sanderson Farms (SAFM, $52.94, down $0.12), SBA (SBAC, $68.69, up $0.58), SCANA (SCG, $47.92, up $0.06), Select Medical (SEM, $9.94, up $0.10), Shutterstock (SSTK, $25.27, up $0.18), Sourcefire (FIRE, $42.59, down $1.35), Southwestern (SWN, $33.04, down $0.27), The Spectranetics (SPNC, $16.89, up $0.08), Spectrum (SPPI, $11.63, down $0.54), Sun Communities (SUI, $45.69, up $0.40), Superior Uniform (SGC, $11.55, Flat), Swift Energy (SFY, $14.88, down $0.69), Symmetry (SMA, $11.09, up $0.21), TASER (TASR, $8.68, down $0.14), Teekay (TK, $35.53, down $0.17), Teekay LNG (TGP, $42.23, up $0.26), Teekay Offshore (TOO, $28.43, down $0.11), Teleflex (TFX, $77.13, up $0.03), Tornier (TRNX, $17.48, up $0.21), Toro (TTC, $45.80, up $0.14), Treehouse Foods (THS, $52.90, up $0.02), Tutor Perini (TPC, $18.44, up $0.15), UIL (UIL, $38.81, up $0.72), Universal Electronics (UEIC, $19.00, down $0.28), Valassis (VCI, $30.38, up $1.10), VASCO Data Security (VDSI, $8.22, up $0.14), Volcano (VOLC, $25.58, down $0.32), Wal-Mart Stores (WMT, $69.30, down $1.52), WebMD Health (WBMD, $17.39, up $0.31), West Marine Inc. (WMAR, $12.99, up $0.12), West Pharmaceutical (WST, $59.13, down $0.57), World Fuel (INT, $44.62, down $0.12), Wright Medical. (WMGI, $21.94, up $0.02)



Abercrombie & Fitch (ANF, $50.96, down $0.33), Barnes (B, $24.72, down $0.32), Charter (CHTR, $79.54, up $0.06), CoreSite Realty (COR, $29.85, down $1.17), Cyberonics (CYBX, $45.05, down $0.52), Daxor (DXR, $7.53, down $0.14), Donegal (DGICA, $14.63, up $0.64), DTS (DTSI, $19.67, down $0.81), Gardner Denver (GDI, $68.94, down $0.31), Gibraltar (ROCK, $17.93, up $0.41), HMS (HMSY, $26.96, down $0.45), The Interpublic (IPG, $12.57, up $0.08), Mobile Mini (MINI, $25.14, down $0.40), NV (NVE, $19.47, up $0.05), PDL BioPharma (PDLI, $6.94, up $0.01), Pinnacle West Capital (PNW, $54.34, up $0.01), Portland General Electric (POR, $28.98, up $0.15), Telephone & Data (TDS, $25.65, up $0.08), Washington Post (WPO, $414.41, up $5.35)

= = = = = = = = = = = = =


5.  Weekly Wrap Covered Call Portfolio Update (Closing prices as of 2/15/13)


Our Weekly Wrap Closed Trade Track Record for 2013 is 3-1 (47-3, overall since 2011).


Cypress Semiconductor (CY, $9.86, down $0.22)

Original Entry Price:  $9.97 (2/13/13)

Lowered Price from Selling Options:  $9.97

Exit Target:  $12+

Return:  -1%

Stop Target:  $8

Action:  Short-term support is at $9.75 but a break below this level gets $8.75 in play.  The 100-day MA is at $10.20 and that was Monday’s peak.  The 50-day MA is at $10.40 and a close above these levels could lead to a run to $11 and where we will look to sell a call option.  The June 10 calls (CY130622C00010000, $0.70, down $0.15) would lower our cost basis to $9.27 but we want to sell these calls at higher prices to reduce our cost basis to under $10.


Keryx Biopharmaceuticals (KERX, $6.82, down $0.12)

Original Entry Price:  $7.22 (2/12/13)

Lowered Price from Selling Options:  $7.22

Exit Target:  $10+

Return:  -6%

Stop Target:  None

Action:  There is risk down to $6.50 and a break below this level open the stock up for a back test to $4.50 or worse.  There is a gap to fill from $3.90 to $4.50 that could also come into play on any setbacks or negative news.  Monday’s low was $6.53 and shares tested $6.56 on Tuesday before pushing $7.27 on Wednesday.  A close above $7.50 would get some momentum back into the trade as shares have been range bound for much of February.


We recommended buying KERX at $7.22 on 2/12/13.


Crosstex Energy (XTXI, $17.75, down $0.09)

Original Entry Price:  $17.20 (2/6/13)

Lowered Price from Selling Options:  $17.20

Exit Target:  $20-$22

Return:  3%

Stop Target:  $17.30 (Hard Stop)

Action:  We have set a Hard Stop of $17.30 to protect profits and preserve cash if there is a pullback in the market, or this stock.  The chart is super bullish as shares have been in a solid uptrend since the November lows but earnings are coming up so we need to be careful as well with volatility picking up.  Monday’s low was $17.26 and support is at $17.  If these levels are tested this week we will be out of the trade.  Shares did trade to $18.64 on Thursday and $18.38 on Friday and a close above $18 would be bullish.  We have a near-term target of $20-$22 for Crosstex Energy but will close the trade if our Hard Stop is triggered.


We recommended buying XTXI at $17.20 on 2/6/13. 


Yahoo (YHOO, $21.01, down $0.17)

April 22 calls (YHOO130420C00022000, $0.53, down $0.07)

Original Entry Price:  $19.81 (2/6/13)

Lowered Price from Selling Options:  $19.16

Exit Target:  $25

Return:  10%

Stop Target:  $14

Action:  We sold the April 22 calls last Wednesday for $0.65 to lower our cost basis to $19.16.  Yahoo was up 50 cents for the week and if we are called away at $22 in mid-April the trade will make 15%.  Support is at $20 and the 50-day MA of $19.84 but a break below these levels will get $19 back in the mix.  The good news is shares are pushing the 52-week highs of $21.43 and could be headed above our $22 strike price.


We recommended buying Yahoo at $19.81 on 2/6/13.

On 2/13/13 we sold the April 22 calls for 65 cents which lowered our cost basis to $19.16.  If we are called-away at $22 in April, the trade will make 15%.


STAAR Surgical (STAA, $5.30, down $0.05)

Original Entry Price:  $5.47 (2/6/13)

Lowered Price from Selling Options:  $5.47

Exit Target:  $8

Return:  -3%

Stop Target:  None

Action:  Shares traded up to $5.65 and the 50-day MA on Monday to finish 2% higher at $5.38.  The high on Tuesday was $5.50 and we were looking for follow through to $5.95 but the momentum wasn’t there.  Shares tested a low of $5.23 midweek and the 52-week low is $4.96.  We believe shares can push $8 over the next 6-12 months once they clear $6.


We recommended buying STAA at $5.47 on 2/6/13.


SolarCity (SCTY, $17.77, down $0.66)

Original Entry Price:  $16.25 (1/7/13)

Lowered Price from Selling Options:  $16.25

Exit Target:  $20 (lower to $19.50 and set good-til-cancel orders to exit at this price)

Return:  9%

Stop Target:  $16.75 (Hard Stop)

Action:  We have placed a Hard Stop of $16.75 on this position although we are looking for support at $16 to hold on a pullback.  Shares rallied 10% on Monday to close at $16.67.  The following day, shares traded up to $18.32 and on Wednesday surged to $19.58 after opening at $19.  Our short-term exit target for the trade is $20 but we thought of cashing out early.  We were down 7% coming into the week and at the highs we were looking at a gain of 20%.  If we can get $19.50 for the position this week, we will gladly exit for a 20% win.


We recommended buying SCTY at $16.25 on 1/7/13.


Solazyme (SZYM, $8.87, down $0.22)

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

Lowered Price from Selling Options:  $11.55

Exit Target:  $15+

Return:  -23%

Stop Target:  $5

Action:  Solazyme tested $9.38 on Friday and made higher highs throughout the week.  A close above $9.50 would be bullish and could lead to a trip past $10 and a test to the 200-day MA of $10.25.  Short-term support has moved up to $8.50 and the 100-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, $13.39, down $0.37)

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 shares are in a mini trading range with $13 holding as support and $14 serving as resistance.  A break above $14 and then $14.50 will be our clues a test to $18 is coming but a close below $13 would be bearish.  Backup support would be at $12 and where shares usually get some buying interest as the takeover chatter picks up.


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.


Scientific Games (SGMS, $9.21, down $0.01)

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

Lowered Price from Selling Options:  $11.10

Exit Target: $13

Return:  -17%

Stop Target:  None

Action:  Shares held support at $9 and the 50-day MA after testing $9.01 on Thursday.  There is additional support at $8.50 and the 100-day MA.  A close above $9.50 could be a nice setup for a run past $10 as shares try to shake their recent trading range.  Earnings are due out in mid-March.


We recommended buying SGMS at $11.10 on 3/20/12.


Pizza Inn (PZZI, $3.27, up $0.06)

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

Lowered Price from Selling Options:  No options available

Exit Target: $9

Return:  -27%

Stop Target:  None

Action:  Shares have been holding $3.20 but there is still risk down to $3.00.  We would like to see a close back above $3.50 and a move above $3.32 could be enough to break shares out of their current range.


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


MGM Resorts International (MGM, $12.88, down $0.41)

March 14 calls (MGM130316C00014000, $0.32, down $0.01)

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

Lowered Price from Selling Options:  $12.35

Exit Target:  $15

Return:  4%

Stop Target:  None

Action:  We sold the March 14 calls last Wednesday for 32 cents to lower our cost basis to $12.35.  Shares traded up to $13.59 to start the week and we wanted to see a close above resistance at $13.50.  Earnings are due out this week so there is a chance for a run to $15.  However, the company is expected to lose 22 cents a share on revenue of $2.31 billion.  If MGM can come in ahead of these numbers and if they say something slightly positive about Vegas (and Macau) we should be good.  If they disappointment with a higher loss on lower revenue, we could see shares test $12.


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.

On 2/13/13 we recommended selling the March 14 calls for $0.32 which lowered the cost basis to $12.35.  If we are called away at $14 in mid-March the trade will make 13%.


Trades on HOLD:  DryShips (DRYS, $2.18, down $0.07), AKS Steel Holding (AKS, $4.33, down $0.05), Rare Element Resources (REE, $2.83, down $0.09), Rambus (RMBS, $5.49, down $0.07), Bebe Stores (BEBE, $3.81, flat),


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6.  Week Ahead