The bears turned grizzly at the open this morning following a shocker Nonfarm payrolls report. The economy added a measly 88,000 jobs in March versus expectations for 200,000. The unemployment rate fell to 7.6%, from 7.7%, but that is due to the half million people who have given up looking for a job. The drop is being blamed on sequester cuts and weather but we have a feeling it has more to do with healthcare (Obamacare). The bulls have rebounded off the lows as we head into the second half of trading but it remains to be seen how much they can recover by the close.
We often mention historical trends and although they don’t always play out the same way every year, they are helpful. It’s too early to tell if today’s damage is the start of a more serious pullback or if the lows provided an opportunity to go long. With earnings starting next week, the market will be at a pivot point and we will do the chart work to get a read on how the action could play out.
We have been thisclose to some monster trades and although we have closed 4 triple-digit winners so far this year, we have yet to hit a multi triple-digit winner but we know we are getting close. It was at this time last year where we went on an incredible winning streak from late March through May where we hit on 38-out-of-40 winning trades after switching from call to put options and we are hoping we have the same success this year.
Of course, we have some current trades that we need to close and cleanup before we start our next batch and the weekend will give us plenty of time to do our homework.
One stock we have played over the years off and on is F5 Networks (FFIV, $74.14, down $16.25) which is getting hammered today after warning Wall Street they won’t meet current estimates. Shares had been hovering around the $87 level and got a pop to $90 earlier in the week on an analyst upgrade. We were miffed by the recommendation as our quick chart work showed a possible test to $80 and the November lows.
We wanted to do some follow up this weekend and to look at some possible May put options but the warning came out of left field and the 18% drop has been a goldmine for the put options. The April 85 puts (FFIV130420P00085000, $11.00, up $10.43) are surging over 1,800% after closing at 57 cents yesterday. (see screen shot below).
We were looking at the May 80 puts (FFIB130518P00080000, $8.20, up $6.70) that were going for $1.50 but we wanted to make sure we weren’t overpaying. We wanted to research the past earnings history for the company before possibly taking a trade.
Obviously, we missed the boat with this trade and it’s too late to chase but with earnings season starting next week, we do see some incredible opportunities ahead.
The price targets we gave you this morning are sticking like glue. The Dow is down 123 points to 14,482 while the S&P is lower by 15 points to 1,544. The Nasdaq is declining 37 points to 3,187.
While we would love to add a few short positions, we rarely buy options on Friday’s and we need to see where the indexes close at before jumping in with new trades. We do have a few open put positions that are currently playing out and they are getting nice pops so we are getting some pin action.
We do have some good news as another recommendation for our Weekly Wrap will likely be closed today for a 10% profit if we are called-away. This gets our track record for the publication to 10-1 for the year and 54-3 since we started the newsletter in late 2010.
We will be back Sunday night with the Weekly Wrap and Monday morning with all of the chart work for the indexes and our current trades. Until then, have a great weekend everyone!