MomentumOptionsTrading.com Weekly Wrap for 4/7/13

 

11:30pm (EST)

 

1.  Market Summary 

2.  Ironwood Pharmaceuticals (IRWD) Could Surprise on Earnings     

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   

“Before we get into this week’s commentary, we wanted to review some of our notes from the past few months:

 

December 9, 2012 Weekly Wrap:

“We gave yearend price targets for the major indexes last week and said we believe the Dow could push new highs by the end of the year.  We are officially making it 13,777.77 as there could be some “fluff” if resistance at the highs is cleared.  Our target for the S&P is 1,492 and for the Nasdaq we will go with 3,140.  For the Russell 2000 we have a target of 867.”  (END)

 

January 21, 2013 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)

 

March 3, 2013:

After giving back 1% at the open, the market started March off with decent quarter-percent gain.  With the major indexes near 5-years highs and all-time highs, another 2%-3% gain would have all of the indexes at all-time highs, excluding Tech of course, and would be the blow-off type top that sucks in the last of the quiet money still on the sidelines.  As long as support holds, the near-term targets we have given you are Dow 14,750; S&P (500) 1,600; Nasdaq 3,300; and Russell (2000) 975. (END)

We have been telling you for a couple of months the bulls haven’t done all of this good work not to get the S&P 500 to new all-time highs and we were proven right on Thursday’s close.  While we do believe higher prices are in store, we need to figure out if the bulls will remain strong out of the gate to start April or if there will be a pullback.

The first trading day after Easter is usually bearish if it falls on April Fool’s Day but overall the bulls usually start the month off with gains.  With many of the “pros” STILL calling for a pullback, we don’t see why they would change their tune this week or next.  Their thinking is that Thursday was the final push to all-time closing highs on the S&P 500 and Dow and now that the indexes are there, the bulls can rest.

We aren’t sure how many of them are history buffs but April is the Dow’s strongest month during the bulls historical runs from November through April.  The blue-chips have average a 2% advance since 1950 and are up 7-straight Aprils with an average pop of 3.5%.  Post-election years are also bullish over the past 60 with the Dow averaging gains of 1.9%; the S&P 500 1.5%; and the Nasdaq 2.4%.

Our current extended targets of Dow 14,750; S&P (500) 1,600; Nasdaq 3,300; and Russell (2000) 975 are less than 1%-2% away so if history plays out like it normally does, we could see these extended fluff targets trigger.  There have also been some bearish April’s over the past decade but the last ones were in 2005 and 2004.  Of course, when you talk winning streak they are normally snapped but any April weakness should come after the tax deadline mid-month if there is a pullback.

Although history is on the bulls’ side, we are seeing some trouble signs ahead for May and the summer.  Copper continues to look weak but held $3.40 for now.  As you can see from the chart, a break below $3.37 could lead to a test to $3.30 but a rebound and close back above $3.50 would be bullish.

COPPER4713

Gold tripped $1,600 before the S&P 500 but ended the quarter with a loss for the second-straight time after finishing below this level.  The yellow-metal finished the quarter at $1,597 and a close below $1,560 again would be bearish.  A close above $1,620 would be bullish going forward and it will be interesting to see where Gold and the S&P will be in a couple of weeks.

GOLD4713

There were no high profile warnings last week which leaves this week as the last window of opportunity to confess to Wall Street ahead of 1Q earnings.  Analysts have low expectations as they only see the S&P 500 growing its earnings base by a half-percent.  Although there wasn’t a big name that came forward to warn, nearly 100 of the companies in the index issued lowered guidance when they gave their 4Q updates in January and February.

Perhaps they were sandbagging due to the political landscape at the time but if company earnings come in much better than expected, then we should see a continued rally.  If the market sees 1Q numbers being better than anticipated the gains usually come before the news is reported which means we could have a very bullish start to April.

Europe and economic news will be two curveballs we will have to continue to watch for.  Although the worst with Cyprus seems to be over, we warned last month to watch out for Spain in April if Europe continues to sink in a recession.  Economic news here at home will have a major impact on the market this week as we will see a number of employment reports along with the final Q4 Gross Domestic Product (GDP) figures.

The next few weeks will be important in determining if our extended targets will be met or if we are in for the slight pullback everyone has been calling for.”  (from 3/31/2013 Weekly Wrap Update)…

The tug-of-war between the bulls and bears continued last week as the back-and-forth action has now stretched into 13-straight sessions.  The Dow was up heading into Friday’s action and we nailed the numbers for all of the indexes on Thursday’s close which gave little clues on which direction the market could go on Friday.  However, futures were weakening in overnight trading leading us to believe there could be some downside action to close out the week.

Of course, the big event came before the bell on Friday as Nonfarm Payrolls came in at a staggering 88,000 or less than half of what the suit-and-ties had forecast (200,000).  Wall Street’s jaw dropped and you could hear the pin that hit on the exchange floor.

We knew the open was going to be nasty but we highlighted support and once it held we had a feeling there would be some dip buying.  The bulls did well to recover their losses on Friday while the bears did their best to crack the first wave of support ahead of 1Q earnings season that begin this week. (read more…)

 

 

Members Area

The Dow dropped 41 points, or 0.3%, to close at 14,565 on Friday.  The blue-chips have been weak on Monday’s of late and last week was no different as they traded down to 14,531 after clearing 14,605 on the open.  We have said a close above this level could lead to a run to 14,750 and the breakthrough was a good clue higher prices would come.  Tuesday’s surge to 14,684 and the close at 14,662 was impressive but Wednesday’s close at 14,550 wasn’t.  There was a rebound back to 14,606 on Thursday which was bullish but the Dow fell to a low of 14,434 on the open.  Support at 14,400 held but it was a quick 172 point decline and reminded Wall Street how elevators work.  The next level the bears will look to attack is 14,200 (50-day MA) and then 14,000.  The bulls held the bottom uptrend line but a close below this level will get these downside targets in play.  The Dow came into Monday at 14,578 and only gave back 13 points, or 0.1%, for the week.  For 2013, the blue-chips are up 1,461 points, or 11.2%.

DOW4713

The S&P 500 fell 7 points, or 0.4%, to settle at 1,553.  The index made a run at its intraday all-time high of 1,576.09 (set on 10/11/07) and reached 1,570 before ending with a 7 point loss to 1,562 on Monday.  Tuesday’s push to 1,573.66 was sweet and the hold at 1,570 looked good until Wednesday’s pullback.  The dip to 1,549.80 and the break below 1,550 was a wakeup call on how fast this market could drop if support fails but the S&P closed at 1,553.  Thursday’s push to 1,562 was a nice rebound but we said that morning we wanted to see the bulls clear 1,560 on the close.  They came in at 1,559.98.  The bears pounced on Friday with the S&P dropping to a low of 1,539.50 (down 20) before the rebound back above 1,550.  A close 1,540 could lead to a back test to 1,525 and the 50-day MA, and possibly 1,500.  The S&P 500 started the week at 1,569 and lost 16 points, or 1%, following the pullback.  For the year, the index has advanced 127 points, or 8.9%, so far.

SPX4713

The Nasdaq tanked 21 points, or 0.7%, to end at 3,203.  After clearing the 3,250 level the previous week, the bulls were looking for a run to 3,300 if they could clear 3,275 on the close and Monday’s run to 3,270.23 was a tease.  It was also a touchdown short of Friday’s peak to 3,270.30.  This was a good sign a back test to 3,250 was coming and Tuesday’s low was 3,245.  Tech closed at 3,254 but Wednesday’s washout to 3,210 and the close below 3,225 at 3,218 was bearish.  Thursday’s rebound was pegged at 3,224.98.  Imagine that.  The bulls needed to hold 3,200 or they faced further risk down to 3,175-3,150 and Friday’s low checked in at 3,168.  If Tech closes below 3,150, there will likely be some panic on Wall Street.  The close above 3,200 to end the week was cool but the bulls need to clear 3,225 early this week.  The Nasdaq was at 3,267 before the open on Monday and was shelled for 64 points, or 2%, by Friday’s close.  YTD, the index is showing a gain of 184 points, or 6.1%.

NAS4713

The Russell 2000 slipped 2 points, 0.3%, to finish at 923 on Friday.  The small-caps were still on track to push 975 and the all-time high of 954 after closing above 950 just before Good Friday.  However, there was only a slight push of less than a point higher to 951.60 on Monday’s open.  This was a bad omen and one of the clues we said to watch for after the Russell tested 940 the prior week.  The next area of support at 920 would get tested with Wednesday’s dip to 916.84 and the close at 918.  Thursday’s 7-point pop to 925 was encouraging and the bulls held 920 but there is risk down to 900 on further weakness.  The Russell 2000 was at 951 to start the week and was down 28 points, or 3%, by the end of it.  The small-caps are still up 74 points, or 8.7%, for the year but last week was ugly.

RUT4713

The S&P Volatility Index ($VIX, 13.92, up 0.03) came into the week at 12.70 and closed above the 13.50 level after trading to a high of 14.05.  We mentioned this level has become a battleground in recent weeks and the bulls were able to get the index down to 12.76 on Tuesday’s rally.  Wednesday close above 14 to 14.21 warned of more weakness as the high came in at 14.66.  Thursday’s peak was 14.79 before a close back below 14 to 13.89 but Friday’s peak to 15.65 is suggesting 20 is in the cards down the road.  A close back below 13.50 would be bullish for one last run at the highs.

VIX4713

The sun came up Friday morning but the talking heads and suit-and-ties were preparing for the end of the world.  While everyone was running for cover, the bulls showed tremendous strength by holding support although some levels have cracked.  It was tempting to take some short positions but we knew if support held there could be a strong rebound.

There has been a ton of cheerleading when the market is making new highs and a bunch of Negative Nancy’s when there is a pullback, but as you can see from the charts, the market has been stuck in a trading range with volatility to the upside and now we are seeing volatility to the downside.  It still remains to be seen if the trading range is stretched or if this is a real pullback in the works but we would be surprised if we didn’t see further highs in April.

The trading ranges since early March have been:  Dow 14,400-14,600 with a breakout to the upside; S&P 1,540-1,560 with a push to all-time highs; Nasdaq 3,200-3,250; and for the Russell – 930-950 but is currently stretched to the downside.  The fact that the market held it March lows is bullish but a break below the February lows would be bearish.  In the meantime, the market remains in a trading range.

We mentioned last week April is the best month for the Dow with average gains of 2% over the past 6 decades and it is also the second best month for the S&P 500.  Although Tech has been weak of late, April has shown strong gains since the 1970’s and is the third best month for the Nasdaq.  There has been a lot of talk that April is the new May but we wouldn’t count the bulls out until the month settles.  However, the market gave mixed signals all week ahead of Friday’s big event and the clues we discussed last week have started to unfold so the bears need to be respected.

Besides a rising VIX, and a break below the bottom uptrend lines for some of the indexes, we had a major high-profile earnings warning after F5 Networks (FFIV, $73.21, down $17.21) lowered their guidance.  While we mentioned there could be some growth, other analysts believe Q1 earnings could be down 2%.  If so, it would be the first negative quarter in 4 years.

Alcoa (AA, $8.24 ,up $0.02) will be the first Dow component to announce, Monday after the bell, and earnings are expected to come in at 8 cents a share on revenue of $5.9 billion.  The company’s first quarter is usually weak but last year they surprised with a 14 cent beat.  This time we aren’t so sure they will even match estimates.  The 52-week low for the stock is $7.97 and although we won’t likely take Alcoa as an earnings trade, the April 8 puts (AA130420P00008000, $0.14, up $0.01) traded nearly 4,300 contracts on Friday.  The April 9 calls (AA130420C00009000, 0.04, up $0.01) traded over 9,000 contracts but shares would need to move 10% in less than 2 weeks for these options to turn a profit.  Perhaps a majority of these call options were sold.

There will be a few earnings trades we may play over the next few weeks so look for them on our Watch List.  We won’t commit a lot of capital to these trades if we do take them because they are risky in nature and the premiums are usually juiced but we do plan to swing the bat.

Copper and Gold continued to melt despite rebounding on Friday.  Gold closed below our bearish $1,560 on Thursday but rebounded nearly 2%.  There could be another test to $1,600 but gold could be headed to $1,525 on further weakness.  (Side note:  Copper closed at $3.34 on Friday after nailing our near-term target of $3.30 on Thursday).

GOLDb4713

The big events beside 1Q earnings starting this week will be the FOMC minutes on Wednesday.  Despite the talk of quantitative easing either slowing down or ending, those worries were dispelled Friday following the weaker-than-expected jobs report.  The bears will be fighting the Fed to take the market lower but if it gets too ugly, Bernanke could get creative and provide even more stimulus packages.

The other worry for the bulls will be the Nutcase in North Korea as tensions continue to escalate.  Kim Jong Un has moved 2 medium range missiles into position after they were installed on launch platforms for possible tests over the next week or 2.  This could be all for show but the market will take further actions more seriously.

As we head to press, futures are showing a mixed open for Monday.  Dow futures are down 3 points to 14,482 while the S&P 500 futures are higher by a point to 1,547.  The Nasdaq 100 futures are advancing 2 points to 2,766.

 

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Key of Technicals Used In Following Articles

Charta8512

 

2.  Ironwood Pharmaceuticals (IRWD) Could Surprise on Earnings 

By Michael Bryant

 

On Tuesday, April 23rd before the bell, Ironwood Pharmaceuticals (IRWD, $17.92, up $0.29) will release its 1st quarter earnings.

Charta4713

IBS is not an anatomical or a structural problem, not an identifiable physical or chemical disorder, not a cancer nor a cause of cancer, and not a cause of other gastrointestinal diseases.  Basically, IBS is a collection of symptoms that one has had for a long while, for at least 12 weeks in the previous 12 months.  Treatments include dietary changes, stress management, medication, and behavioral therapy.  Since diarrhea and gas can develop when some people eat too much fiber, or certain high-fiber foods, fiber supplements such as wheat bran and corn fiber can be used to treat IBS with constipation.

Chronic idiopathic constipation (CIC) is differentiated from IBS-C by the lack of pain as a primary symptom.  The individuals have a healthy bowel but suffer from chronic constipation.  Like IBS, CIC is classified as a functional gastrointestinal disorder due to the lack of any sign of injury or disease.  While about 13 million Americans are affected by IBS-C, it is estimated that about 35 million Americans are affected by CIC.

Positive preclinical, phase I, and phase II trials for linaclotide led to the company signing a collaboration and license agreements with Forest Laboratories (FRX, $37.52, down $0.14) in 2007 to develop and commercialize its lead drug linaclotide in North America.  Under the agreement, FRX would pay $70 million in licensing fees towards the development of linaclotide, with profits shared between the two companies.

In April 2008, the company changed its name to Ironwood Pharmaceuticals.  The name was changed to better reflect its focus on more than a single therapeutic area and its approach to creating important human medicines.  As its CEO notes, the ironwood is a long-lived tree that thrives in the harshest desert environment and provides a shaded microclimate for birds, reptiles, insects, animals, and plants.

In November 2008, it signed an agreement with Japan’s Astellas Pharmaceuticals to develop and commercialize linaclotide for the treatment of IBS-C, CIC, and other gastrointestinal conditions in Japan, South Korea, Taiwan, Thailand, the Philippines, and Indonesia.  Under the terms, Astellas would pay $75 million in upfront and precommercial milestones, including a $30 million licensing fee, as well as escalating royalties on linaclotide sales.  Astellas would also lead clinical development in Japan and be responsible for all activities and expenses relating to clinical development, regulatory approval, and commercialization in those countries.

In May 2009, it signed a license agreement with Almirall, S.A, a Spanish pharmaceutical, under which Almirall holds exclusive marketing rights for linaclotide in all European Union member states, plus Russia, the CIS (Commonwealth of Independent States of the former USSR), Switzerland, Norway and Turkey.  Under the terms, Almirall would pay $40 million upfront plus future payments based on achievement of development, regulatory, and commercial milestones.  Further, Almirall would make a $15 million equity investment if the certain future conditions are met.

On February 2, 2010, Ironwood raised $188 million, selling 16.7 million shares in its IPO at $11.25 per share.  With about 97.8 million shares outstanding, the company was valued at $1.07 billion.  The company was highly viewed by analysts, having completed two pivotal trials for linaclotide and raising more than $300 million since its founding.  These two factors set it apart from most biotech IPOs.  However, this was below its target price of $14 to $16.  Investor caution could have been due to the fact that linaclotide was the only drug it has in clinical development.

On August 30, 2012, the company received FDA approval to market linaclotide for IBS-C and CIC gastrointestinal disorders in adults.  Linaclotide is marketed under the LINZESS name in the United States and Constella name in the European Union.  LINZESS is the first and only FDA-approved GC-C agonist approved by the FDA.  For the first time in over six years, a new prescription option is available for adults with these disorders.  The drug is projected to reach blockbuster status by 2021.

Patients up to 6 years of age are not recommended to take linaclotide.  In nonclinical studies, deaths occurred within 24 hours in young juvenile mice (1 to 3 week-old mice; approximately equivalent to human pediatric patients less than 2 years of age) following administration of one or two daily oral doses of linaclotide.  Use of the drug should also be avoided in patients 6-17 years of age as a safety measure, despite that there were no deaths in older juvenile mice (approximately equivalent to humans age 12 to 17 years).

On October 3, 2012, AstraZeneca (AZN) agreed to co-develop and co-commercialize linaclotide in China, including Hong Kong and Macau.  AZN made an upfront payment of $25 million and will share the net profits and losses associated with AstraZeneca carrying 55% of each until a certain specified milestone is achieved, then moving to a 50/50 split.  Ironwood will also be eligible for $125 million in additional commercial milestone payments contingent on the achievement of certain sales targets.

The cost of constipation in the United States has been estimated at $29 billion per year.  The cost of irritable bowel syndrome in the United States has been estimated at $1.7–$10 billion in direct medical costs, with an additional $20 billion in indirect costs, for a total of $21.7–$30 billion.  Thus, with a $1.9 billion market cap, it is not hard to see how the drug could become a blockbuster.  Further, with major drug manufacturers losing patents on their blockbuster drugs, the company could be a takeover candidate.

The drug also looks promising in the treatment of gastroparesis, chronic intestinal pseudo-obstruction (CIPO), and inertia coli as well.  This could add extra promise in the stock which will push it higher.

As mentioned earlier, the company will release 1st quarter earnings on Tuesday, April 23rd before the bell.  Analysts estimate that revenue and earnings will dramatically fall.  But why would revenue fall to the lowest level in three years?  Most of past revenue was collaborative agreement revenue.  Sales of linaclotide began in December 2012, and we expect that the revenue would be higher than analysts’ estimates.

Chartb4713

Chartc4713

At $17.92, the stock is slightly above its mean target of $17.35 made by the 13 analysts recorded by Thomson/First Call.  Median target is $18.00, low target is $11.50, and high target is $25.00.  Using a scale of 1.0 as a strong buy and 5.0 as a sell, the average rating of the stock was 2.5, unchanged from a week ago.

 

Current Month

Last Month

Two Months Ago

Three Months Ago

Strong Buy

2

2

2

2

Buy

4

4

4

4

Hold

5

5

3

4

Underperform

2

2

2

1

Sell

0

0

1

1

On March 15th, Credit Suisse raised its target to $24 from $14 and placed an outperform on the stock.

Chartd4713

 

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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 4/5/13 close)

 

By Catherine Tierney

 

Monday

A. Schulman (SHLM, $30.09, down $0.54), Alcoa (AA, $8.24, up $0.02), Assisted Living Concepts (ALC, $11.90, Flat), AngioDynamics (ANGO, $10.85, down $0.03), AZZ (AZZ, $46.32, up $0.04), Cherokee (CHKE, $12.63, up $0.02), Handy & Harman (HNH, $15.42, up $0.29), Healthcare (HCSG, $24.09, down $0.21), Kansas City Life Insurance (KCLI, $36.33, down $0.38), Mistras (MG, $23.87, up $0.27), NL Industries (NL, $11.26, down $0.26)

 

Tuesday

Century Bancorp (CNBKA, $33.83, down $0.27), Global-Tech (GAI, $8.11, up $0.01), Pep Boys – Manny, Moe & Jack (PBY, $11.82, down $0.07), Phoenix Companies (PNX, $29.07, down $0.66), PriceSmart (PSMT, $79.04, up $0.22), SeaChange (SEAC, $11.28, down $0.23), Synergy Resources (SYRG, $6.75, up $0.42), Zep (ZEP, $14.64, down $0.23)

 

Wednesday

Adams Express (ADX, $11.59, down $0.09), ADTRAN (ADTN, $18.55, down $0.41), Albany (AIN, $28.46, down $0.33), Apogee Enterprises (APOG, $28.68, up $0.42), Bed Bath & Beyond (BBBY, $63.76, down $0.91), Bridgford Foods (BRID, $8.02, Flat), CarMax (KMX, $41.35, up $0.24), Constellation Brands (STZ, $47.84, down $0.41), Demandware (DWRE, $26.48, up $0.47), Family Dollar Stores (FDO, $59.40, down $0.10), Fastenal (FAST, $49.19, down $0.16), Frisch’s Restaurants (FRS, $16.64, down $0.60),  Industrial Direct (MSM, $82.83, up $0.24), Richardson Electronics (RELL, $11.86, down $0.07), Ruby Tuesday (RT, $7.69, down $0.15), Saba Software (SABA, $7.35, down $0.38), Synergy (SYRG, $6.75, up $0.42), Zep (ZEP, $14.64, down $0.23)

 

Thursday

Bank of the Ozarks (OZRK, $41.80, down $0.40), Commerce Bancshares (CBSH, $39.68, up $0.17), iGATE (IGTE, $18.01, down $0.32), JB Hunt Transport (JBHT, $73.40, up $0.94), Northern Technologies (NTIC, $12.90, Flat), Pier 1 Imports (PIR, $21.83, up $0.04)

 

Friday

JPMorgan (JPM, $47.91, up $0.42), Wells Fargo (WFC, $37.15, down $0.27)

 

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4.  Weekly Wrap Covered Call Portfolio Update (Closing prices as of 4/5/13)

Our Weekly Wrap Closed Trade Track Record for 2013 is 10-1 (54-3, overall since late 2010)

Special Notice:  We were “called-away” on our Research in Motion (BBRY, $14.70, down $0.29) trade after selling the April 12.50 calls to lower our cost basis.  The trade made 10% in a month and we would like to see shares come down to $14 and where we may start new positions.

 

Current Trades 

Genworth Financial (GNW, $9.46, down $0.03)

Original Entry Price:  $9.88 (4/2/13)

Lowered Price from Selling Options:  $9.88

Exit Target:  $15+

Return:  -4%

Stop Target:  $8

Action:  Shares close 2 pennies above their 50-day MA and face further risk down to $9.  A break below the 100-day MA, or $8.50, would be bearish.  We would like to see a rebound back above $10 this week and we will likely write a covered call when shares crack $10.50.

GNW4713

We recommended buying Genworth Financial at $9.88 on 4/2/13.

 

Dendreon (DNDN, $4.57, down $0.15)

August 6 calls (DNDN130817C00006000, $0.42, down $0.04)

Original Entry Price:  $4.91 (4/2/13)

Lowered Price from Selling Options:  $4.36

Exit Target:  $15+

Return:  5%

Stop Target:  $8

Action:  Recent support has been strong at $4.50.  There is risk down to $4.25-$4.00 on a close below this level.  We like Medicare’s recent decision to pay money out and Dendreon is getting commercials on the air about its drug Provenge.  We believe the company is a buyout candidate in the $8-$10 range.  A close above $5 would set shares up for a run at their 100-day and 200-day MA’s.  The chart is showing a huge move is coming down to $4 or back past $5.

DNDN4713

We recommended buying Dendreon at $4.91 on 4/2/13.  We also sold the August 6 calls for 55 cents which lowered our cost basis to $4.36.  If we are called-away at $6 in mid-August, the trade will make 38%.

 

Bank of America (BAC, $11.97, up $0.03)

Original Entry Price:  $11.61 (3/5/13)

Lowered Price from Selling Options:  $11.16

Exit Target:  $15+

Return:  7%

Stop Target:  $12

Action:  The WEEKLY April12.50 calls expired worthless on Friday so we were not called away.  We can look to sell another call option now but we would like to wait until shares reach $12.50 again.  Shares fell to a low of $11.64 and below the 50-day MA before nearly clearing $12 by the close.  There is further weakness down to $11.50 but a close back above $12.25 and then $12.50 would be bullish.

BAC4713

We recommended buying Bank of America at $11.61 on 3/5/13.

On 3/21/13 we sold the April 12.50 (WEEKLY) calls for $0.45, down which lowered our cost basis to $11.16.  If we are called-away at $12.50 in April, the trade will make 12%.

 

 

Apollo Group (APOL, $17.06, down $0.54) (Short Position)

Original Entry Price:  $16.10 (3/4/13)

Lowered Price from Selling Options:  None

Exit Target:  $12

Return:  -6%

Stop Target:  $20

Action:  Near-term resistance is trying to hold at $17.50 and there is risk up to $18.  Friday’s low was $16.89 and we would like to see a close below $17 this week.

APOL4713

Sony (SNE, $16.69, down $0.31)

April 16 calls (SNE130420C00016000, $0.95, down $0.25)

Original Entry Price:  $15.38 (3/4/13)

Lowered Price from Selling Options:  $14.78

Exit Target:  $20+

Return:  13%

Stop Target:  $12

Action:  The volatility in Sony has been incredible.  Following the prior week’s run to $18, shares struggled at longer-term resistance and traded to a low of $16.21 midweek and $16.23 on Friday.  Support at $16 held and there is further help at the 50-day MA or $15.50.  A close back above $17.50 would be bullish for another possible push to $20.

SNE4713

We recommended buying Sony at $15.38 on 3/4/13.  We also sold the April 16 calls for 60 cents which lowered our cost basis to $14.78.  If we are called-away at $16 in April, the trade will make 8%.

 

Keryx Biopharmaceuticals (KERX, $7.31, up $0.22)

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

Lowered Price from Selling Options:  $7.22

Exit Target:  $10+

Return:  -1%

Stop Target:  None

Action:  Shares continue to trade in a tight range with the lows coming in at $6.82 on Wednesday and Thursday/  The 50-day MA is holding and Friday’s high of $7.35 was good to see.  A close above $7.50 would be bullish for a possible run to $8 while a drop below $6.50 would give us caution.

KERX4713

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

 

Yahoo (YHOO, $23.30, down $0.22)

April 22 calls (YHOO130420C00022000, $1.40, down $0.15)

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

Lowered Price from Selling Options:  $19.16

Exit Target:  $25

Return:  22%

Stop Target:  $14

Action:  Near-term support at $23 held and there is back up at $22.  A drop below this level could lead to a test to $20 but if Tech can turnaround over the next few weeks we would see a push past $24.

YHOO4713

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%.

Scientific Games (SGMS, $8.16, up $0.01)

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

Lowered Price from Selling Options:  $11.10

Exit Target: $13

Return:  -26%

Stop Target:  None

Action:  Shares held $8 on Friday after dipping to a low of $7.95 on Friday.  A close below this level would likely lead to a test to $7.50, possibly $7.  We would like to see a run past $8.50 this week.

SGMS4713

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

 

Pizza Inn (PZZI, $4.21, down $0.16)

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

Lowered Price from Selling Options:  No options available

Exit Target: $9

Return:  -6%

Stop Target:  None

Action:  Shares peaked at $4.75 to start the week and following the parabolic moves there was a back test to $4 midweek.  We are looking for this level to be the new floor but if not $3.80 should be.  A close above $4.75 should get a run back to $5 in play.

PZZI4713

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

 

MGM Resorts International (MGM, $11.99, down $0.28)

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

Lowered Price from Selling Options:  $12.35

Exit Target:  $15

Return:  -3%

Stop Target:  None

Action:  Shares broke down like a rented mule when the $12.75 level failed on Tuesday.  Friday’s low was $11.72 and there is further risk down to $11.25 and the 200-day MA on continued weakness.  Prior support at $12.75 is now short-term resistance.

MGM4713

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.

 

Trades on HOLD:  DryShips (DRYS, $1.84, down $0.03), AKS Steel Holding (AKS, $3.06, down $0.02), Rare Element Resources (REE, $2.07, flat), Rambus (RMBS, $5.89, up $0.36), Bebe Stores (BEBE, $4.48, up $0.26), Vivus (VVUS, $10.43, down $0.08), Solazyme (SZYM, $7.34, up $0.09)

 

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6.  Week Ahead

Ecocal4713