MomentumOptionsTrading.com Weekly Wrap for 4/14/13
1. Market Summary
2. Mini Options Are Here!
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 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 were 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).
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.” (from 4/7/2013 Weekly Wrap Update)…
The bulls got back on track last week following another push to all-time highs. While no one talked about it, Alcoa (AA, $8.22, down $0.10) was the main catalyst behind the bullishness as their numbers came in better-than-expected. The Fed minutes were released early on Tuesday by a fat finger in DC, or by a zombie that forgot what day it was, and it helped take the pressure off as there was no anxiety on when QE may or may not end.
Wednesday’s surge past resistance was followed by Thursday’s run to new highs for the Dow and S&P 500. Although Friday morning was weak there was a steady rebound into the close that has the bulls seeking continued new highs. (read more…)
The Dow fell less than a tenth of a point (.08), or 0.0%, to finish at 14,865 on Friday. The blue-chips needed to hold 14,400 on any pullback to start the week and the bears tried to rekindle their Monday magic by pushing 14,497. That would be the best it would get as the close above 14,600 gave us a good feeling the bulls would push our 14,750 target. Tuesday’s high was 14,716 and was a prelude to Wednesday’s surge to 14,826. The close at 14,802 opened the door for a test to 15,000 and Thursday’s peak was 14,887. There was a slight pullback to 14,790 on Friday as prior resistance at 14,750 will now try to hold as short-term support. If not, watch for 14,600 and more importantly 14,400 to hold on an a pullback. A break below the 50-day MA at 14,200 would suggest a trend change as the 5-year chart shows the uptrend line at 14,000. The Dow started Monday at 14,565 and soared 300 points, or 2.1%, for the week. For the year, the blue-chips have now gained 1,761 points, or 13.4%.
The S&P 500 slipped 4 points, or 0.3%, to settle at 1,588. The bulls and bears battled for weeks over the 1,550 level and Monday’s dip to 1,548 was as far as the bears got. The 10 point pop by the close at 1,563 was bullish and led to Tuesday’s push to 1,573. We had a good feeling the bulls were going to clear resistance at 1,575 and Wednesday’s surge to 1,589 put our 1,600 target in play. Thursday’s high was 1,597 but the index spent Friday in the red and touched a low of 1,579. This could be the week that 1,600 trips but a drop below 1,575 and then 1,550 would be worrisome. The S&P 500 started the week at 1,553 and surged 35 points, or 2.3%, by Friday’s close. For the year, the index has advanced 162 points, or 11.4%.
The Nasdaq gave back 5 points, or 0.2%, to close at 3,294. Tech needed to hold 3,200 on Monday’s close or it was going to be a rough week. The bears got down to 3,195 but the bulls held strong and got a close at 3,222. Tuesday’s tease to 3,249.95 had the bears nervous and Wednesday’s surge to 3,299 had the bulls salivating. Thursday’s push to 3,306 ended with a close right on our 3,300 target. There is further room up to 3,350-3,400 but Friday’s low was 3,271 and the bulls need to hold 3,275 to start the week. More importantly, any dip below 3,250 will need to be watched, especially with Tech earnings in play. The Nasdaq came into Monday’s session at 3,203 and gained 91 points, or 2.8%, by the weekend. Year-to-date, the index is showing a gain of 275 points, or 9.1%.
The Russell 2000 declined 4 points, 0.4%, to close at 942 on Friday. The small-caps held 920 to start the week after a test to 921 and the rebound to 931 was bullish. There was a slight pullback on Tuesday to 929 but Wednesday’s push to 950 got the all-time highs back in the mix. Thursday’s high was 951 and a close above 954 should get the last of our fluff targets in play. Friday’s low was 937 and the bulls will try to hold 940-930 to start the week. A close below 920 could lead to another test down to 900. The Russell 2000 was at 923 to start the week and added 19 points, or 2.2%, by Friday’s close. The small-caps have advanced 93 points, or 11%, for the year.
The S&P Volatility Index ($VIX, 12.06) came into the week at 13.92. The bulls needed to hold 15 out of the gate and Monday’s pop to 14.50 would the high for the week. The index finished lower every day afterwards and kissed a low of 11.99 on Friday. The 52-week low of 11.09 was set in mid-March and a continued run to new highs could push the VIX to single-digits. At 9, it would suggest a bottom is in for the VIX and possibly a peak for the S&P 500. A close back below 13.50 would get some life back into the bears but the bulls have no worries until they see a close above 15 again.
The bulls triggered 3 of our 4 near-term targets that we gave at the beginning of March and for the talking heads who said April was the new May following the prior week’s slight pullback, they were proven wrong, again. The suit-and-ties that have called for a continued pullback are in continued disbelief and Friday’s drop and pop nearly gave the bulls a clean sweep for the week.
Although trading ranges can be frustrating and cause panic, we said the longer the market stayed in one, the bigger the breakout or breakdown would be. We were glad to see the trading ranges break to the upside as the bulls pushed historic highs on the Dow and S&P 500 while the Nasdaq triggered 3,300.
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)
The 5-year charts we have shown you for the major indexes are still bullish and this week promising to be exciting as earnings season hits second gear. The Dow will be sending 10 batters to the plate and, collectively, they will decide if the Dow clears 15,000 or tumbles back towards 14,000 over the next few weeks. The lineup includes Coca- Cola, Intel, and Johnson & Johnson on Tuesday followed by American Express and Bank of America midweek. On Thursday: IBM, Microsoft and UnitedHealth Group confess to Wall Street with General Electric and McDonald’s following up on Friday.
The biggest report will be International Business Machines (IBM, $211.38, up $1.97) as it accounts for nearly 11% of the blue-chips weight. Shares made a nice 5% jump back in January after earnings to clear the $200 hurdle and reached a peak of $215.90 in mid-March. There is a good chance shares move another 5% and that would mean a $10 move to new all-time highs or a break back below the $200 level. A print below $198 could cause a selloff down to $190 and the 100-day MA but IBM has been on a roll in beating Wall Street’s estimates quarter-after-quarter and we don’t expect that to change this time out.
McDonald’s makes up 5.4% of the Dow’s weight, American Express 3.4% and J&J, 4.3%. UnitedHealth Group makes up 3.3%. As you can see, the Dow could have a very volatile week depending on what these companies say. GE numbers could give us good or bad clues on how well the global economies are recovering, or not. Tech will also have some influence on the market as Google, Yahoo, Intel, eBay, and Sandisk will announce their numbers as well.
Gold got mugged last week, falling over $100 an ounce, or nearly 7%. We have been warning of the breakdown to $1,525 and we said last week it could do a perfect back test to $1,600 before the bottom fell out. Bingo. The close at $1,480 opens the door for a test to the 200-day MA ($1,433) and possibly a drop to $1,400. At these levels, Gold would be at decade lows and would probably represent a great opportunity to start building positions.
Silver just hit our BUY target again at $26 following Friday’s 5% drop to $25.89 but we mentioned there was a $4 spot on getting American Eagles. We will see if the spot goes down but Silver is likely to outperform gold over the next few years. The spot is high because of supply and demand despite Silver sitting at 2-year lows. Demand is roughly 60% higher than output and silver is used in more than gold. Buying silver under $26 with a $4 spot was unimaginable a few months ago but we believe somewhere down the road silver will be north of $50. However, a continued selloff could lead to $22.50, or even $20. At $20, we might back up the truck and bet the farm.
There are a few economic reports that could cause some stickiness this week and April option expiration is this Friday. Monday is tax deadline day and is usually bullish as the Dow has only fallen 5 times over the past 20 years on April 15. April option expiration day is also bullish as the blue-chips have been up 13-out-of-the-last-16 Friday’s. Some years have shown nice 1%+ pops and would be enough this year to clear 15,000 if current levels hold.
If earnings come in better-than-expected and economic news doesn’t disappoint then the indexes should see a continued rally. If so, the extended targets we could see are: Dow 15,300; S&P 1,625; Nasdaq 3,350. We will keep our target of 975 for the Russell 2000.
We must admit even we are surprised by the GAINS the indexes have made for the year but we are not surprised by the rally as we told you it would have legs from December through April. May might be a different story and there could be some seasonal weakness in late April but until the bottom uptrends lines from the 5-year charts crack, the bulls are in control.
Futures are showing a lower open for Monday following disappointing data out of China. As we head to press, here is how we look: Dow futures are down 40 points to 14,744 while the S&P 500 futures are lower by 6 points to 1,575. The Nasdaq 100 futures are declining 9 points to 2,837.
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2. Mini Options Are Here!
Mini options started trading in mid-March and we have been doing some homework on them before making them official trade recommendations. These options can be used on stocks that trade for over $100 or more and will only gain in popularity as option traders find out there is a cheaper way to play the volatility in Apple, Google, and the S&P 500.
Mini options have the same strike price expirations as “regular” options as well as the bid/ ask but are based on 10 shares instead of 100 shares.
There are only 5 stocks that trade mini options as of now and they include Apple (AAPL, $429.80, down $4.53), Amazon (AMZN, $272.87), Google (GOOG, $790.05, down $0.34), Spiders Gold Trust (GLD, $143.95, down $7.10), and the Spiders S&P 500 (SPY, $158.80, down $0.39).
To dummy things down or an easier way to look at mini options is to remember you are only paying 10% of a normal trade on these 5 stocks. With earnings coming out for Apple, Amazon, and Google, mini options could be a great way to play these names at a fraction of the cost.
For example, the Google April 800 calls (GOOG130420C00800000, $15.60, down $0.40) are currently going for $15.60. The math works like this: $15.60 x 100 (shares)=$1,560. This means that 1 call option would cost you $1,560 and a 10 contract trade would cost you a cool $15,600.
With the mini options, 1 contract would only cost you $1.56 and a 10 contract trade would cost $1,560 at current prices. This is right in our wheelhouse. We aren’t sure if we will participate in Google’s earnings announcement this week but if we do, these are the options we would target on a run past $800. Of course, Google could also miss earnings and shares could test $750. Below is a Google chart and the red boxes show the moves the stock has made after announcing earnings.
We will do some more research this week and we will watch the price action in Google heading into Thursday’s announcement. If we see an opportunity to add mini options as an earnings play, we will send out a Trade Alert for the Daily. Otherwise, we will be on the sidelines although we like the leverage the mini options provide.
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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 4/12/13 close)
By Catherine Tierney
American Electric Power (AEP, $49.98, up $0.05), Arlington Asset Investment (AI, $26.33, down $0.55), Art’s-Way Manufacturing (ARTW, $6.32, up $0.02), BancFirst (BANF, $41.15, down $0.10), Bank Mutual (BKMU, $5.32, down $0.08), Brown & Brown (BRO, $31.31, down $0.51), Charles Schwab Corporation (SCHW, $17.28, down $0.26), Citigroup (C, $44.78, down $0.09), Farmers Capital Bank (FFKT, $18.76, down $0.15), First Republic Bank (FRC, $40.00, down $0.03), Hanesbrands (HBI, $47.39, down $1.06), Heartland Express (HTLD, $13.37, down $0.03), Hooker Furniture (HOFT, $17.53, up $0.55), Lakeland (LBAI, $9.57, up $0.02), Layne Christensen (LAYN, $20.49, down $0.01), Linear (LLTC, $36.69, down $0.20), M&T Bank (MTB, $100.24, down $4.68), Marten Transport (MRTN, $19.48, down $0.27), Metals (MUSA, $20.64, Flat), MicroFinancial (MFI, $8.21, up $0.02), Monarch Casino & Resort (MCRI, $9.76, down $0.11), Orbital Sciences (ORB, $16.83, down $0.15), Overstock.com (OSTK, $12.76, down $0.01), PacWest Bancorp (PACW, $28.21, up $0.17), Park National (PRK, $68.37, up $0.12), Pep Boys – Manny, Moe & Jack (PBY, $11.68, down $0.23), Pinnacle Financial (PNFP, $22.38, down $0.58), Rocky Brands (RCKY, $13.86, down $0.12), Trinity Biotech (TRIB, $16.69, up $0.35), Triangle Petroleum (TPLM, $5.88, down $0.27), Union Bankshares (UNB, $20.88, up $0.47), United-Guardian (UG, $22.41, down $0.09), Webster Financial (WBS, $23.71, down $0.14), Westamerica (WABC, $44.15, down $0.06)
Badger Meter (BMI, $52.84, down $0.69), BlackRock (BLK, $263.13, down $1.01), Cathay General (CATY, $19.21, down $0.19), Comerica (CMA, $35.05, down $0.40), CSX (CSX, $24.51, up $0.23), Flexsteel Industries (FLXS, $24.41, down $0.10), Fulton Financial (FULT, $11.39, down $0.09), The Goldman Sachs (GS, $149.12, up $0.05), IberiaBank (IBKC, $50.49, down $0.36), Intel (INTC, $21.67, down $0.15), Interactive Brokers (IBKR, $14.45, down $0.19), Johnson & Johnson (JNJ, $82.74, up $0.42), Mercantile Bank (MBWM, $16.64, down $0.06), Northern Trust (NTRS, $55.64, down $0.45), SY Bancorp (SYBT, $22.17, down $0.10), TD Ameritrade (AMTD, $20.00, down $0.35), The Coca-Cola Company (KO, $41.08, down $0.10), U.S. Bancorp (USB, $34.08, down $0.12), United Rentals (URI, $54.98, down $0.23), W.W. Grainger (GWW, $228.00, down $0.87), Wolverine World Wide (WWW, $46.33, down $0.11), Yahoo! (YHOO, $24.69, up $0.21),
Abbott Laboratories (ABT, $37.13, down $0.14), Acacia Research (ACTG, $30.29, up $0.77), Albemarle (ALB, $60.87, down $1.06), American Express (AXP, $65.68, down $0.06), Arrow Financial (AROW, $24.24, down $0.22), Bank of America (BAC, $12.17, down $0.10), The Bank of New York Mellon (BK, $28.45, down $0.20), Boston Scientific (BSX, $7.66, down $0.01), Community Trust (CTBI, $33.39, down $0.06), Core Laboratories NV (CLB, $136.20, down $1.96), Crown (CCK, $41.34, down $0.35), CVB Financial (CVBF, $11.08, up $0.01), Donegal (DGICA, $15.16, up $0.04), Dover (DOV, $73.41, down $1.29), East West (EWBC, $25.16, down $0.10), eBay (EBAY, $57.31, down $0.47), Exponent (EXPO, $53.06, up $0.84), Fidelity Southern (LION, $11.25, down $0.17), First Cash (FCFS, $54.97, down $2.28), Gardner Denver (GDI, $75.06, down $0.09), HNI (HNI, $34.31, down $0.19), Huntington Bancshares (HBAN, $7.39, down $0.08), ICU Medical (ICUI, $60.09, up $0.55), Ixia (XXIA, $18.37, down $0.31), Kinder Morgan (KMI, $38.78, up $0.01), LaSalle Hotel (LHO, $26.97, down $0.03), Mattel, (MAT, $44.02, down $0.20), McMoRan Exploration (MMR, $16.50, down $0.03), Noble (NE, $36.70, down $0.75), Platinum Underwriters (PTP, $56.04, down $0.62), Plexus (PLXS, $26.13, up $0.16), The PNC Financial Services (PNC, $65.81, down $1.06), Quest Diagnostics (DGX, $59.34, down $0.49), SanDisk (SNDK, $57.71, down $0.91), Select Comfort (SCSS, $18.49, down $0.33), SLM (SLM, $20.92, up $0.14), St. Jude Medical (STJ, $42.48, up $0.27), Steel Dynamics (STLD, $14.98, down $0.18), Textron (TXT, $29.81, down $0.13), Umpqua (UMPQ, $12.33, down $0.06), Virginia Commerce (VCBI, $13.63, down $0.08), WNS (WNS, $13.99, down $0.09)
Amphenol (APH, $73.49, down $1.28), AutoNation (AN, $44.17, down $0.39), Baxter (BAX, $71.78, down $0.09), BB&T (BBT, $31.01, down $0.23), Capital One Financial (COF, $54.66, down $0.16), Celanese (CE, $43.96, down $1.01), City National (CYN, $56.41, down $0.84), CoBiz Financial (COBZ, $7.95, down $0.02), Cytec (CYT, $75.98, up $0.65), Danaher (DHR, $61.56, down $0.38), EastGroup (EGP, $61.20, up $0.17), Fifth Third Bancorp (FITB, $16.49, down $0.37), Glacier (GBCI, $), Google (GOOG, $), Healthways (HWAY, $11.93, down $0.10), Home Bancshares (HOMB, $38.61, up $0.25), Hub (HUBG, $39.75, up $0.55), Insteel Industries (IIIN, $15.58, down $0.22), International Business Machines (IBM, $211.38, down $1.54), Intuitive Surgical (ISRG, $512.05, down $0.52), KeyCorp (KEY, $9.84, down $0.19), Microsoft (MSFT, $28.79, down $0.14 OceanFirst (OCFC, $14.25, down $0.02), People’s United (PBCT, $13.30, down $0.09), Philip Morris (PM, $96.44, up $0.84), Pool (POOL, $48.81, down $0.21), The Sherwin-Williams (SHW, $170.74, down $0.28), Sonoco (SON, $35.22, down $0.06), Superior Uniform (SGC, $11.50, down $0.03), Union Pacific (UNP, $141.27, down $0.13), UnitedHealth (UNH, $63.03, up $0.05), Valmont (VMI, $145.13, down $0.92), Verizon (VZ, $50.86, up $0.35), WESCO (WCC, $69.92, down $1.28), Wintrust Financial (WTFC, $36.00, down $0.30)
Baker Hughes (BHI, $46.00, down $0.70), Briggs & Stratton (BGG, $24.09, down $0.37), First Horizon National (FHN, $10.24, down $0.16), First Niagara (FNFG, $9.08, down $0.12), General Electric (GE, $23.46, down $0.13), Genuine Parts (GPC, $77.74, down $0.26), Honeywell (HON, $74.25, down $0.45), The Interpublic Group (IPG, $13.65, up $0.01), Kansas City Southern (KSU, $107.77, up $0.56), Kimberly-Clark (KMB, $101.23, up $0.11), Laboratory Corp (LH, $94.36, down $0.71), ManpowerGroup (MAN, $55.61, down $0.41), Maxwell Technologies (MXWL, $5.18, down $0.07), McDonald’s (MCD, $103.59, up $1.60), Metrocorp Bancshares (MCBI, $10.41, down $0.24), National Penn Bancshares (NPBC, $10.40, down $0.04), Rockwell Collins (COL, $62.88, down $0.81), Schlumberger (SLB, $75.66, down $1.48), Sensient (SXT, $38.47, down $0.31), State Street (STT, $59.75, down $0.73), SunTrust Banks (STI, $28.79, down $0.19), TASER (TASR, $8.09, down $0.17), Taylor Capital (TAYC, $15.36, down $0.34), TCF (TCB, $14.96, down $0.21), Under Armour (UA, $57.00, up $0.97)
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4. Weekly Wrap Covered Call Portfolio Update (Closing prices as of 4/12/13)
Our Weekly Wrap Closed Trade Track Record for 2013 is 10-1 (54-3, overall since late 2010).
magicJack VocalTec (CALL, $17.24, up $0.47)
May 17.50 calls (CALL130518C00017500, $1.05, up $0.15)
Original Entry Price: $16.65 (4/9/13)
Lowered Price from Selling Options: $15.75
Exit Target: $20+
Stop Target: $15
Action: Shares traded to a high of $17.90 last week and resistance is at $18 as you can see from the 3-year chart. If cleared, shares could make a run to $20. Short-term support is at $15 and the 100-day MA (not shown). We sold the May 17.50 calls to lower our cost basis to $15.75 when we added magicJack to the portfolio last week at $16.65.
We recommended buying magicJack at $16.65 on 4/9/13. We also sold the May 17.50 calls for 90 cents which lowered our cost basis to $15.75. If we are called away at $17.50 in mid-May the trade will make 11%.
Genworth Financial (GNW, $9.90, down $0.09)
Original Entry Price: $9.88 (4/2/13)
Lowered Price from Selling Options: $9.88
Exit Target: $15+
Stop Target: $8
Action: Shares cleared the 50-day MA at $9.50 to start the week and made a high of $10.06. There is further risk down to $9 on a break back below support and then $8.50. A close above $10 and then $10.50 should get new 52-week highs in play. We have a 6-12 month target of $15 for the stock and we believe the company could be a buyout candidate down the road. We will probably sell call options on a move past $11.
We recommended buying Genworth Financial at $9.88 on 4/2/13.
Dendreon (DNDN, $4.63, down $0.09)
August 6 calls (DNDN130817C00006000, $0.49, down $0.01)
Original Entry Price: $4.91 (4/2/13)
Lowered Price from Selling Options: $4.36
Exit Target: $15+
Stop Target: $8
Action: Shares dipped to $4.44 to start the week and support has been strong at $4.50. There is risk down to $4.25-$4.00 on a close below this level. Friday’s high was $4.87 and a break above $5 would be bullish. 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. The chart is showing a huge move could be coming.
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, $12.17, down $0.10)
Original Entry Price: $11.61 (3/5/13)
Lowered Price from Selling Options: $11.16
Exit Target: $15+
Stop Target: $12
Action: Support has been solid at $11.75 since early March and there is further help at $11.50, or the 100-day MA. The close back above $12 to start the week was bullish and we are waiting for a trip past $12.50 before possibly writing more call options.
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.
Apollo Group (APOL, $17.84, down $0.25) (Short Position)
Original Entry Price: $16.10 (3/4/13)
Lowered Price from Selling Options: None
Exit Target: $12
Stop Target: $20
Action: We said there could be risk up to $18 and last week’s high was $18.12. A close above this level and the downtrend line could lead to $20 but we are looking for a close back below $17.50 this week.
We recommended shorting Apollo Group at $16.10 on 3/4/13.
Sony (SNE, $16.67, down $0.23)
April 16 calls (SNE130420C00016000, $0.75, down $0.15)
Original Entry Price: $15.38 (3/4/13)
Lowered Price from Selling Options: $14.78
Exit Target: $20+
Stop Target: $12
Action: Sony made a brief trip above $17 to start the week but traded down to $16.45 on Friday. There is further risk down to $16 but as long as this level holds by this Friday’s close we will be called away. A break below this level and the uptrend line would be bearish for a trip down to $15 or worse. A close back above $17.50 would be bullish for another possible push to $20.
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, $8.05, down $0.05)
May 9 calls (KERX130518C00009000, $0.35, flat)
Original Entry Price: $7.22 (2/12/13)
Lowered Price from Selling Options: $6.72
Exit Target: $10+
Stop Target: None
Action: Shares traded to a low of $7.77 on Friday but held $8. The 52-week high of $9.98 was hit in late January and last week’s peak was $8.55. A close above $9 should get double-digits in play. Support is now at $7.50 following the break out of the trading range with $7 serving as backup.
We recommended buying KERX at $7.22 on 2/12/13.
On 4/9/13 we sold the May 9 calls for 50 cents which lowered our cost basis to $6.72. If we are called away at $9 in mid-May the trade will make us 34%.
Yahoo (YHOO, $24.69, up $0.21)
April 22 calls (YHOO130420C00022000, $2.75, up $0.25)
Original Entry Price: $19.81 (2/6/13)
Lowered Price from Selling Options: $19.16
Exit Target: $25
Stop Target: $14
Action: We will get called away at $22 if shares close above this level on Friday.
Shares traded to a 52-week high of $24.80 this past Friday and and our near-term target is $28. Support is at $24 followed by $22 and the 50-day MA.
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, $8.43, down $0.10)
Original Entry Price: $11.10 (3/20/12)
Lowered Price from Selling Options: $11.10
Exit Target: $13
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.
We recommended buying SGMS at $11.10 on 3/20/12.
Pizza Inn (PZZI, $6.09, up $0.10)
Original Entry Price: $4.50 (2/22/12)
Lowered Price from Selling Options: No options available
Exit Target: $9
Stop Target: None
Action: Shares made a major breakout last week after surging from 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.
We recommended buying PZZI at $4.50 on 2/22/12.
MGM Resorts International (MGM, $13.04, up $0.18)
Original Entry Price: $13.77 (2/2/12)
Lowered Price from Selling Options: $12.35
Exit Target: $15
Stop Target: None
Action: Shares rebounded to clear $13 following the prior week’s test to $11.72 and the 100-day MA. We would like to see a close above $13.25 and then $13.50 this week. If resistance is cleared, we should see a quick trip to $15.
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, $1.88, down $0.04), AKS Steel Holding (AKS, $3.06, down $0.08), Rare Element Resources (REE, $2.07, down $0.02), Rambus (RMBS, $6.93, up $0.13), Bebe Stores (BEBE, $4.71, up $0.40), Vivus (VVUS, $11.65, up $0.13), Solazyme (SZYM, $8.02, down $0.01)
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6. Week Ahead