1:15pm (EST)

The market is mixed as we head into the home stretch with the bulls trying to recoup some of the weekly losses.  The past 2 sessions have seen lower highs and lower lows and today’s action was to be expected as the indexes make a back test to support.  The bears are on track to win the week but if the bulls can clear key levels of resistance and hold the uptrend lines then next week could go either way.

One of the biggest stories in the market today was International Business Machines’ (IBM, $191.83, down $15.32) earnings miss.  Here is what we said in our Weekly Wrap about IBM and our chart work:

“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.”

IBM41913

We would have done well with a short position against IBM ahead of last night’s earnings announcement but it has been a losing bet for several quarters for a lot of traders as the company continually beat Wall Street’s expectations.  We also don’t like to trade options on stocks over $100 because the premiums are more expensive and IBM currently doesn’t trade “mini” options.

We also mentioned IBM accounts for 10% of the Dow weight and if it weren’t for the other blue-chips, the Dow would be down 120 points on IBM alone.

The IBM options pits have been active as the April 200 puts (IBM130420O00200000, $8.05, up $6.45) have traded nearly 5,500 contracts and are up 400% after closing at $1.60 yesterday.  The May 200 puts (IBM130518P00200000, $9.75, up $6.60) have traded 4,500 contracts and are up over 200% on the stock’s pullback after closing at $3.15 on Thursday.

A straddle or strangle option trade would have also been a nice hedge because we did predict a 10-point plus move in the stock but again, the premiums were a little juicy for us to try and make 50%.

We have started another new batch of trades to play the market’s next trend and we feel we are in good position heading into next week.  Our Daily portfolio will be light and we will have room for a number of new trades and for the Weekly Wrap we are closing 2 more profitable trades today that will run our track Record to 12-1 for 2013 and 56-3 since we started the publication in late 2010.  This is a 95% win rate and our overall win rate for both publications is just under 70% on nearly 1,000 real-time trades for the past 5 years.

We have some last minute updates on our current trades but before we roll let’s look at the indexes.

The Dow is down 38 points to 14,498 while the S&P 500 is up 7 points to 1,549.  The Nasdaq is jumping 31 points to 3,198 and we talked about these levels this morning.  If the bulls can regain support then they have a shot a rebounding into next week but the overall action this week is suggesting a trend change is upon us.

We will have a more clearer picture after doing the chart work this weekend and we will be back Sunday night with the outlook.  We could have some last minute Trade Alerts ahead of the close but if we don’t, have a great weekend!