1:10pm (EST)
The bulls are making another push towards fresh highs as all of the major indexes are now positive for the year – minus the Dow. Along with the Financial stocks, the blue-chips have struggled to keep pace with the rest of the market and are still 188 (16,576) points away from breaking even. It will be important they play catch up as the bulls will need their help to keep their momentum.
We have talked about a continued run higher into March but we warned yesterday the month has been very volatile in recent years. We can’t wait as we are looking forward to a continued breakout or a back test that could get serious if support levels fail to hold.
We have done well navigating February as also said it would be a tricky month to trade. We bought some insurance at the beginning of the month that could help us in March but overall we are still favoring call options over put options. However, we also realize it is imperative we lock-in gains when we can to protect profits because the bears have proven they can strike quickly and from anywhere.
Our homework and chart work have really helped us navigate this market as more and more slick talking pros have called for a correction while we have said to stay long. We are still hopeful our December fluff targets trigger and last weekend we released our yearend targets for 2014.
We have been incredibly accurate in calling and predicting in February where the market will be in December for the past two years. We surprised everyone last year when we predicted a 3,000 point gain and Dow 16,000 last year and were likely the only option newsletter we know of that made this bold prediction.
We also have great expectations this year if major support levels hold and if we are right, we should have another banner year. This is our 7th-year in publication and we have NEVER had a losing year. We say this because making money in 2008 in a down market when Wall Street was wining is a big deal. We TEACH you how to play market selloffs and corrections and although it remains to be seen if there will be one in 2014, we can prepare you for one.
We can also prepare you for incredible gains if the market continues setting record highs but it is imperative you learn how to play both sides of the market when the music stops. When the musical chairs stop and investors start fighting for chairs, we will have you sitting pretty.
We have a ton to talk about this weekend, including why and how we arrived at our yearend targets for the indexes, and what the near-term outlook holds.
As we make the turn, the Dow is advancing 116 points to 16,388 while the S&P 500 is higher by 13 points to 1,867. The Nasdaq is up 16 points to 4,335 while the Russell 2000 is gaining 3 points to 1,191. The VIX is at 13.61, down 0.43.
We have action to take as we have a trade that is up 80% in 24 hours. We mentioned yesterday the trade would be short in nature so let’s go ring the register on at least HALF of the trade.
Do not risk more than 5% of your trading account on any one trade but do try to take ALL of the trades. Please remember, ALL “Exit Targets” and “Stop Targets” are targets. You should not have any “Hard Stops” entered to close any tradesor “Exit Orders” in your brokerage account unless we list one. We will send out a “Profit Alert” or “New Trade” if we want you to close a position OR if a new trade comes out. Otherwise, follow instructions at all times in the 9am and 1pm updates. Also, we will usually give you a heads-up if we think we are going to send an email outside of these time frames. Closed Trades for 2014: 21-8 – the Weekly Wrap is 9-2 for 2014 (94-9, or 91% win rate, since 2011) and is designed for traders that want to use options with less risk.
Ingersoll-Rand (IR, $61.37, up $0.84)
April 62.50 calls (IR140419C00062500, $1.20, up $0.20)
Entry Price: $0.90 (2/27/2014)
Exit Target: $1.80
Return: 33%
Stop Target: None
Action: We have a near-term target of $64-$65. If reached, these options will easily double from our entry price. Support will try to hold at $60 on any pullback with $58 serving as backup.
S&P 500 Spiders (SPY, $187.01, up $1.19)
March 188 calls (SPY140322C00188000, $1.35, up $0.40)
Entry Price: $0.75 (2/27/2014)
Exit Target: $1.50
Return: 80%
Stop Target: None
Action: Close HALF of the trade at current levels.
We said this would be a short-term trade and with a 80% gain in 24 hours, let’s take half off the table. We will set a stop over the weekend after doing some chart work.
Discovery Laboratories (DSCO, $2.70, down $0.03)
April 2 calls (DSCO140419C00002000, $0.85, flat)
Entry Price: $0.65 (2/24/2014)
Exit Target: $1.00-$1.30
Return: 31%
Stop Target: None
Action: Shares recently made a break out of a symmetrical triangle and appear to be headed to $3. This would get the options to a least $1.00-$1.10. Support is at $2.40.
World Wrestling Federation (WWE, $23.44, up $0.70)
March 30 calls (WWE140322C00030000, $0.25, flat)
Entry Price: $0.40 (2/18/2014)
Exit Target: $0.80
Return: -38%
Stop Target: None
Action: We should get some numbers from the company next week on how the launch of its Pay-Per-View subscription model went this week. We are expecting a pop past $25 with a run to $30. Support is at $22.
Kodiak Oil & Gas (KOG, $12.03, up $0.30)
March 12 calls (KOG140322C00012000, $0.55, up $0.15)
Entry Price: $0.60 (2/13/2014)
Exit Target: $1.20
Return: -8%
Stop Target: None
June 13 calls (KOG140621C00013000, $0.70, up $0.15)
Entry Price: $0.70 (2/13/2014)
Exit Target: $1.40
Return: 0%
Stop Target: None
Action: Shares dipped to a low of $11.38 after trading up to $11.83 on the open and have now cleared $12. A flat or positive close would be bullish for next week.
Ariad Pharmaceuticals (ARIA, $8.80, down $0.19)
March 10 calls (ARIA140322C00010000, $0.50, flat)
Entry Price: $0.95 (1/28/2014)
Exit Target: $1.90
Return: -47%
Stop Target: None
May 11 calls (ARIA140517C00011000, $0.90, flat)
Entry Price: $1.05 (1/28/2014)
Exit Target: $2.10
Return: -14%
Stop Target: None
Action: We are expecting a pop to $10 over the next few weeks. Support is at $8 with $7 serving backup.
Revenues should grow during the current quarter with the re-launch of Iclusig in the U.S. The company could also have a new drug debut in the second half of 2014 and why we also suggested longer-term options on this trade as well.
The water cooler talk is that Eli Lilly has made a “friendly approach” to buy the company and is willing to pay up to $20 a share. GlaxoSmithKline is also in the hunt along with Shire.
We have said there is a HUGE gap to fill on the stock’s drop from $23 to a 52-week low of $2. Eli is trying to get the company for cheap as it currently has a $1.25 billion market-cap.
Exact Sciences (EXAS, $14.05, down $0.25)
April 19 calls (EXAS140419C00019000, $0.60, flat)
Entry Price: $0.88 (1/22/2014)
Exit Target: $1.75
Return: -32%
Stop Target: None
Action: Resistance is at $15 and a move above this level should get us back near even.
Support is at $11.75. The company should get some FDA news in March on its Cologuard drug. These are April options with 2 months until expiration and we plan to hold through the volatility because we want to be in when the March news is released. We do not have a Stop Limit listed.
Other 2014 Portfolio OPEN positions (5): These are trades that are still open in the portfolio but are down over 50%. They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around. This means we would not open any new positions. We are still keeping track of the trades and we will record the results, accordingly, when we close them or if the options expire. Click on the 2013Portfolio link in the Members Area to view ALL open/ closed trades.
Sony April 20 calls (from January 2014) – continue to HOLD
General Electric March 28 calls (from January 2014) – continue to HOLD
Caterpillar March 85 puts (from January 2014) – continue to HOLD
McDonald’s March 90 puts (from February 2014) – continue to HOLD
Apollo Education Group March 29 puts (from February 2014) – continue to HOLD
WATCH LIST SECTION
These trades are NOT recommendations. They are trades that we like but have not added to the portfolio as an official recommendation because of market conditions or because we are waiting for better entry prices. We try not to have more than 12-15 open trades at any one time and why we have a Watch List. We will not list entry prices because these stocks are on the verge of breaking out or they could sell off but these are the trades we are watching as new candidates.
We will update this section on Monday with some fresh ideas.
We will be back Sunday night with the Weekly Wrap and Monday morning with the Daily. Until then, have a great weekend everyone!
