9:00am (EST)
Following Monday’s sharp pullback and Tuesday’s amazing rebound, we figured Wednesday (and Thursday) could be flat sessions ahead of Friday’s Nonfarm Payroll report.
The tight trading range was more bullish than bearish as the indexes continue to seek new highs but the bears are watching closely for another opportunity to catch Wall Street off guard.
The Dow dipped 35 points, or 0.2%, to settle at 16,360. The blue-chips traded to a low of 16,343 after a slight pop to 16,406 on the open. The close above 16,350 keeps 16,500-16,600 in play while a close below this level favors the bears and a possible test to 16,200.
The S&P 500 slipped a tenth of a point, or 0.01%, to close at 1,873.81. The index traded to another intraday high of 1,876.53 before testing 1,871 and finishing below resistance at 1,875. A close above this level will likely lead to 1,900 and we have predicted a possible short-term top at 1,909. Continued closes below 1,875 could lead to 1,850.
The Nasdaq gained a 6-pack, or 0.1%, to finish at 4,356. Tech reached a peak of 4,362.50 and held positive territory for much of the session. The brief trips into negative territory touched a low of 4,344 at the open before a positive close. Our near-term target remains 4,400-4,500 if the bulls clear and hold 4,375. Support is at 4,300 followed by 4,275-4,250.
The Russell 2000 fell nearly 3 points or 0.2%, to end at 1,205.91. The small-caps were in the red from start to finish but held 1,200 after testing a low of 1,203. We have penciled-in fluff up to 1,225 for the small-caps over the near-term as long as support holds. A close back below 1,200 could lead to a back test to 1,175.
The S&P 500 Volatility Index ($VIX, 13.89, down 0.21) also traded in a tight range as it relaxed between 14.32-13.81 before ending slightly lower. A close below 13.50 would confirm a possible continued rally while a print above 15 (and then 17.50) would be cause for concern.
We had a monster gain yesterday in one of our current trades that is on track to produce our sixth triple-digit winner for 2014. We were able to lock-in a 100% return on half the position but we left the other half open to enjoy further gains.
We have stayed red-hot following an incredible 2013 as we have hit on 75% of our option recommendations despite the choppy action. Our CLOSED trades has yielded a total return of 147% on a $10,000 account in just over 2 months of trading and is at $24,730 based on our Track Record. Some traders may have more or less on the line but the bottom line is we said this year could be one of the BEST years ever to trade options.
As we head from desk to press, here is how futures are shaping up: Dow (+30); S&P 500 (+3); Nasdaq 100 (+4).
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: 24-8 – the Weekly Wrap is 10-2 for 2014 (95-9, or 91% win rate, since 2011) and is designed for traders that want to use options with less risk.
Aruba Networks (ARUN, $21.18, up $0.01)
April 23 calls (ARUN140419C00023000, $0.65, up $0.05)
Entry Price: $0.65 (3/5/2014)
Exit Target: $1.30
Return: 0%
Stop Target: None
Action: We believe shares could make a run past $25 and challenge its 52-week high of $26.26. Support is at $20.
Opko Health (OPK, $9.40, down $0.06)
April 10 calls (OPK140419C00010000, $0.60, down $0.05)
Entry Price: $0.65 (3/4/2014)
Exit Target: $1.30
Return: -8%
Stop Target: None
Action: We are expecting a surge past $10 over the next few weeks and a close above $9.50 would be bullish. Support is at $9.
Ingersoll-Rand (IR, $60.97, down $0.26)
April 62.50 calls (IR140419C00062500, $1.00, down $0.15)
Entry Price: $0.90 (2/27/2014)
Exit Target: $1.80
Return: 11%
Stop Target: 90 cents
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 $59 serving as backup.
Discovery Laboratories (DSCO, $2.65, down $0.05)
April 2 calls (DSCO140419C00002000, $0.85, flat)
Entry Price: $0.65 (2/24/2014)
Exit Target: $1.00-$1.30
Return: 31%
Stop Target: 60 cents
Action: Shares continue to climb higher after the break out of the symmetrical triangle but Friday’s close felt bearish. Support is at $2.50 but we are still looking for shares to test $3.
World Wrestling Federation (WWE, $27.10, up $0.86)
March 30 calls (WWE140322C00030000, $0.85, up $0.25)
Entry Price: $0.40 (2/18/2014)
Exit Target: $0.80 (3/5/14 closed half @ $0.80)
Return: 106%
Stop Target: 40 cents, raise to 50 cents (Hard Stop on other half)
Action: Shares continued their surge higher following our midday update and traded to a peak of $27.43. The options reached a peak of 95 cents. We set a Hard Stop at 40 cents yesterday and we have raised it by a dime to 50 cents on the other half.
Kodiak Oil & Gas (KOG, $12.14, down $0.30)
June 13 calls (KOG140621C00013000, $0.80, down $0.10)
Entry Price: $0.70 (2/13/2014)
Exit Target: $1.40
Return: 14%
Stop Target: None
Action: We closed the March 12 calls for a slight profit as support at $12 was tested yesterday. We still like the June 13 call options as we believe the company is a takeover candidate that could get a bid north of $15. Resistance is at $12.50.
Ariad Pharmaceuticals (ARIA, $8.58, down $0.17)
March 10 calls (ARIA140322C00010000, $0.20, down $0.10)
Entry Price: $0.95 (1/28/2014)
Exit Target: $1.90
Return: -79%
Stop Target: None
May 11 calls (ARIA140517C00011000, $0.75, flat)
Entry Price: $1.05 (1/28/2014)
Exit Target: $2.10
Return: -29%
Stop Target: None
Action: We are expecting a pop to $10 over the next few weeks but we are running out of time with the March calls. 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, $14.39, up $0.22)
April 19 calls (EXAS140419C00019000, $0.60, up $0.10)
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 $12.50.
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.
Valero Energy (VLO, $50.28, up $1.06)
April 52.50 calls (VLO140419C00052500, $1.35, up $0.35)
Thoughts: The 50-day MA is at $49.62 but there is risk to $46. We could go long if shares clear $49.75.
S&P 500 Spiders (SPY, $187.75, up $0.17)
March 190 calls (SPY140322C00190000, $0.67, up $0.01)
Thoughts: We like these calls if the S&P clears and holds 1,875.
H&R Block (HRB, $31.13, down $0.44)
April 33 calls (HRB140419C00033000, $0.65, down $0.20)
Thoughts: Earnings are due out today
Philip Morris (PM, $81.07, down $0.51)
April 77.50 puts (PM140419C00077500, $0.80, up $0.10)
Thoughts: We said a close above $80 could lead to $82.50. A back test to $75 could be coming afterwards and this could be setting up for a decent strangle trade.
Krispy Kreme Doughnuts (KKD, $18.57, down $0.55)
April 17 puts (KKD140419P00017000, $0.65, up $0.10)
May 17 puts (KKD140517P00017000, $0.85, up $0.10)
Thoughts: Resistance is at $20. We could go short on a close below $18.
Verizon (VZ, $47.38, down $0.52)
April 45 puts (VZ140419P00045000, $0.50, up $0.05)
Thoughts: If shares clear $48.50 we could go long as they could reach $50-$52. If resistance holds, we could go short at some point.
iShares Russell 2000 (IWM, $119.76, down $0.07)
April 115 puts (IWM140419P00115000, $1.45, flat)
Thoughts: We could go short on a drop below $117.50
Alexza Pharmaceuticals (ALXA, $5.53, down $0.02)
June 6 calls (ALXA140621C00006000, $0.40, flat)
Thoughts: These options look like a bargain if shares make a run past $6.
