1:15pm (EST)
We are still trying to play catch up to the hour of sleep we lost Saturday night after the clocks in the US were moved forward. Alaska and Arizona are the 2 states excluded but we didn’t mind as it signals Spring is just around the corner and the weather is getting warmer.
Our chart work from the weekend showed all 4 of the major indexes at the top of their upper price channels and with global markets and futures down, we figured the stigma would carry over here at home.
If you haven’t logged into our Members Area to review the chart work then please do so at some point today. It takes us hours to do the breakdowns but you can get a brief snapshot of the market in minutes by checking them out. While we do all the homework, we still want you to understand the why’s, how’s, and what if’s on how we see the market.
We have been long call options and stocks for much of 2014 and the majority of 2013 but we do have some insurance in case there is a severe pullback over the next 2 weeks. We are in the process of winding down our March trades from January and February and we will be in great shape to play the market’s next major move.
While it is still too early to “load-up” on our next batch of trades into April or May, we do see plenty of opportunities ahead. These trades will likely be short in nature as we will try to hit singles with near-term options and lock-in profits when we can.
If we had to close our eyes and guess where the market would be, we mentioned Monday morning weakness could lead to Dow 16,350; S&P 1,870; Nasdaq 4,325-4,300; and Russell 1,195. These are the first waves of support we mentioned to watch for this morning and today’s close will be important and could be a good tell on how the week unfolds.
With the indexes at or near all-time highs, short-term support can be shaky at best and longer-term price targets can seem out of reach. However, the chart work we do is the road map to our success as it keeps our emotions in check and avoids the traps of trading in a chopping or range bound market.
As we make the turn, the Dow is down 72 points to 16,380 while the S&P 500 is lower by 5 points to 1,872. The Nasdaq is off a 12-pack to 4,323 and the Russell 2000 is declining a point to 1,202. The S&P 500 Volatility Index ($VIX, 14.57, up 0.46) is testing 15. Remember, no flinching until 17.50 triggers.
We have a New Trade and we have raised our Stop Limits and Hard Stops on our current trades. We could have additional Trade Alerts into the closing bell stay so locked-and-loaded or follow us on Twitter to know the instant we are taking action.
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.
1:15pm (EST)
New Trade
Verizon (VZ, $46.74, down $0.41)
Buy to OPEN April 45 puts (VZ140419P00045000, $0.62, up $0.12)
Action: We believe shares could test $40 over the longer-term and fall below $45 over the near-term.
These options also trade WEEKLY so make sure you pick the right expiration date and the “regular” April expiration date of 4/19.
Current Trades
Aruba Networks (ARUN, $22.02, up $0.19)
April 23 calls (ARUN140419C00023000, $0.80, flat)
Entry Price: $0.65 (3/5/2014)
Exit Target: $1.30
Return: 23%
Stop Target: 65 cents (Stop Limit)
Action: We have set a Stop Limit order at 65 cents in case shares slip from here.
We believe shares could make a run past $25 and challenge its 52-week high of $26.26 on a close above $23.50. Support is at $20.50. If shares slip today we could close the trade for a slight profit but we are looking for support to hold.
Opko Health (OPK, $9.22, up $0.03)
April 10 calls (OPK140419C00010000, $0.50, flat)
Entry Price: $0.65 (3/4/2014)
Exit Target: $1.30
Return: -23%
Stop Target: None
Action: Resistance remains at $9.50-$10 and a close above the latter would be super bullish for a run to $12-$13 on short-covering. Support is at $9-$8.75.
Ingersoll-Rand (IR, $61.05, down $0.89)
April 62.50 calls (IR140419C00062500, $1.05, down $0.25)
Entry Price: $0.90 (2/27/2014)
Exit Target: $1.80
Return: 17%
Stop Target: 90 cents, raise to 95 cents (Hard Stop)
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. We have a Hard Stop at 90 cents that we have raised by a nickel to 95 cents.
Discovery Laboratories (DSCO, $2.55, down $0.05)
April 2 calls (DSCO140419C00002000, $0.70, down $0.10)
Entry Price: $0.65 (2/24/2014)
Exit Target: $1.00-$1.30
Return: 8%
Stop Target: 65 cents (Hard Stop)
Action: We have a Hard Stop on these options at 65 cents and today’s low has been 67 cents. Any further weakness or a break below $2.50 will likely force us out of this trade.
World Wrestling Federation (WWE, $29.43, down $0.21)
March 30 calls (WWE140322C00030000, $1.70, down $0.15)
Entry Price: $0.40 (2/18/2014)
Exit Target: $1.60, raise to $3 (3/5/14 closed half @ $0.80, 3/6/14 closed a quarter at $1.80)
Return: 219%
Stop Target: $1.20, raise to $1.45 (Hard Stop on remaining quarter)
Action: Set limit orders to exit at $3 or better on the last quarter position.
Near-term support is at $28 and we will likely get stopped out of the remaining quarter position on a drop below this level. Shares have traded down to $28.82 today and we have raised our Hard Stop to $1.45 on the remaining quarter position.
Kodiak Oil & Gas (KOG, $11.72, down $0.33)
June 13 calls (KOG140621C00013000, $0.60, down $0.10)
Entry Price: $0.70 (2/13/2014)
Exit Target: $1.40
Return: -14%
Stop Target: None
Action: We believe the company is a takeover candidate that could get a bid north of $15. Resistance is at $12.50. Support is at $11.75 on a close below $12.
Exact Sciences (EXAS, $13.60, down $0.12)
April 19 calls (EXAS140419C00019000, $0.50, flat)
Entry Price: $0.88 (1/22/2014)
Exit Target: $1.75
Return: -43%
Stop Target: None
Action: Support is at $13. Resistance is at $14.50 and a move above this level should get us back near even.
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 (6): 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 mkh jb√ 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
Ariad Pharmaceuticals March 10 calls (from January 3014)
May 11 calls (from January 3014)
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 in the morning.
