9:00am (EST)

The bears made some noise for the second-straight session on Wednesday but once again, the damage was minimal.  The talking heads were blaming the early morning pullback on an upset victory in DC but the smarter traders were watching the geopolitical tensions heighten overseas with Iraq back in the spotlight.

Republican US House Majority Leader, Eric Cantor, lost a Virginia primary election to David Brat, a Tea Party-backed elective that surely has different views on how the zombies should operate.  While it was a big loss for the Republican party to a degree, it is good to see new faces coming to DC with better ideas and energized to do what’s best for the country.  It just means more gridlock down the road.

The Dow declined 102 points, or 0.6%, to end at 16,843 on Wednesday.  The blue-chips traded to a low of 16,821 while holding near-term support at 16,800.  There is additional help at 16,600 but a close below this level would be bearish.  The bulls are looking to trip 17,000 ahead of the weekend.

The S&P 500 sank 7 points, or 0.4%, to settle at 1,943.  The index traded down 1,940.08 and I mentioned yesterday near-term support at 1,940 could be tested on a continued decline.  A close below this level gets 1,925-1,920 back in play and the bears came awfully close yesterday.  The bulls will try to reclaim the 1,950 level by today’s or Friday’s close.

The Nasdaq dropped a 6-pack, or 0.1%, to finish at 4,332.  Tech tested a low of 4,315 shortly after the open but held support at 4,325-4,300.  A close below this level could lead to 4,275-4,250.  The index did make a brief trip into positive territory by a fifth of a point shortly after the midday update before closing in the red.  If the bulls continue to hold 4,300 there is still a good chance they push fresh 52-week peaks in June (or July).

The Russell 2000 pounded the other 6-pack and slipped 0.5% to 1,166 into the close.  The small-caps 1,161 before recovering half their losses and holding support.  I mentioned there was risk to 1,160-1,150 on continued weakness following the close back below 1,175 on Tuesday.  A close above or below these aforementioned could set the tone for next week.

The S&P 500 Volatility Index ($VIX, 11.60, up 0.61) tested 11.50 throughout the day and ended slightly above this level after trading to a high of 11.87.  I said the bulls had wiggle room to 12.50 but a close above this level would favor the bears.  The recent 52-week and multi-year low is at 10.73 so the bulls likely need to hold the 11.50 level by the weekend.  A close in between at 12 would be a coin-flip for next week.

Despite Wednesday’s pullback, I was able to lock-in profits on 2 more winners for the portfolio.  I have been on a hot streak since late April and while I don’t say this to toot my horn, it has been important to stay positive (and confident) following the incredibly hard trading range in May.  I said there would be a big breakout (or breakdown) once the war played out and the bulls have been the beneficiary.  I waited for the clues to confirm the breakout in late April and it has paid off in spades.

There are still a few put option trades that are still in the mix and one of them, BBBY, has shown a nice comeback this week.

The suit-and-ties were calling yesterday’s pullback a selloff and were pushing the panic button but I said to remain calm and relaxed in May.  I have outlined some of the clues for when a possible top would be in but I believe the bulls still have a few more good days left in them as I have called for this rally through mid-June.

Despite my fluff targets triggering, picking EXACT market tops and bottoms are a little more difficult and why the slick talking pros have no idea what the heck is going on.  The charts tell a better story of where a stock or the market is headed than the flip-flopping talking heads and I’m excited about how the rest of the week might play out.

 

Closed Trades for 2014: 50-29 – the Weekly Wrap is 15-3 (83%) for 2014 (100-10, or 91% win rate, since 2011) and is designed for traders that want to use options with less risk.  All trades are dated and time stamped so new subscribers can look at our past history to see how the trades have played out.

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 trades or “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 12pm-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.

Kodiak Oil & Gas (KOG, $13.41, up $0.33)

July 14 calls (KOG140721C00014000, $0.40, up $0.10)

Entry Price:  $0.35 (6/11/2014)
Exit Target:  $0.70
Return:  14%
Stop Target:  None

Action:  Shares recently cleared the 50-day MA and the close above $13 was bullish.  The stock could be setting up for a run to $15 that would easily double or triple these call options.  They would be worth at least 70 cents if $14.70 is triggered by mid-July and $1-$1.05 if $15 is reached.

I have recommended this stock along with options over the past few years and a breakout appears to be on the horizon.  Volume in these contracts exceeded 1,100 contracts yesterday.

Hercules Offshore (HERO, $4.66, down $0.01)

October 5 calls (HERO141018C00005000, $0.35, flat)

Entry Price:  $0.35 (6/11/2014)
Exit Target:  $0.70
Return:  0%
Stop Target:  None

Action:  Shares have cleared the 100-day MA at $4.64 this week and a run to $5-$6 could be in the works over the summer.  I wanted to give the trade plenty of time to play out and why I went 4 months out.  Open Interest is over 6,000 contracts.

Imax (IMAX, $26.92, up $0.39)

September 28 calls (IMAX140920C00028000, $1.00, up $0.10)

Entry Price:  $0.60 (6/5/2014)
Exit Target:  $1.20
Return:  67%
Stop Target:  None

Action:  The close above the 50-day MA was bullish and should get $28-$30 in play.  Yesterday’s high was $27.93.  Support is at $25.50.

Limelight Networks (LLNW, $2.98, down $0.04)

September 3 calls (LLNW140920C00003000, $0.35, flat)

Entry Price:  $0.15 (6/4/2014)
Exit Target:  $0.45
Return:  133%
Stop Target:  None

December 3 calls (LLNW141220C00003000, $0.50, flat)

Entry Price:  $0.20 (6/4/2014)
Exit Target:  $0.60
Return:  150%
Stop Target:  None

Action: Shares tested $3 for much of the session before failing to hold this level into the close.  The low of $2.92 was triggered at the open and I liked how shares stayed steady afterwards.

Roth Capital lifted its Price Target for Limelight Networks to $4.50 from $3 following its recent court win against AKAM.  I have already covered the acquisition appeal of the stock and Captain Obvious echoed those comments with the late day Tuesday comments on the stock.  In any event, it is good to see the suit-and-ties start to jump on board as analyst upgrades are good for a company’s stock.

If shares make a run to $3.50, the return should be 200% for each trade.  A close above $4 would make both calls worth $1 and an even bigger payday.  Support is at $2.75.

Fortinet (FTNT, $23.78, up $0.49)

July 25 calls (FTNT140719C00025000, $0.45, up $0.10)

Entry Price:  $0.25 (6/4/2014)
Exit Target:  $0.50 (closed half @ $0.45 on 6/11/14)
Return:  80%
Stop Target:  25 cents

July 24 calls (FTNT140719C00024000, $0.85, up $0.20)

Entry Price:  $0.45 (5/30/2014)
Exit Target:  $0.90 (closed half @ $0.80 on 6/11/14)
Return:  81%
Stop Target:  50 cents

Action:  I suggested closing half positions in the call options to lock-in profits.  The July 24’s traded to 90 cents and half the trade was closed at 80 cents.  The July 25’s traded to 46 cents and half the trade was closed at 45 cents.

Shares traded to a high of $23.84 yesterday and are still on track for a run to $25 and fresh 52-week highs.  The current 52-week high is at $23.93.  Support is at $22 but moving up.  I have Stop Targets to protect the other halves of the trades but they are not Stop Limit orders, yet.

Twitter (TWTR, $35.54, up $0.17)

January 50 calls 2015 (TWTR150117C00050000, $1.60, up $0.10) LEAP option

Entry Price:  $1.75 (5/8/2014)
Exit Target:  $3.50
Return:  -9%
Stop Target:  None

Action:  Twitter shares reached a peak of $35.xx on Wednesday.  Fresh support is at $35 with $32.50 serving backup.

Other 2014 Portfolio OPEN positions (4):  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 2014 Portfolio link in the Members Area to view ALL open/ closed trades.

iShares Russell 2000 June 103 puts (from May 2014) – continue to hold
McDonald’s July 95 puts (from May 2014) – continue to hold as shares are nearing a close below $100.  Yesterday’s low was $100.51.
Bed, Bath & Beyond – continue to hold as shares could still make a break below $60 by next week.  Wednesday’s low was $60.53.
June 60 puts (from May 2014)
August 55 puts (from May 2014)
Apollo Group – continue to hold
June 25 puts (from April 2014)
August 23 puts (from April 2014)