Weekly Wrap for 6/15/2014

11:30pm (EST)


1.  Market Summary

2. Sigma Designs (SIGM) Could be Turning the Corner

3. Earnings

4. Weekly Wrap Portfolio Update 

5.  Week Ahead


(To view the charts, please log into the Members Area and go to the Weekly Wrap Premium section.)


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1.  Market Summary 

The market continued its winning ways to start the week as the bulls pushed towards fresh all-time highs.  The Dow came within 30 points of triggering 17,000 while the S&P 500 reached an all-time intraday peak of 1,955.55.

Tuesday’s sloppy action favored the bears for much of the session before the bulls made a late day run to get the split.

Wednesday’s action was dominated by the bears as they snapped a 5-session skid while the VIX closed above 11.50.  It would prove to be a warning sign.

The bulls were defenseless on Thursday as they tried to hold fresh support that served as prior resistance but gave back more ground.  The bears won their second-straight session for the first time since mid-May as they made a push towards the second levels of support.  The VIX closed right at 12.50 and left no clues as to how Friday’s action would play out.

Needless to say, Friday was an important day for both sides as the battle over support and resistance would be important going into the weekend. (read more…)

The Dow added 41 points, or 0.3%, to finish at 16,775 on Friday.  The blue-chips traded to an all-time intraday high of 16,970.17 to start the week before going out at 16,943.  There was a dip to 16,897 on Tuesday but the bulls fought back to get a 3-point win by the closing bell.  Wednesday’s triple-digit pullback to 16,843 held support at 16,800 but I talked about risk to 16,600 on dips below this level.  Thursday’s drop to 16,703 ended with a close at 16,734 before Friday’s slight rebound.  On Tuesday morning (6/10) I said there could be a push to 17,250-17,300 on an overshoot past 17,000 but the second wave of support needs to hold.


The S&P 500 gained 6 points, or 0.3%, to end at 1,936 ahead of the weekend.  The index traded to an all-time intraday high of 1,955.55 on Monday before settling at 1,951.  Tuesday’s back test to 1,944 ended with a 1-point loss.  I talked about 1,940 holding or there would be risk to 1,925 and Wednesday’s low reached 1,940.08 with a close back below 1,950 to 1,943.  Thursday’s bottom touched 1,925.78 before a rebound to 1,930.  The bears pushed 1,927 on Friday.  I said 1,975-2,000 could trigger on continued closes above 1,950 and the next up or down 15 points from here could determine the next trend for the month.


The Nasdaq advanced 13 points, or 0.3%, to end at 4,310 to end the week.  Tech traded to 4,346 and closed 10 points off this level to open the week.  Tuesday’s trip to 4,319 ended in a 2-point victory to 4,338 before a drop to 4,315 and a 7-point loss on Wednesday.  I talked about risk to 4,275-4,250 on a close back below 4,300 and Thursday’s low reached 4,284 with the bears holding 4,297 by the bell.  Friday’s dip to 4,288 was minor and the close back above 4,300 was bullish.  The 52-week high of 4,371.71 from early March is still in play with fluff up to 4,400-4,500.


The Russell 2000 popped 3 points higher, or 0.3%, to close at 1,162 on Friday.  The small-caps reached a peak of 1,179 and cleared 1,175 with Monday’s push past resistance.  However, Tuesday’s back test to 1,166 and close at 1,172 suggested the bulls weren’t quite ready to push 1,200 again.  Wednesday’s low reached 1,161 with support at 1,160 holding.  I cautioned a close back below this level could lead to 1,150 and the bears clawed at 1,156 and 1,154 to end the week.  A close back below 1,150 will likely lead to 1,125-1,120.


The S&P 500 Volatility Index ($VIX, 12.18, down 0.38) came into the week at 10.73 but traded higher on Monday’s record push to all time highs before closing at 11.15.  Tuesday’s low of 10.93 and finish at 10.99 might have suggested a short-term top was in and I talked about 11.50 and 12.50 coming into play on a further back test by the bears.  Wednesday’s close was at 11.60 and Thursday’s 12.56.  From Thursday morning’s update:

“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.”

I have talked about the possibility of a single-digit VIX all year long but again, it is too early to tell if it happens sooner rather than later.  This week could help in determining that time frame and a close above 13.50 would be very bearish over the near-term.


Wall Street has been playing catch up in June as many of the traders that took extended vacations in May try to show some kind of positive return.  However, the end of the week pullback followed by Friday’s slight rebound is showing just how fragile the market really is.

The Dow fell triple-digits mid-week for the first time since May 20 and followed it with a triple-digit loss on Thursday.  It was the first back-to-back triple-digits losses for the blue-chips since May 14-15.

I talked about the tight trading throughout May and reminded readers that a big breakout (or breakdown) would come once resolved.  The VIX gave the BEST clues the bulls would win the war.

The “fluff targets”  I gave in late December finally triggered after a close run in March.  Here were my comments on 12/29/13:

“There is the possibility of the bulls pushing (Dow) 16,800-17,000 by late January…

The (S&P 500) index made a run to 1,844.89 at the opening but fell short of my 1,850 fluff target.  If cleared, there could be a push to 1,875-1,900…

If cleared, the bulls could push Nasdaq 4,400-4,500…

If the bulls can clear this level (1,175) a run past 1,200 could come…(END)

The S&P 500 came into the year at 1,848.  The yearend price targets from the top brokerage firms ranged from 1900-1,975 from my research in February.

Goldman Sachs (GS, $186.89, down $0.07) was at 1,900 and penciled-in a 3% move.  An analyst from Bank of America (BAC, $15.44, up $0.02) estimated the S&P 500 might trigger 2,000.  I found a total of 10 firms in the 1,900 range.

Morgan Stanley (MS, $31.59, down $0.14) tried to be smooth by guessing 2014 as a yearend target along with Oppenheimer.  This is a 9% gain for the year.  The high estimate came from an analyst out of JP Morgan (JPM, $57.04, flat) as they penciled-in 2075, a move of 12%.

I went on record in the February 24 Weekly Wrap with my yearend targets and said the S&P could make a run at 2,100.  Obviously, there could be upgrades to yearend targets as some of the ten I found in the 1,900’s are upping their yearend price targets.  (I have also predicted Dow 19,000; Nasdaq 4,800-5,000; and Russell 1,400 – providing the major MA’s hold up and there isn’t a war or conflict involving the US).

The famous pros that have flip-flopped are now back on the bulls bandwagon.  Cramer, Gartman, Tepper, Icahn and a host of others having said they were growing extremely bearish over the past few months and into May.  Now, all of a sudden, they are/ were cheerleading the higher highs.  Cramer urged caution again on Thursday after hyping up the market Monday on fresh highs.

I have never met them duds and like their personalities but don’t get me wrong, the divergence and the chart work they didn’t do caused them to panic.  That and they don’t follow the VIX.

The divergence I talked about in March and April is clear in this monthly chart for the indexes that show the gains and losses.



The Monday/ Friday closes have been bullish since mid-April as you will see from the charts below.  The Dow is up the past 8-straight Monday’s and will be looking for 9-in-a-row to start the week.  The Monday ahead of June expiration has been bearish in recent years as the blue-chips have fallen 10 of the past 16 but hopefully they can keep their Friday momentum.

The charts below show how Monday’s have performed this year.



The Friday closes have also been bullish since early May as well with the blue-chips finishing higher 6-straight sessions.  The charts below show the Friday movements for 2014.



Tuesday’s have been less bullish in recent weeks as the Fed continues to wind down their QE program.  I’ve mentioned banks have used the extra funds to put to other uses instead of making loans but they are running out of options as the printing presses wind down.  The charts below show the action on Tuesday’s for 2013 and 2014.




The smart suit-and-ties have said all year long this is a stock picker’s market and that really is the truth.  There are opportunities to go long AND short but the put options trades must be well timed and fundamentals must be breaking down.  Chart work has been important to help keep emotions in check and to find the best trades.

While June has been a fun ride, during mid-term election years it has not been too kind to the bulls as it is the worst month of the year for the Dow and S&P, historically.  However, the Nasdaq and Russell 2000 can rally into June during their 8-month bullish cycle that starts in November despite it being the 10th worst month for the 2 indexes.

I have talked about a continued rally into mid-June and there are a number of events this week that could help or hinder this prediction.

The Fed will host a 2-day meeting this week and it’s also June option expiration week.  Additionally, I am not a geopolitical expert and hate writing about politics but I mentioned Friday there could be US air strikes in Iraq and this was echoed throughout the weekend.  Time is running short and US ships are “in the area” to give the President “options”.

The market can go up in the face of war but usually suffers a serious pullback if our country gets involved.  One of my headlines to start the month was that June could be volatile.  There is still a chance the bulls push higher highs but they need a continued rebound to start the week.

If the second layers of support I have mentioned start to crack, there is a good chance the 50-day and 100-day MA’s come back into play.

Wall Street likes to label the time from now into August as the summer doldrums but I have a feeling it will be everything but boring this week and this summer.

Ahead of the open, futures look like this:  Dow (-44); S&P 500 (-6); Nasdaq (-11).


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2. Sigma Designs (SIGM) Could be Turning the Corner  

By Michael Bryant


Key of Technicals Used In Following Article


Sigma Designs (SIGM, $4.34, down $0.15) has surged nearly 29% in the last five days. But the stock is still down 73% in the last five years. Has this semiconductor maker turned the corner and is it a good time to buy?


Born in 1955, founder Thinh Q. Tran received a Bachelors of Science in Electrical Engineering from the University of Wisconsin in 1974 and a Masters of Science in Electrical Engineering from Stanford University in 1975. Tran worked for as a staff engineer ofTrilogy Systems (now bankrupt) and later president of product development at Amdahl Corporation (now a subsidiary of Fujitsu). Both specialized in the IBM-compatible mainframe computer market. In February 1982, Tran and several engineers got together and tinkered with a PC add-on memory board in one of their homes as a hobby. But realizing this could have a lot of business potential, they displayed the boards at the annual PC Fair in San Francisco. The boards became popular, selling for $500 to $600 a piece, and Sigma Designs was formed. Tran left Amdahl in October to focus on the company. At the time, sales had grown to $125,000 a month.  By June 1984, monthly sales had skyrocketed to $800,000. Tran served as its president and chief executive officer from its founding to present.

On May 15, 1986, the company went public, listing its shares on NASDAQ Capital Market stock exchange under the ticker SIGM. The company’s stock reached as high as $3.25 on its first trading day, but closed as $3.12.


Over the next decade, three big events further strengthened the company. In September 2002, the company, already a leader in IP video streaming, combined its technologies with that of Thirdspace, a broadband TV enablement company. They hoped to improve the quality of streaming video solutions over broadband IP networks and gain market share. Then in 2003, a prototype of a Blu-ray disk was released in Japan. Sigma Design’s products were used in many of the first Blu-ray players. Lastly in late 2007, the company released the first 1080p capable media player chipset, the SMP863x. The 1080p is a set of HDTV high-definition video modes. It led to a series of stand-alone media players, starting in 2008.

The company also made three acquisitions in 2008 and 2009.

  • On February 8, 2008, it acquired Canadian manufacturer Gennum’s VXP image processing business, whose technology was used in video projectors. In January 2011, Sigma announced it was adding the VXP technology to its SMP8910 system-on-chip.
  • On December 18, 2008, it acquired California-based Zensys, a company that provides the wireless mesh networking technology Z-Wave.
  • On October 14, 2009, it purchased Israeli home-networking chip maker CopperGate for $160 million in cash and stock. CopperGate technologies included HomePNA and HomePlug AV networking technologies.       Sigma has since updated HomePlug AV to include ClearPath, an award-winning technology which significantly increases throughput.

Sigma Designs is a fabless semiconductor company, and thus it does not own or operate a fabrication or manufacturing facility. Instead, it depends on independent manufacturers to manufacture, assemble and test its products. It currently relies on Taiwan Semiconductor Manufacturing (TSM) and, to a lesser extent, United Microelectronics (UMC), private Grace Semiconductors, and NXP Semiconductors (NXPI). Further, the company uses a single wafer foundry to manufacture a substantial majority of its products and to a lesser extent two other foundries including NXP. This could pose significant risk if something happened to the main wafer foundry.

The company sells its products into four primary target markets: the DTV market, home networking market, set-top box market, and home control market. It also licenses its technology to third parties.

The DTV market includes all products that are sold into digital televisions or “SmartTVs” and similar markets using chipset products that are designed for video post-processing. It includes its VXP brand video image processor chipsets that provide video output or input for professional and consumer applications, as well as address applications, including audio/video receivers, broadcast studios, and digital cinema. This also includes its media processor SoC product line which consists of platforms that are based on integrated chips, embedded software, and hardware reference designs.

Its home networking product line consists of communication devices that use a standard protocol to connect equipment inside the home and stream IP-based video and audio, VoIP, or data through wired or wireless connectivity. It also includes chipsets such as HomePNA, HomePlug AV, and standards that provide connectivity solutions between various home entertainment products and incoming video streams.

Its set-top box market includes all set-top box products delivering IP streaming video, including hybrid versions of these products. This market is primarily served with its media processor products.

The home control market includes all gateways and interconnected appliances that provide home monitoring and control for the management of security, safety, energy, health, and convenience. Its control product line consists of its wireless Z-Wave modules and chipsets, which consist of wireless transceiver devices along with a mesh networking protocol.

The “license and other” market includes other products and services, including technology licenses, software development kits, engineering support services for hardware and software, engineering development for customization of chipsets, and other accessories.


Bad news was that Matthews International replaced Sigma Designs in the S&P SmallCap 600 after the close of trading on Friday, May 30th. That means funds that track the S&P SmallCap 600 may be forced to sell their holdings.

But then four pieces of good news followed. On June 2nd, advanced networking supplier Tecom selected Sigma Designs’ CG5200 family of chipsets for their HD3000 and HD3010 power line MIMO-based products.

Also on June 2nd, Prime Electronics and Satellites, a leading manufacturer of state of the art set top boxes selected Sigma Designs’ CG5200 family of chipsets for their newest set top box design. With increased demands for bandwidth, quality of service, remote management, and coverage, Prime wanted to use technology to deliver the most reliable and stable Multi-screen, Home Networking services possible by embedding Sigma’s CG5200 directly into their set top box.

On June 11th, the company announced Edge Electronics as an authorized distributor of Z-Wave development kits and components. The explosion of the home control market has created an enormous demand for Z-Wave, the market-leading technology in the home control field.

Also on June 11th after the bell, the company reported results for the 1st quarter ending May 3rd.

  • Revenue was $36.9 million, down 4.2% from $38.5 million reported in the 4th quarter and down 29.8% from $52.5 million reported for the same quarter a year ago.
  • GAAP net loss was $9.9 million, or -$0.29 per share, down from a net income of $1.3 million, or $0.04 per share, for the 4th quarter and down from a net loss of $4.5 million, or -$0.13 per share, for the same period a year ago.
  • Non-GAAP net loss was $5.0 million, or -$0.14 per share, down from a net loss of $4.5 million, or -$0.13 per share, for the 4th quarter and down from a net income of $0.3 million, or $0.01 per share, for the same period a year ago.

Despite the seemingly disappointing numbers, they actually beat analysts’ estimates. The net loss of 14 cents was better than the expected net loss of 15 cents. Thus, shares surged 18% on Thursday, June 12th. Revenue was in-line with analysts’ estimates. But we think the big driver is that analysts expect revenue and earnings to rise over the next two quarters, (7/14) and (10/14) in the graphs below. The next earnings report is August 27th after the bell. Analysts estimate the company will earn -$0.09 a share on $41.8 million.


Revenue seems to peak for the year in the 2nd or 3rd quarters. Thus, revenue will likely move up in the next two quarters. And it seems that the loss (difference in revenue and total expense) is getting smaller. Earnings seem to peak for the year in the 3rd or 4th quarters. The price (light blue graph in the background) seems to rise when revenue rises. Thus, we can expect the stock price to rise.

The company has many competitors. Principal competitors include:

  • Broadcom (BRCM), Taiwan-based Mediatek (2454.TW), MStar Semiconductor (3697.TT), RealTek (2379.TW), and ST Microelectronics (STM) for its media processors
  • Broadcom (BRCM), Marvell Technology Group (MRVL), and Qualcomm (QCOM) for its HPNA, HPAV, and products
  • Texas Instruments (TXN), Freescale Semiconductors (FSL), and Silicon Laboratories (SLAB) for its Z-Wave products
  • Pixelworks (PXLW) and Marvell Technology Group (MRVL) for its VXP products


At $4.34, the stock is below its low target of $5.50 made by the 2 analyst recorded by Thomson/First Call. Its high target is $9.00. Thus, the median and mean targets are $7.25. Using a scale of 1.0 as a strong buy and 5.0 as a sell, the average rating of the stock was 2.0, up from 2.5 a week ago.

  Current Month Last Month Two Months Ago Three Months Ago
Strong Buy 0 0 0 0
Buy 1 1 1 1
Hold 1 1 1 1
Underperform 0 0 0 0
Sell 0 0 0 0


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3.  Earnings  

The companies in BOLD, we are looking at as possible trades and we may list call or put options on them in our Daily Newsletter (subscription link).  If they become official recommendations, we sent out Trade Alerts or include them in our 9am and 1pm updates that come out during the week.



Ahead of the open:  Butler National (BUKS), Layne Christensen (LAYN)

After the close:  Amira Nature Foods (ANFI), Korn/Ferry International (KFY), Oxygen Biotherapeutics (OXBT), WPCS International (WPCS)



Ahead of the open:  FactSet Research Systems (FDS), GlobalTech Appliances (GAI), John Wiley & Sons (JW.A/B), Motorcar Parts of America (MPAA), Nevada Gold & Casinos (UWN), Yingli Green Energy (YGE)

After the close:  Adobe Systems (ADBE), Bob Evans Farms (BOBE), Ecology & Environment (EEI), L & L Energy (LLEN), La-Z-Boy (LZB), NeoPhotonics Corporation (NPTN)



Ahead of the open:  Actuant (ATU), Crown Crafts (CRWS), FedEx (FDX)

After the close:  China Cord Blood (CO), Clarcor (CLC), Jabil Circuit (JBL), Red Hat (RHT), Steelcase (SCS)



Ahead of the open: BlackBerry (BBRY), IHS (IHS), Kroger (KR), Methode Electronics (MEI), Pier 1 Imports (PIR), Rite Aid (RAD), Scholastic (SCHL)

After the close:  Chimera Investment (CIM), Oracle (ORCL), Smith & Wesson Holding (SWHC), Tibco Software (TIBX)



Ahead of the open:  Carmax (KMX), Darden Restaurants (DRI)

After the close:  Dataram (DRAM), Impac Commercial Holdings (ICH)


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4.  Weekly Wrap Covered Call Portfolio Update (Closing prices as of 5/30/14)

The Weekly Wrap Closed Trade Track Record for 2014 is 15-3, or 82% win rate (100-10, or 91% win rate, overall since the start of 2011)


Limelight Networks (LLNW, $2.83, down $0.09) stock trades 

Original Entry Price:  $3.00 (6/9/14)

Lowered Price from Selling Options:  None

Exit Target:  $5

Return:  -6%

Stop Target:  None


Original Entry Price:  $2.50 (6/4/14)

Lowered Price from Selling Options:  None

Exit Target:  $5

Return:  13%

Stop Target:  $2.70 (Stop Limit)

Action: Shares traded to a high of $3.19 to start the week as bandwagon jumpers stormed in.

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 last week.  I was hoping shares would go unnoticed by the suit-and-ties and perhaps they have been reading my updates but I have a much higher target for Limelight.  I have said shares could make a run to $5, possibly $8 if the takeover talk heats up over the summer.

I mentioned support at $2.75 could be tested following the close back below $3 on Thursday and Friday’s low was $2.75.  I have set a Stop Limit of $2.70 on the first stock trade to take profits and don’t mind leaving some money on the table as I do believe a takeover could happen this year.

Apple, Google, Facebook, Microsoft and Verizon, just to name a few, could take a look at this company as it looks to build out its CDN network.  Limelight has a market cap of just $280 million and would be a great acquisition target for Apple.  The market cap was just $214 million when I started recommending shares at the end of May at $2.16.


Hercules Offshore (HERO, $4.83, up $0.04) 

July 4.50 calls (HERO140719C00004500, $0.45, flat)

Original Entry Price:  $4.50 (5/30/14)

Lowered Price from Selling Options:  $4.20

Exit Target:  $7

Return:  15%

Stop Target:  $2

Action:  Hercules traded to a high of $4.83 on Thursday and Friday.  A run to $5-$6 could be in the works over the summer.  Support is at $4.60 and the 100-day MA followed by $4.40.


Limelight Networks (LLNW, $2.83, down $0.09) 

Sold June 2 calls (LLNW140621C00002000, $0.85, down $0.10)

Original Entry Price:  $2.16 (5/30/14)

Lowered Price from Selling Options:  $1.76

Exit Target:  $3

Return:  61%

Stop Target:  None

Action:  The June 2 calls expire this Friday and the position will likely be “called away”.  If shares are called away at $2 the return will be 14%.


Coca-Cola (KO, $40.37, down $0.05) strangle option trade

June 41 calls (KO140621C00041000, $0.10, flat)

Original Entry Price:  $0.60 (4/24/14)

Exit Target:  $1.20-$1.50

Return:  -83%

Stop Target:  None

Action:  Shares finally cleared $41 to start the week after trading to a high of $41.15 on Tuesday.  However, KO pulled back throughout the week and closed back below resistance after going ex-dividend Friday.  With 5 days left in the trade, these calls will likely expire if left open.

There is a dime left in premium so close the trade on Monday’s open.  I learned a valuable lesson trading shares of Coca-Cola as the low beta and tight trading throughout May punished the premiums.  The trade is at down -75%, overall.


Kodiak Oil & Gas (KOG, $13.79, up $0.15) Stock Trade

Original Entry Price:  $13.25 (4/14/14)

Lowered Price from Selling Options:  $13.25

Exit Target:  $15

Return:  4%

Stop Target:  $13.35 (Stop Limit)


September 15 calls (KOG140920C00015000, $0.65, up $0.05) LEAP Trade

Original Entry Price:  $.0.72 (4/24/14)

Exit Target:  $1.45

Return:  -10%

Stop Target:  None

Action:  Shares traded to $13.84 last week and made a nice recovery off the Friday morning low of $13.47.  A close above $14 would be bullish and get 52-week highs in play.  Support is at $13.50-$13.

I have set a Stop Limit at $13.35 to protect profits on the Stock Trade.  The options have made a sweet comeback but are still slightly lower.


Alexza Pharmaceuticals (ALXA, $4.29, flat) Covered Call Trade

Sold June 6 calls (ALXA140621C00006000, $0.05, flat)

Original Entry Price:  $5.53 (3/4/14)

Lowered Price from Selling Options:  $5.03

Exit Target:  $6+

Return:  -10%

Stop Target:  $3

Action:  The June 6 calls expire this week and I will look at selling July or August call options next week to lower the cost basis of the trade.

Support at $4.20 held after shares tested $4.16 to start the week.  Resistance is at $4.30 and the 50-day MA.


On 3/4/2014 I recommended buying shares at $5.53 and selling the June 6 calls for 50 cents to lower the cost basis to $5.03.


Discovery Laboratories (DSCO, $1.72, flat) Covered Call Trade

Sold June 3 calls (DSCO140621C00003000, $0.05, flat)

Original Entry Price:  $2.42 (1/7/14)

Lowered Price from Selling Options:  $2.02

Exit Target:  $4.50-$5

Return:  -15%

Stop Target:  None

Action:   The June 3 calls expire this week and I will look at selling July or August call options next week to lower the cost basis of the trade.  Support at $1.70 held last week and there is risk to $1.60-$1.50.

A close above $1.85 and the 50-day MA would be bullish for a possible run up to $2.


On 1/7/2014 I recommended buying shares at $2.42 and selling the April 3 calls for 25 cents to lower the cost basis to $2.17.

On 4/30/14 I recommended selling the June 3 calls for 15 cents to lower the cost basis for the trade to $2.02.


Pizza Inn Holdings (PZZI, $6.09, down $0.04) Stock Trade

Original Entry Price:  $8.10 (10/11/13)

Lowered Price from Selling Options/ Dividends:  No options available

Exit Target:  $12+

Return:  -25%

Stop Target:  $5

Action:  Shares traded back above $6 last week

And reached $6.17 on Thursday.  Support is at $6 and the 50-day MA WITH $5.75 serving backup.

The company recently added 10 more units into their mix and now has 160 Pie Five shops opening this year and is expanding rapidly.  I believe this will be a $15-$20 stock in 1-2 years and insiders and mutual funds own nearly 40% of the company.  I have already recommended 2 profitable trades when shares were near $3.


Rambus (RMBS, $13.64, down $0.05)

Original Entry Price:  $17.83 (11/14/11)

Lowered Price from Selling Options:  $16.38

Exit Target:  $18-$20

Return:  -17%

Stop Target:  $10

Action:  Shares traded to a high of $14.11 last Thursday and a close above this level should get $18-$20 in play.  The chart shows the huge drop in late November 2011 from $18 to $7 on a court ruling the company had infringed on certain patents.


Rambus is a current Weekly Wrap holding and I have covered the company’s litigation issues over the years.  The outlook has improved over the past 6 months with profitable quarters and a recent deal with Qualcomm.

Shares are pushing fresh 52-week highs.  Short-term support is at $13.  If you are a new subscriber, I like new positions at these levels but I’m not leveraging down.


On 11/14/2011 I recommended buying shares at $17.83 and selling the December 20 calls for $1.45 to lower the cost basis to $16.38.

Trades on HOLD:  AKS Steel Holding (AKS), DryShips (DRYS), Bebe Stores (BEBE), Vivus (VVUS), Dendreon (DNDN), Galena Biopharma (GALE) LEAP Trade/ Stock Trade, Zynga (ZNGA)


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5.  Week Ahead 

Here is a chart of the events for the week ahead: