The market is trading in another tight range today as the bulls and bears fight over fresh support and resistance levels.
I have talked about a possible trading range developing into 2Q earnings season as June winds down and Wall Street looks ahead to the July fireworks.
As far as the off cycle earnings, Walgreen (WAG, $73.24, down $0.49) shares are trending lower after missing analysts expectations. The company has now missed the suit-and-ties estimates in 3 of the past 5 quarters.
I thought about a possible put option trade as I noticed the weakness in the stock after watching CVS Caremark (CVS, $75.84, down $0.48) start to fade last Friday.
The Walgreen July 72.50 puts (WAG140719P00072500, $1.85, up $0.17) could have been used to play the test to $70 but these options were expensive for an earnings trade. However, there was a chance for a quick in-and-out trade as the puts did trade to a high of $2.40 after shares tested a low of $71.73.
I like to show these types of option trades because buying overinflated option premiums can be risky. I prefer to trade options for under $1 using near-term options to play these types of moves. The risk/reward is much better but again, earnings trades are tricky.
Heading into the second half of trading, the Dow is down 43 points to 16,893 while the S&P 500 is slipping a point to 1,961after touching fresh all-time highs. The Nasdaq is at 14-year highs as Tech is advancing 15 points to 4,383 and the Russell 2000 is lower by a tenth-point to 1,184.
Subscribers, check the Members Area for the current updates. I could have a New Trade later this afternoon but I’m still doing research. Look for a possible alert into the close, if not, maybe I get in tomorrow as there is no need to rush things in this environment.
Closed Trades for 2014: 60-33 – the Weekly Wrap is 16-4 (80%) for 2014 (101-11, or 90% 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 the 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.
General Motors (GM, $36.83, up $0.16)
September 32 puts (GM140920P00032000, $0.35, down $0.03)
Entry Price: $0.40 (6/23/2014)
Exit Target: $0.80- $1.20
Stop Target: None
Action: I believe shares will make a dramatic back test to $30 if $36-$35 fails to hold. There is risk to $37.50 but I am looking for $36.75-$37 to hold. This trade has 3 months to play out and why I went longer-term the put options.
BlackBerry (BBRY, $9.93, down $0.19)
August 9 calls (BBRY140816C00009000, $1.25, down $0.15)
Entry Price: $0.45 (6/18/2014)
Exit Target: $0.90 (closed half @ 85 cents on 6/19/14, closed quarter @ $1.40 on 6/23/14)
Stop Target: $1.05 (Stop Limit)
Action: Fresh support will try to hold at $10 with backup at $9.50.
Limelight Networks (LLNW, $3.00, down $0.03)
September 3 calls (LLNW140920C00003000, $0.40, flat)
Entry Price: $0.15 (6/4/2014)
Exit Target: $0.45
Stop Target: None
December 3 calls (LLNW141220C00003000, $0.50, flat)
Entry Price: $0.20 (6/4/2014)
Exit Target: $0.60
Stop Target: None
Action: A close above $3.25 should get shares rolling again. Support is at $2.75.
Shares traded to a high of $3.25 last Monday after Tuition Build offered roughly $645 million, or $6.55 a share, for Limelight. The company dismissed the Silicon Valley’s private-equity firm’s offer after basically saying they weren’t experienced enough to run the business.
I have been suggesting a buyout offer would come for Limelight Networks with the company’s cheap market cap and said they would make a very luscious takeover target.
Its litigation issues have decreased dramatically following their recent win against AKAM and they are open to a much bigger marriage.
Other 2014 Portfolio OPEN positions (2): 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 I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly, when the trade closes or if the options expire. Click on the 2014 Portfolio link in the Members Area to view ALL open/ closed trades.
McDonald’s July 95 puts (from May 2014) – continue to hold
August 23 puts (from April 2014) earnings are due out Wednesday – continue to hold