MomentumOptionsTrading.com Weekly Wrap for 7/20/2014

11:00pm (EST)

 

1.  Market Summary

2. Russian Stocks Volatile

3. Earnings

4. Weekly Wrap Portfolio Update 

5.  Week Ahead

 

1.  Market Summary 

The market rebounded on Friday following Thursday’s steep pullback to end the week on a positive note.  The gains were enough to give the bulls the weekly win but the small-caps struggled as volatility has been elevated given the geopolitical events from around the world.

This week promises to be just as exciting with the opening of the flood gates for 2Q earnings.  There are a number of heavy-hitters reporting and I have talked about the possibility of a new trend forming in the back end of July and into August.

While the bears made some noise, it remains to be seen if their clues were a buying opportunity or the real deal of more serious things to come.

The Dow gained 123 points, or 0.7%, to settle at 17,100 on Friday.  The blue-chips traded in positive territory throughout the day and tested a high of 17,113.  The all-time high of 17,151 triggered ahead of Thursday’s drop below 17,000 to 16,966 but the recovery keeps my fluff early June fluff target of 17,200-17,300 in play.  There is the possibility of 17,500-17,600 coming on a “summer rally” if these levels clear as long as 16,900-16,800 holds on any pullbacks.  For the week, the Dow added 156 points, or 0.9%.

DOW72014

The S&P 500 added 20 points, or 1%, to close at 1,978.  The index made a run at 1,980 and held 1,975 following Thursday’s steep drop to 1,955.  The all-time intraday high of 1,985 triggered on July 3rd and a close above this level gets 2,000 in play.  An overshoot could lead to 2,025-2,050. Support is at 1,950 with wiggle room to 1,940-1,935.  The index was higher by 11 points, or 0.5% for the week.

SPX72014

The Nasdaq soared over 68 points, or 1.6%, to finish at 4,432 ahead of the weekend.  Tech easily reclaimed 4,400-4,425 after pushing 4,434.  Resistance at 4,450 was strong throughout the week and a close above this level would be bullish for a run at 4,500-4,600.  The 52-week high of 4,485 was also reached on July 3rd.  Support is at 4,350 and a close below this level would be bearish.  For the week, the Nasdaq advanced 17 points, or 0.4%.

NAS72014

The Russell 2000 surged 18 points, or 1.6%, to end at 1,151.  The small-caps were able to reclaim the 1,150 level following Thursday’s low of 1,131.  I talked about the importance of the bulls holding 1,125 on any close below 1,150 but there is still risk to 1,100 given the current volatility.  The bulls face hurdles at 1,160 and then 1,175-1,180 before 1,200 can be considered again.  The index fell 8 points, or 0.7%, for the week.

RUT72014

The S&P Volatility Index ($VIX, 12.06, down 2.48) fell 17% on Friday after zooming 32% on Thursday.  The VIX closed back below 12.50 and ended near its session low.  The bears pushed a high of 15.38 on Thursday’s drama but failed to hold 15.  This was a very important clue as I said not to flinch until this level was cleared.  The 13.50-15 area is still on “high alert” but if the bulls can get below 11.50 to start the week, higher highs in the market are likely in store.

VIX72014

If you go by last week’s headlines, one would think Wall Street had a terrible week but the resiliency in the bulls showed up again on Friday.  However, it is important to note just how fragile the market is and what could be coming down the road.

Trading in heightened periods of volatility can be tricky because emotions are high.  I mentioned that it is important to wait for all of your “buy” or “sell” signals to trigger before getting into new positions or trading the indexes and for me, that didn’t happen.

While Wall Street was throwing the baby out with the bathwater on Thursday, it was tempting to bet on a down Friday and continued lows into this week.  I watched every single tick into Thursday’s close and studied the charts but with the uptrend lines holding, it looked like a risky bet and why I didn’t suggest new short positions.

The charts (and the VIX), along with the Monday/ Friday closes were signaling a possible trading range last week but it is getting stretched to the upside and downside.  Trading ranges usually lead to the start of a much larger breakout or breakdown coming and the longer the range, the bigger the forthcoming move will be.

The first clue of this was indicative by the 1% moves in the S&P 500 on back-to-back sessions to end the week.  It was the first 1% swings since May 12th and with the Dow making triple-digits moves, they are now showing the volatility that Tech and the small-caps have displayed throughout the year.

The market got good earnings from the Financials and I talked about the group needing to lead the next leg of the market higher.  The Financial Select Sector Spiders (XLF, $22.91, up $0.26) made a run at its early July 3rd 52-week high of $23.07 but failed to breakout.  A close above $23 would be bullish while a drop below $22.50 and the 50-day MA would be bearish.

XLF72014

The Monday / Friday have still been bullish as the blue-chips ended a 2-session Monday losing streak to start last week.  Before the June 30th and June 23rd dips, the index had been up 8-straight Monday’s.

The Dow extended its Friday win streak to 9-straight sessions following the huge rebound ahead of the weekend.  I mentioned the up Thursday ahead of the July 4th Friday holiday would be technically make it 10-straight bullish closings to end the week.

The higher Monday/ Friday closings show that money is continuing to move into the market and not out of despite the “lack of volume” that is so often misunderstood.

It has been awhile since I have covered Gold and Silver and I thought I would touch base on the metals since I do own some of both.  I often talk about buying gold and silver coins but the spot prices can hurt investors so you have to be careful.  The “spot” is what you pay in addition to the current values on Gold and Silver and it is important to not overpay.

Gold ($GOLD, $1,311.40, down $7.30) recently made a run at $1,350 an ounce but made a nasty back test to $1,300 last week.  The major moving averages (MA’s) are all converging just below this level with a “golden cross” forming.  The crossover of the 50-day MA and 200-day MA is usually a bullish signal but any closes below these levels would be bearish.

GOLD72014

Silver ($SILVER, $20.93, down $0.26) tested resistance at $21.50 before fading to test $20.75 last week.  A similar pattern is playing out in the metal with its 50-day MA about to crossover the 100-day MA.  The spot on silver has been outrageously high as the dips into the teens still had dealers and mints trying to get $4-$6 over the price.  They claim “supply and demand” as investors rush out to buy physical coins but it is part of the game.

SILVER72014

The week after July option expiration has seen huge price swings of 3%-4% over the past decade.  I warned coming into the month history may repeat itself as volatility would pick up.  The talking heads say history doesn’t repeat itself it often rhymes but that is nonsense.  History has a way or repeating itself and if there is a 3%-4% move this week I would bet on the bulls.

This will be one the busiest weeks for 2Q earnings with 12 Dow companies reporting and a slew of other A-list names announcing their numbers.  Although betting on the bulls would be my preference, the bears still need to be respected following last week’s growl to lower lows.

I often mention the bulls like to take the stairs higher while the bears like riding the elevator.  The uptrend lines are still intact despite the divergence and volatility from last week.  The time to go short will be on any drops below:  Dow 16,800-16,750: S&P 1,940-1,935; Nasdaq 4,350-4,325; and for the Russell 1,110-1,100.  Otherwise, I remain bullish.

Heading from desk to press, futures look like this:  Dow (-9);  S&P 500 (-1); Nasdaq 100 (-2).

 

= = = = = = = = = = = = = = =

 

2. Russian Stocks Volatile 

By Michael Bryant

 

Key of Technicals Used In Following Article

 

Key_of_Technicals

Disclaimer: All money are converted from Russian Rubles to U.S. Dollars

 

QIWI (QIWI) – Buy at Maximum Fear

Russian stocks were hit hard on Thursday July 17th after Flight MH17, a Boeing 777 Malaysian passenger jet, was shot down in Eastern Ukraine. Speculation is that Pro-Russian rebels were responsible. Further, new sanctions from the United States gave another blow to Russian stocks. The latest U.S. sanctions cut Rosneft and Novatek, Russia’s two leading energy companies, and Gazprombank and VEB, two major banks, from raising medium and long-term financing from U.S. sources. It also froze the U.S. assets of certain companies and individuals and cut off access from doing business with American companies and individuals. European leaders also said they would be drafting a new list of sanctions to be released by the end of July. Then on Saturday, Ukraine stated that Russia is helping the rebels conceal evidence from the plane crash. Further, armed separatists are said to have denied full access to inspectors. On Sunday, it was reported that armed rebels forced emergency workers to hand over all 196 bodies recovered from the crash site and then had them loaded onto refrigerated train cars bound for a rebel-held city. The Russian stock market Micex (MICEXINDEXCF.ME, 1422.53, down 18.10)plunged 2% on Thursday, tumbled another 1.5% Friday, is down 4.8% this month, and down 5.4% since the beginning of this year.

Charta72014

Qiwi was incorporated in Cyprus under the name OE Investments Limited on February 26, 2007 as a new holding company for CJSC Unified Instant Payments System, or OSMP, which was established in 2004.

The company helps consumers and merchants connect more efficiently by providing an network of kiosks and terminals that enable consumers to deposit cash, convert it into a digital form, and send the funds to a virtual wallet, a variety of Visa-branded prepaid cards, or any merchant in the network. Customers can pay bills, add minutes to their mobile phones, purchase transportation and tickets, shop online or at a retail store, buy digital services, or send money to a friend or relative. This is an advantage since many Russians use cash.

On May 3, 2013, the company sold 12.5 million shares to the public for $17 each, at the midpoint of the expected range of $16 to $18, raising $213 million. Shares opened for trading at $17, and closed the day up 0.5%. Only 23% of its outstanding shares were sold in the IPO, valuing the company at $884 million. Revenue for 2012 totaled $293 million, and profit was $30 million. At the time of the IPO, Mail.ru owned 20.6% of the company and Mitsui owned 14.5%.

Qiwi has two principal operating segments: Qiwi Distribution, which primarily generates revenue from payment services offered through kiosks and terminals, and Qiwi Wallet, which generates revenue from payments processed through online electronic user accounts and bank prepaid products, including the prepaid card business. The primary source of revenue in each segment is fees received for processing payments made by consumers to merchants, based on a percentage of the size of transaction. Qiwi refers this as payment volume.

Chartb72014

 

On May 21, 2014, the company reported results for the 1st quarter ending March 31st.

  • Adjusted net revenue was $52.6 million, up 46.0% from the same quarter a year ago.
  • Adjusted EBITDA increased 75% to $29.9 million from the same quarter a year ago.
  • Adjusted net profit increased 72% to $22.0 million, or $0.41 per diluted share, from the same quarter a year ago.
  • Total payment volume increased 20% to $4.2 billion from the same quarter a year ago.

Chartc72014

It seems that revenue reaches a trough in the 1st (3/13, 3/14) or 2nd quarters (6/12). Thus, revenue will likely rise in the 2nd and 3rd quarters. From the year over year graph, revenue seems it may be higher than expected. Earnings seem to be on an uptrend. The company does not report till August 27th before the bell. Analysts expect the company to earn $0.40 per share on $55.75 million in revenue.

chartd72014

charte72014

At $40.22, the stock is between its low target of $33.00 and its median target of $60.00 made by the 11 analysts recorded by Thomson/First Call. Mean target is $54.57, and high target is $70.00 Using a scale of 1.0 as a strong buy and 5.0 as a sell, the average rating of the stock is 2.0, unchanged a week ago.

  Current Month Last Month Two Months Ago Three Months Ago
Strong Buy 3 3 2 2
Buy 3 3 4 4
Hold 3 3 2 2
Underperform 0 0 0 0
Sell 0 0 0 0

 

Yandex N.V. (YDNX) – The Next Google or Bidu?

Speaking of Yandex.Money, another stock an investor should look at is the Google of Russia, search provider Yandex (YNDX, $30.74, up $0.71).

chartf72014

Yandex.News – a news aggregation and information service

  • Yandex.Market – an e-commerce gateway service that provides product information, price comparisons, and consumer-generated reviews of products and online retailers
  • Kinopoisk.ru – a Russian language website for movies, television programs, and celebrities
  • Other specialized search services for images, video, music, theatre, television, weather, jobs, transportation, cars, and real estate.
  • Yandex.Mail – provides users access to their email accounts
  • Yandex.Maps, Yandex.Navigator maps, and location-based services
  • Downloadable applications for mobile and digital platforms and devices
  • Yandex.Browser – a cloud-based browser
  • Yandex.Disk – a cloud-based storage service that lets users upload, store, and share files.
  • Yandex.Direct – an auction-based advertising placement service
  • Yandex ad network service
  • Yandex.Webmaster – enables Webmasters to tag information on their websites
  • Yandex.Metrica – a web statistics analysis tool
  • Yandex Site Search – a search tool for Webmasters and website owners
  • Yandex APIs – enables developers to use company’s technologies in their own businesses
  • Yandex.Money – an online payment system

On May 24, 2011, the company sold 52.2 million shares to the public for $25 each, above the expected range of $20 to $22, raising $1.3 billion. Shares opened for trading at $35, and closed the day at $38.84. Only 16.2% of its outstanding shares were sold in the IPO, valuing the company at $8 billion.

On April 24, 2014, the company reported results for the 1st quarter ending March 31st.

  • Revenue was $305.0 million, up 36% from the same quarter a year ago.
  • Adjusted EBITDA increased 15% to $113.3 million from the same quarter a year ago.
  • Adjusted net profit increased 6% to $71.5 million from the same quarter a year ago.

It seems that revenue reaches a trough in the 1st (3/12, 3/13, 3/14) quarter. Thus, revenue will likely rise in the 2nd and 3rd quarters. From the year over year graph, 3rd quarter revenue seems it may be higher than expected. Hopefully earnings resume its uptrend. The company does not report till July 29th before the bell. Analysts expect the company to earn $0.29 per share on $342.99 million in revenue.

charth72014

At $30.74, the stock is between its low target of $30.60 and its median target of $39.49 made by the 18 analysts recorded by Thomson/First Call. Mean target is $39.47, and high target is $51.34 Using a scale of 1.0 as a strong buy and 5.0 as a sell, the average rating of the stock is 1.9, unchanged a week ago.

  Current Month Last Month Two Months Ago Three Months Ago
Strong Buy 6 6 6 6
Buy 9 9 9 9
Hold 3 3 3 4
Underperform 1 1 1 1
Sell 0 0 0 0

charti72014

chartj72014

These are volatile stocks but we suggest further due diligence for before investing in them.

 

= = = = = = = = = = = = = = =

3.  Earnings 

 

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

There are a ton of companies reporting earnings this week and way to many to cover for possible earnings trades.  I have highlighted the ones I will be watching this week as there could be room to add a few new option trades.  With volatility heating up, I could issue some strangle option trades for the Weekly Wrap that might produce some solid double-digit gains.

 

Monday

Ahead of the open: Halliburton (HAL), Hasbro (HAS), Six Flags (SIX)

 

After the close:  Chipotle Mexican Grill (CMG), Netflix (NFLX), Rambus (RMBS), Texas Instruments (TXN)

 

 

Tuesday

Ahead of the open:  Altria Group (MO), Coca Cola (KO), Del Frisco’s Restaurant Group (DFRG), Domino’s Pizza (DPZ), DuPont (DD), Exact Sciences (EXAS), Harley-Davidson (HOG), Ingersoll-Rand (IR), Kimberly-Clark (KMB), Lockheed Martin (LMT), McDonalds (MCD), Peabody Energy (BTU), Travelers Companies (TRV), United Technologies (UTX), Verizon Communications (VZ)

 

After the close:  Apple (AAPL), Discover Financial Services (DFS), Electronic Arts (EA), International Game Technology (IGT), Intuitive Surgical (ISRG), iRobot (IRBT), Juniper Networks (JNPR), Microsoft (MSFT), VMware (VMW)

 

 

Wednesday

Ahead of the open:  Boeing (BA), Delta Air Lines (DAL), Dow Chemical (DOW), EMC (EMC), Freeport-McMoRan (FCX), Hercules Offshore (HERO), PepsiCo (PEP), Ryder System (R), Tupperware (TUP)

 

After the close:  Angie’s List (ANGI), AT&T (T), CA Technologies (CA), Cheesecake Factory (CAKE), E*Trade Financial (ETFC), F5 Networks (FFIV) , Facebook (FB), Fortinet (FTNT), Illumina (ILMN), O’Reilly Automotive (ORLY), Qualcomm (QCOM), Skechers U.S.A. (SKX), TripAdvisor (TRIP)

 

 

Thursday

Ahead of the open:  3M (MMM), Boston Scientific (BSX), Bristol-Myers Squibb (BMY), Caterpillar (CAT), Dr Pepper Snapple Group (DPS), Dunkin’ Brands Group (DNKN), Ford Motor (F), General Motors (GM), Hershey Company (HSY), Imax Corporation (IMAX), JetBlue Airways (JBLU), Nasdaq Stock Market (NDAQ), Nucor (NUE), Pinnacle Entertainment (PNK), Piper Jaffray (PJC), Potash (POT), Precision Castparts (PCP), Southwest Airlines (LUV), Starwood Hotels & Resorts (HOT), T. Rowe Price Group (TROW), UAL (UAL), Under Armour (UA), Union Pacific (UNP), Zimmer Holdings (ZMH)

 

After the close:  Amazon.com (AMZN), Baidu.com (BIDU), Cliffs Natural Resources (CLF), Deckers Outdoor (DECK), Flextronics International (FLEX), Gigamon (GIMO), HomeAway (AWAY), Huttig Building Products (HBP), KLA-Tencor (KLAC, NetGear (NTGR), Pandora Media (P), QLogic (QLGC), Regal Entertainment (RGC), RFMD (RFMD), Starbucks (SBUX), VeriSign (VRSN), Visa (V)

 

 

Friday

Ahead of the open:  Burger King Worldwide (BKW), DoCoMo (DCM), Moody’s (MCO), Stanley Black & Decker (SWK), Whirlpool (WHR), Xerox (XRX)

 

After the close:  None worth mentioning.

 

= = = = = = = = = = = = =

 

4.  Weekly Wrap Covered Call Portfolio Update (Closing prices as of 7/18/14)

The Weekly Wrap Closed Trade Track Record for 2014 is 20-4, or 83% win rate (105-11, or 91% win rate, overall since the start of 2011)

 

 

Pizza Inn Holdings (PZZI, $7.30, up $0.88) Stock Trades

Original Entry Price:  $6 (7/9/14)

Lowered Price from Selling Options:  No options available

Exit Target:  $8

Return:  22%

Stop Target:  $4, raise to $6.70 (Stop Limit)

 

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

Lowered Price from Selling Options:  No options available

Exit Target:  $12+

Return:  -10%

Stop Target:  $5

Action:  Shares were in a steady uptrend throughout the week after the company announced further expansion plans.  Pizza Inn is now on track for 200 stores.  Shares reached a peak of $6.48 on Thursday and surged to $7.61 on Friday.  Near-term resistance is at $7.50-$7.75 and the close above the 200-day MA was super bullish.  Support needs to hold at $7 on any pullback to keep the momentum intact.

I have set a stop limit of $6.70 to protect profits on the second position.  The other position is a long-term core holding.

Previous comments:

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.

 

Kodiak Oil & Gas (KOG, $16.01, up $0.64) LEAP Trade

December 16 calls (KOG141220C00016000, $1.40, up $0.15)

Original Entry Price:  $0.95 (6/30/14)

Exit Target:  $1.90-$2 (closed half @ $1.25 on 7/16/2014)

Return:  39%

Stop Target:  85 cents (Stop Limit)

Action:  I have recommended numerous bullish trades on Kodiak over the past few years for both the Weekly Wrap and Daily.  I predicted a takeover offer would come this year and it finally did last Monday but not without some controversy.

The buyout offer was way less than I expected  and despite shareholders getting a piece of Whiting, the deal was a steal.  Both stocks continued to rise during the week as lawsuits were filed.

Profit Alert from 7/17/2014:

“Shares traded to a high of $15.11 to start the week and finished at $14.91 on the buyout but the options got no love until today.

Under the terms of the agreement, Kodiak shareholders are getting .177 of a share of Whiting stock for each share of Kodiak stock they own.  This valued Kodiak’s shares at $13.90 based on the closing price of Whiting shares on July 11th.  This equates to only a 5% premium to the average price of Kodiak shares during the last 60 trading days and why shareholders are ticked.

I’m not sure of the eventual outcome but I want to close half of the trade in case shares do slip below $15 again and head towards the $13.90 takeover target.  If so, I will close the other half.  Otherwise, I will ride the other half of the calls higher if shares continue to roll towards my $20 price target.” (END)

I have set a Stop Limit of 85 cents on the other half of the trade to ensure a profit.  My buyout prediction for Kodiak was for a bid of $20.  I will keep the trade open as long as shares continue to rise but a drop back below $15 will likely end this fun ride.

KOG72014

Apple (AAPL, $94.43, up $1.34) covered call/ stock trade

Sold July 97 calls (Weekly) (AAPL140725C00097000,  $1.10, up $0.15)

Original Entry Price:  $93.10 (6/30/14)

Lowered Price from Selling Options/ Dividends:  $91.25

Exit Target:  $120

Return:  3%

Stop Target:  $85

Dividend Yield:  2.1%

Action:  Shares of Apple traded to a high of $96.89 to start the week and reached $97.10 midweek after announcing a collaboration with IBM.  However, shares closed below $95 on Wednesday followed by a 2% pullback to $93 on Thursday.  Shares rebounded on Friday to push $95.  Resistance is at $97.50 and support is at $92.50.

The company will announce earnings after Tuesday’s close and these options expire on Friday.  Shares will likely be at fresh highs on Wednesday or pushing the low $90’s.  If the latter plays out, I will look to sell another short-term call option next week.  If shares clear $97 late in the week, I may suggest another bullish position.

AAPL72014

On 7/9/2014 I recommended selling the July 97 calls for $1.85 to lower the cost basis to $91.25.  If shares are called away at $97 by July 25th the trade will make 6%.

 

CubeSmart (CUBE, $18.61, up $0.15) stock trade

Original Entry Price:  $18.62 (6/23/13)

Lowered Price from Selling Options/ Dividends: $18.49

Exit Target:  $22

Return:  1%

Stop Target:  $14

Dividend Yield:  2.8%

Action:  Shares traded to a low of $18.24 on Tuesday and held support is at $18.25 and the 50-day MA.  There is risk to $18 on a close below this level.  Resistance is at $18.75.  Earnings are due out on August 7.

Options do trade on CubeSmart but I would like to see a run past the 52-week high of $19.69, or $20 before making this a covered call trade.

The company paid a dividend of 13 cents on 6/27/2014 to lower the cost of the trade to $18.49.

CUBE72014

Limelight Networks (LLNW, $2.90, up $0.09) stock trade

Original Entry Price:  $3.00 (6/9/14)

Lowered Price from Selling Options:  None

Exit Target:  $5

Return:  -3%

Stop Target:  None

Action:  Shares were able to hold $2.90 into Friday’s close after reaching $2.91.  A mini trading range has formed that could take time to play out or not.  A close above $3 would be bullish.  A drop below $2.70 and the 50-day MA would be bearish.  The company will announce earnings on August 4th and talk about why they declined a takeover offer north of $6.

Previous comments:

Shares traded to a high of $3.25 on 6/20 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.

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.

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.

LLNW72014_001

Hercules Offshore (HERO, $4.01, up $0.01)

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

Lowered Price from Selling Options:  $4.20

Exit Target:  $7

Return:  -5%

Stop Target:  $2

Action:  The July 4.50 calls expired last week.

There is risk to $3.90-$3.75 if shares continue to struggle at $4.  Resistance is at $4.20.

I’m looking at selling August or September calls to lower the cost of the trade to below $4.  I will likely send out a Trade Alert on Monday or Tuesday but I may also wait until shares trade near resistance.

HERO72014

On 5/30/2014 I recommended buying shares at $4.50 and selling the July 4.50 calls for 30 cents to lower the cost basis to $4.20.

 

Alexza Pharmaceuticals (ALXA, $5.03, up $0.01) Covered Call Trade

Sold September 5 calls (ALXA140920C00005000, $0.60, flat)

Original Entry Price:  $5.53 (3/4/14)

Lowered Price from Selling Options:  $4.68

Exit Target:  $6+

Return:  7%

Stop Target:  $3

Action:  Shares cleared $5 midweek and reached $5.27 on the breakout.  Thursday’s high at $5.25 may have formed a short-term double top but if $5 holds, higher highs are in store. Backup support is at $4.80.  The 52-week high is at $5.93.

ALXA72014

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.

On 6/23/2014 I recommended selling the September 5 calls for 35 cents to lower the cost basis of the trade to $4.68.  If shares are called away at $5 by mid-September the trade will make 7%.

 

Discovery Laboratories (DSCO, $1.68, down $0.02) Covered Call Trade

Sold October 2 calls (DSCO140101900002000, $0.35, flat)

Original Entry Price:  $2.42 (1/7/14)

Lowered Price from Selling Options:  $1.67

Exit Target:  $4.50-$5

Return:  1%

Stop Target:  None

Action:   Disco shares danced with $2 to start the week but faded to $1.68 by Friday’s close.  There is further risk to $1.60-$1.50.  Resistance is at $1.75 and the 50-day MA.

The company recently announced Phase 2 trials for Aerosurf have begun.

DSCO72014

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.

On 6/23/2014 I recommended selling the October 2 calls for 35 cents to lower the cost basis of the trade to $1.67.  If shares are called away at $2 by mid-October the trade will make 20%.

 

Rambus (RMBS, $13.66, up. $0.10)

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:  Resistance is at $13.75-$14.  A close below $13 would be bearish.  The company will announce earnings on Monday and Wall Street is looking for 5 cents a share on revenue of $76 million.  The company beat estimates 4 cents last time out but missed the prior 2 quarters.

This is a very important quarter for Rambus as they will need to show a beat on both top and the bottom lines while giving a rosy outlook. I am expecting shares to make a run past $15 (and where I’d like to sell another option) or test $12.50 depending on the results.

Previous comments:

Shares tanked $11 in late November 2011 from $18 to $7 on a court ruling the company had infringed on certain patents.  I originally recommended this trade on a favorable court ruling.

The outlook for Rambus has improved over the past 6 months with a profitable quarter and a recent deal with Qualcomm.

I want to sell another call option on this position but would like to see shares clear $15-$16 before doing so.

RMBS72014_001

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)

 

= = = = = = = = = = = = = = =

 

5.  Week Ahead 

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

ecocal72014