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 “Trade Update” 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 but it is rare that we do.
1:25pm (EST)
Special Notice: This is one of the few times we have felt “trapped” over the past 4 months and we knew coming into March that things would be tricky as we have a number of open positions. Also, trading ranges are never good for options because the time decay is a killer but our HIGHER premium trades have done really, really well which has allowed us to take some risk with some “cheaper” out-of-the-money options. We also suggested trading light in February which means if you normally trade 20 contracts for each position, then do 10.
There are some trades that you can speculate on but please make sure to take ALL of our trades. Just because an option is at 40 cents doesn’t mean you should overload the position. Also, since we don’t carry stops on options under $1.00, it is possible to have a 100% loser. However, if you have a $1.50 trade that goes to $2 then the 100% loser is paid for by the 50 cents you made on this trade even though the gain was 33%.
People seem to “freak out” when they see a 100% losing trade but that is part of the game when playing options. If you go all-in with your first and only trade with us and you lose, then of course, we expect you to be mad at us, but trading is for the long haul so there will be highs and lows. We are 30-3 for 2012 and 12-0 for our Weekly Wrap so if we have 10 trades that don’t gives us a gain we will be at 42-13.
We also have some longer-term trades that we really like and we expect to keep open but we will continue to be nimble. If we closed all of our trades right now we would be up over 170% for the year so we have gotten off to an incredible start. These figures are based on our $10,000 trading account. If they were based on $5,000 our return would be way higher. If we started with a $20,000 it would be lower. Every year we start at $10,000 and see where we finish by the end of the year. Some of you may have higher trading accounts or lower so everyone’s returns will be different. The bottom line is we will be profitable for 2012 and so will you.
Our point is, don’t get too caught up in percentages.
Again, the trades that will expire next week may or may not come back, but the good news is that we will have a ton of room to open new trades that will allow us to play a continued move higher or the impending correction that so many Wall Street pros seem to be calling for. Oh, and make sure you take all the trades for the Weekly Wrap which is a safer way to play options. Remember, you should have two accounts. A “safe” trading account and a “speculative” trading account.
Silver Wheaton (SLW, $35.98, down $1.61)
April 42 calls (SLW120421C00042000, $0.40, down $0.25)
Entry Price: $1.00 (3/1/12)
Exit Target: $1.50-$2.00
Return: -60%
Stop Target: 50 cents
Action: We said there would be risk down to $36 so let’s see if we hold today.
Adobe Systems (ADBE, $33.24, down $0.49)
April 35 calls (ADBE120421C00035000, $0.80, down $0.20)
Entry Price: $0.75 (2/28/12)
Exit Target: $1.50
Return: 7%
Stop Target: None
July 38 calls (ADBE120721C00038000, $0.80, down $0.15)
Entry Price: $0.70 (2/28/12)
Exit Target: $1.40
Return: 14%
Stop Target: None
Action: A move above $35 gets the 52-week high of $35.99 in play and from there a multi-year high of $40 could come on a breakout. Our Ace-in-the-hole is Apple which we hope makes a bid for the company.
Solazyme (SZYM, $12.11, down $0.94)
April 15 calls (SZYM120421C00015000, $0.20, down $0.15)
Entry Price: $0.55 (2/28/12)
Exit Target: $1.10
Return: -64%
Stop Target: None
March 15 calls (SZYM120317C00015000, $0.10, down $0.05)
Entry Price: $0.45 (1/10/12)
Exit Target: $1.00
Return: -78%
Stop Target: None
Action: Shares traded up to $14.70 last Wednesday and immediately gave back their gains by the end of the week. Strong support is at $12, followed by $11 but the bullish “symmetrical continuation triangle” is still in play for a run back to $15.
Freeport McMoRan (FCX, $40.20, down $1.53)
March 45 calls (FCX120317C00045000, $0.10, down $0.10)
Entry Price: $0.62 (2/27/12)
Exit Target: $0.90
Return: -84%
Stop Target: None
Action: There was a small window of opportunity to take profits last week and we blew it. We thought about adding put positions on Friday because there is a chance $40 doesn’t hold but we want to let the rest of our trades play out before putting new money to work. There is a still a chance these options come back and our breakeven point would be $45.62 but shares will need to rally 10% or more from current levels by next Friday. We will keep the trade open and on HOLD.
Sony (SNE, $20.70, down $0.67)
April 22 calls (SNE120421C00022000, $0.45, down $0.20)
Entry Price: $0.90 (2/27/12)
Exit Target: $1.60
Return: -50%
Stop Target: None
Action: There is a chance shares test $20 but we are looking for a pop to $25 if $22 is cleared. The April options have 46 days before they expire.
U.S. Oil Fund (USO, $40.80, up $0.03)
April 45 calls (USO120421C00045000, $0.55, flat)
Entry Price: $0.80 (2/24/12)
Exit Target: $1.60
Return: -31%
Stop Target: None
Action: We said there would be risk down to $40 and a drop below $39 would get us nervous but we expect shares to make a run past $45 by mid-April. The high last week was $42.30.
magicJack VocalTec (CALL, $23.26, up $1.28)
June 22.50 calls (CALL120616C00022500, $3.25, up $0.75)
Entry Price: $1.10 (2/15/12)
Exit Target: $2.20 (closed quarter position at $2.10 on 3/1/12, closed quarter position at $3.40 on 3/1/12)
Return: 173%
Stop Target: $1.10
Action: Shares have been on fire again today and have traded to a high of $23.74. Continue to hold the other half of the trade.
Our average closing price on the two quarters we closed is $2.75 ($3.40 + $2.10/ 2). The current price on our other half is $3.25 which gives us our total return as the average is up to $3.00 from an entry price of $1.10.
ValueClick (VCLK, $20.91, down $0.04)
June 23 calls (VCLK120616C00023000, $0.65, flat)
Entry Price: $0.40 (2/15/12)
Exit Target: $0.80 (closed half position at $0.70 on 2/29/12)
Return: 69%
Stop Target: 40 cents
Action: ValueClick traded to new 52-week highs again last week, peaking at $21.50 on Tuesday. Our near-term target is $22.50 then $25 but there is a chance shares hit $30 by June. Support is at $20 and we will close the other half of the trade if this level fails to hold.
Other 2012 Portfolio OPEN positions (8): These are trades that are still open in the portfolio that have longer expiration dates or 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 the options expire. Click on the 2012 Portfolio link in the Members Area to view ALL open/ closed trades.
Newpark Resources March 10 calls (from January 2012) HOLD
iRobot March 40 calls (from February 2012) HOLD
Polypore International March 60 calls (from January 2012) HOLD
Abercrombie & Fitch March 39 puts (from February 2012) HOLD
PowerShares QQQ Trust March 60 puts (from February 2012) HOLD
Dendreon May 22 calls (from January 2012) HOLD
OCZ Technology Group March 10 calls (from February 2012) HOLD
Acme Packet March 37.50 calls, April 40 calls (from February 2012) 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 which is why we created a Watch List. We will not list entry prices because these stocks are on the verge of breaking out or they could sell off.
We will update this section in the morning.
***************************
10:50am (EST)
Carrizo Oil & Gas (CRZO, $28.82, down $1.10)
April 30 calls (CRZO120421C00030000, $1.50, down $0.50)
Entry Price: $1.20 (1/17/12)
Exit Target: $2.40 (closed half position at $1.70 on 3/1/12)
Return: 33%
Stop Target: $1.30 (HARD STOP)
Action: Close the other half of the trade at current levels.
***************************
9:00am (EST) continued…
The Dow went into Friday’s session with a 2-point loss for the week and slipped 3 points, or 0.02%, to settle at 12,977. The blue-chips traded to a high of 12,997 in the final hour of trading and but failed to close above the magical 13,000 level after doing so on Tuesday. The index peaked at 13,055 on Wednesday but failed to reach our upper-end fluff target of 13,200. If the Dow can clear this level then pencil in a test to 13,500 but if not, look for a test to support at 12,800. If buyers don’t come in here, there is a chance they wait for a drop to 12,600 or 12,350 before buying. The Dow started Monday at 12,983 and fell 5 points for the week. YTD, the index up 760 points, or 6.2%.
The S&P 500 gave back 4 points, or 0.3%, to finish at 1,369. The index traded to a 52-week high of 1,378 mid-week but close just below our 1,375 fluff target. We are still looking for a run to 1,400 over the near-term but the bears will be gunning for 1,350 this week. This level has been strong support for a few weeks and a break below this level would get 1,325-1,300 back in play. For the week, the S&P 500 added 4 points after starting at 1,365 on Monday. For the year, the index is up 112 points, or 8.6%.
The Nasdaq declined 12 points higher, or 0.4%, to close at 2,976. Tech was able to reach the 3,000 milestone on Wednesday’s opening pop after kissing 3,000.11, to be exact, and traded to 2,996 on Friday. We mentioned a close above this level would bring 3,250 into the picture and to us, this number is more important than Dow 13,000. The bulls did well by holding 2,975 on Friday and 2,950 is serving as solid but if these levels fail to hold then there is a chance for a test down to 2,800-2,750. From there, the 200-day MA at 2,650 could come into the picture which would be over an 11% correction from current levels. The Nasdaq came into Monday’s session at 2,963 and added 13 points for the week. For 2012, Tech is ahead by 371 points, or 13.9%.
The S&P Volatility Index ($VIX, 17.29, up 0.03) came into the week just above 17 and spiked past 19 on Monday. The VIX reached 18.75 on Wednesday’s pullback and fell 6% on Thursday to close at 17 again. Friday was flat so there is a chance the index touches 15 before we get a pullback. A break above 20-22.50 would confirm the bears are hungry.
The Russell 2000 bended but didn’t break as it dropped 13 points, or 1.5%, to close at 802. We mentioned the index in our Thursday update because we were worried about the signs it is flashing for a pullback. The small-caps will need to contribute in the market’s next move higher and after having trouble with the 830 level, we find ourselves looking right at 800 which was exactly the low on Friday. We said a close below 800 would be dangerous and if this level falls it would bring 780 in play. The 200-day MA is just above 750. For the week, the Russell 2000 tanked 24 points, or 3% but is still up 62 points, or 8%, for the year.
Friday’s action was a little disappointing and we have shown you a lot of things to look for when trying to find clues on the market’s next direction because we believe you can never have too many resources. Besides following the 4 major indexes and the VIX, market sentiment, overseas developments, oil, gold and silver, we also like to watch the action on Friday’s and Monday’s to see if a trend is about to change or if one will continue.
Usually, in bull markets or when the trend is up, Friday’s and Monday’s are positive because investors are leaving their money in the market. When we start to see negative Friday/ Monday closes, it could mean a trend change or if we get multiple weeks of negative F/M closes, it could mean a bear market is coming.
Since the beginning of the year, the S&P has experienced one such occurrence and that was at the end of January. The index fell about 2 points on the F/M closes at the end of the month which is why we were nervous for February and why we mentioned we could get a pullback the first FULL week last month. That happened but on the following Monday before Valentine’s Day, the S&P added 9 points and closed above 1,350.
That is when we had a good clue our “fluff” targets would be hit because the market always overshoots resistance and support in most cases. We also said last week we would like to see a rally up until St. Patty’s Day which is when the March options expire but there is one event that could really cause a pullback before then.
Apple (AAPL, $545.18, up $0.71) is expected to announce its iPad3 tablet on Wednesday and the stock has a history of selling off after the announcement following a big run-up into the event. Shares have zoomed $140 to start 2012 as they were at $405 at the end of 2011. This is a 35% increase so history is setting up to repeat itself once again.
Perhaps a pullback in Apple is in the cards which would mean the bulls winning streak could be coming to an end as shares weigh heavily on a couple of the major indexes. However, what if Apple moves to $600, first? This would be the perfect setup, along with the buying Adobe Systems (ADBE, $33.73, up $0.63). Shares look ready to zoom and we have a $50 price target on Adobe on a buyout offer from Apple. Of course, this is speculation on our part but sometimes it pays to think outside the box and the chart is super bullish as you will see.
It would be great if the market stayed green until St. Patty’s day and our feeling is Apple and its half-trillion market-cap will have a lot to do with it.
The big thing about trading ranges is that the longer the market or a stock stays in one, the bigger the breakout, or breakdown will be. We mentioned last week the S&P 500 has gone more than a month without a 1% drop but we also haven’t had that euphoric 3%-4% rally that gets everyone excited. After 5 weeks of flat action, we expect March to be much more volatile and at some point, we will likely see one last surge or we get the dip that everyone has been calling for over the last 2 months.
MEMBERS AREA
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 “Trade Update” 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 but it is rare that we do.
Silver Wheaton (SLW, $37.59, down $1.19)
April 42 calls (SLW120421C00042000, $0.65, down $0.35)
Entry Price: $1.00 (3/1/12)
Exit Target: $1.50-$2.00
Return: -35%
Stop Target: 50 cents
Action: There are a lot of Wall Street pros bearish on silver right now but we are in the other camp. We are also buying silver American Eagles to store for a rainy day but that is another story down the road. Silver Wheaton is one of the best ways to play the moves in silver and we warned this trade would be volatile. There is risk down to $36 but we are looking for a run past $40.
Adobe Systems (ADBE, $33.73, up $0.63)
April 35 calls (ADBE120421C00035000, $1.00, up $0.25)
Entry Price: $0.75 (2/28/12)
Exit Target: $1.50
Return: 33%
Stop Target: None
July 38 calls (ADBE120721C00038000, $0.95, up $0.15)
Entry Price: $0.70 (2/28/12)
Exit Target: $1.40
Return: 36%
Stop Target: None
Action: Adobe made a nice late day move after our update on Friday and reached a high of $33.83. A move above $35 gets the 52-week high of $35.99 in play and from there a multi-year high of $40 could come on a breakout. Our Ace-in-the-hole is Apple which we hope makes a bid for the company.
Solazyme (SZYM, $13.05, down $0.50)
April 15 calls (SZYM120421C00015000, $0.35, down $0.25)
Entry Price: $0.55 (2/28/12)
Exit Target: $1.10
Return: -36%
Stop Target: None
March 15 calls (SZYM120317C00015000, $0.15, down $0.10)
Entry Price: $0.45 (1/10/12)
Exit Target: $1.00
Return: -67%
Stop Target: None
Action: Shares traded up to $14.70 last Wednesday and immediately gave back their gains by the end of the week. Strong support is at $12, followed by $11 but the bullish “symmetrical continuation triangle” is still in play for a run back to $15.
Freeport McMoRan (FCX, $42.03, down $0.88)
March 45 calls (FCX120317C00045000, $0.20, down $0.20)
Entry Price: $0.62 (2/27/12)
Exit Target: $0.90
Return: -68%
Stop Target: None
Action: Shares traded above $44 mid-week and we were looking for a pop over $45. However, shares reversed course and could test $40. We wanted to close this trade by last Friday but decided to roll the dice because these were cheap “out-of-the-money” options that we thought we could make 50% on. Our breakeven point is $45.62 if we were to hold until expiration and we still believe the market will get one blow off the roof type rally before there is a pullback.
Sony (SNE, $21.37, down $0.20)
April 22 calls (SNE120421C00022000, $0.65, down $0.10)
Entry Price: $0.90 (2/27/12)
Exit Target: $1.60
Return: -28%
Stop Target: None
Action: Shares traded past $22 early in the week but settled below this level by Friday. There is a chance shares test $20 but we are looking for a pop to $25 if $22 is cleared.
U.S. Oil Fund (USO, $40.77, down $0.98)
April 45 calls (USO120421C00045000, $0.55, down $0.25)
Entry Price: $0.80 (2/24/12)
Exit Target: $1.60
Return: -31%
Stop Target: None
Action: We said there would be risk down to $40 and a drop below $39 would get us nervous but we expect shares to make a run past $45 by mid-April. The high last week was $42.30.
magicJack VocalTec (CALL, $21.98, up $0.49)
June 22.50 calls (CALL120616C00022500, $2.50, up $0.50)
Entry Price: $1.10 (2/15/12)
Exit Target: $2.20 (closed quarter position at $2.10 on 3/1/12, closed quarter position at $3.40 on 3/1/12)
Return: 139%
Stop Target: $1.10
Action: Shares traded to a high of $23.99 on Friday and we used the breakout to lock-in another quarter position. Our average closing price on the two quarters we closed is $2.75 ($3.40 + $2.10/ 2). The current price on our other half is $2.50 which gives us our total return as the average cost is $2.625. Shares hit fresh 52-week highs on Friday after trading up to $23.99. Near-term support has moved up to $18 and we have been saying our near-term target is $25 on a multi-year breakout which was nearly hit last week. Longer-term we feel shares will make a run past $30 in 2012. Below is a 10-year chart for magicJack.
ValueClick (VCLK, $20.95, down $0.13)
June 23 calls (VCLK120616C00023000, $0.65, down $0.05)
Entry Price: $0.40 (2/15/12)
Exit Target: $0.80 (closed half position at $0.70 on 2/29/12)
Return: 69%
Stop Target: 40 cents
Action: ValueClick traded to new 52-week highs again last week, peaking at $21.50 on Tuesday. Our near-term target is $22.50 then $25 but there is a chance shares hit $30 by June. Support is at $20 and we will close the other half of the trade if this level fails to hold.
Carrizo Oil & Gas (CRZO, $29.92, down $0.38)
April 30 calls (CRZO120421C00030000, $2.00, down $0.10)
Entry Price: $1.20 (1/17/12)
Exit Target: $2.40 (closed half position at $1.70 on 3/1/12)
Return: 54%
Stop Target: $1.30 (HARD STOP)
Action: We told you the breakout from the bullish wedge at $24 was on the horizon. Shares of Carrizo had a big week as they jumped $2 to close just under $30. The move above the 200-day average was bullish and there is a chance shares can reach $32-$34 on continued momentum. Support will try to hold at $28 if there is a pullback.
Other 2012 Portfolio OPEN positions (8): These are trades that are still open in the portfolio that have longer expiration dates or 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 the options expire. Click on the 2012 Portfolio link in the Members Area to view ALL open/ closed trades.
Newpark Resources March 10 calls (from January 2012) HOLD
iRobot March 40 calls (from February 2012) HOLD
Polypore International March 60 calls (from January 2012) HOLD
Abercrombie & Fitch March 39 puts (from February 2012) HOLD
PowerShares QQQ Trust March 60 puts (from February 2012) HOLD
Dendreon May 22 calls (from January 2012) HOLD
OCZ Technology Group March 10 calls (from February 2012) HOLD
Acme Packet March 37.50 calls, April 40 calls (from February 2012) 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 which is why we created a Watch List. We will not list entry prices because these stocks are on the verge of breaking out or they could sell off.
First Solar (FSLR, $30.02, down $0.40)
April 25 puts (FSLR120421P00025000, $1.10, up $0.05)
September 18 puts (FSLR120922P00018000, $1.40, up $0.05)
Thoughts: The drop below $40 was super bearish and shares are free-falling. The next stop appears to be to $20 over the near-term but we wouldn’t be surprised to see First Solar in the single-digits sometime this year. The puts are getting expensive.
Market Vectors Gold Miners ETF (GDX, $54.79, down $1.10)
April 60 calls (GDX120421C00060000, $0.55, down $0.30)
Thoughts: Short-term support is at $54 but a drop below $52 would be bearish. If current levels hold then expect a run to $58-$60.
Bebe Stores (BEBE, $9.01, down $0.14)
June 10 calls (BEBE120616C00010000, $0.30, flat)
September 10 calls (BEBE120922C00010000, $0.60, flat)
Thoughts: Support is at $8 and our near-term target is $10. Longer-term (6-12 months) we think shares can reach the mid-teens.
Shares traded up to $9.25 on Thursday and we are going to wait for Bebe to trade above $10 before we sell a call option. Our 2012 price target is $15 and we like the turnaround story which we wrote about last week. Support is at $8 then $7 as shown in this 5-year chart.
American Express (AXP, $52.99, down $0.88)
April 55 calls (AXP120421C00055000, $0.70, down $0.10)
Thoughts: We have been bullish on Mastercard and Visa for years and we have played option on them in the past. However, we think we can get more bank for our buck with American Express. Support is at $52 but a break below would be bearish over the short-term. If shares can get back above $54, look for a possible multi-year breakout up to $60.
E*Trade Financial (ETFC, $9.99, up $0.15)
April 10 calls (ETFC120421C00010000, $0.55, up $0.05)
Thoughts: Shares traded past $10 on Friday and our near-term target is $12. There is risk down to $8. Below is a 5-year chart for E*Trade.
MGM Resorts (MGM, $13.84, down $0.09)
April 15 calls (MGM120421C00015000, $0.40, flat)
January 20 calls 2013 (MGM130119C00020000, $0.55, flat)
Thoughts: MGM tried to stay above $14 on Friday after reaching $14.20 but struggled late in the day to finish below this level. There is further risk down to $12 but our-near-term target is $17. A break above $17 would be super bullish later this year and would likely lead to $25. The 52-week high is $16.05.
Zynga (ZNGA, $14.69, up $0.21)
September 19 call (ZNGA120922C00019000, $1.20, flat)
Thoughts: Zynga traded to a peak of $15.91 on Friday and these options kissed a high of $1.70. Short-term support is at $14.50 and then $13.50. If Zynga doesn’t have any setbacks, we believe shares test $20+ this year.
Scientific Games (SGMS, $10.30, down $0.01)
July 12.50 calls (SGMS120721C00012500, $0.40, flat)
April 10 calls (SGMS120421C00012500, $0.85, flat)
Thoughts: Shares took a pounding after the company reported earnings and support is at $10. If this level fails to hold then $9 would be on the board but we think shares will stabilize and trade to $15 this year.
