9:00am (EST) continued…
The Dow dropped 153 points, or 1%, to close at 15,593. The blue-chips traded up to 15,797 on the open and came within a field goal of triggering our 15,800 target before the pullback began. This would have got 16,000 in play but the bears made a stand and pushed a low of 15,586. Support at 15,600 failed to hold and the seesaw action this week keeps 15,400-15,350 in the mix.
The S&P 500 sank 23 points, or 1.3%, to settle at 1,747. The index kissed 1,774.54 to start the session but also had trouble clearing resistance at 1,775. We have said a close above this level should lead to a push to 1,800 but the dip below 1,750 needs to be respected as there is still risk down to 1,725-1,700.
The Nasdaq gave back nearly 75 points, or 1.9%, to finish at 3,857. Tech made a weak attempt at clearing 3,950 at the open (3,939 was the high) and when it didn’t we knew there could be some trouble. Support at 3,925-3,900 wasn’t much help and we said a dip below 3,900 would get 3,850 in the mix, quickly. Yesterday’s low checked-in at 3,855 and a close below the next wave of support will get 3,800-3,750 in the picture.
The Russell 2000 tanked 19 points, or 1.8%, to end at 1,079. The small-caps made a brief run past 1,100 to 1,103 but it was all downhill afterwards. We have said there would be risk down to 1,075 on any closes below 1,100 and the index went out at its low for the session. If breeched, the bears could push 1,050.
The S&P 500 Volatility Index ($VIX, 13.91, up 1.24) zoomed 10% and cleared 13.50 after reaching a peak of 14.14. We have said not to flinch until 15 cracks and we went through this scenario last week. We talked about last Wednesday’s “phantom” print of 20+ on the VIX that some financial websites had reported but the charts we use still showed the VIX holding 15.
On paper, yesterday was ugly but the Dow is only down 27 points for the week while the S&P is off less than 1%, or 14 points. The Nasdaq and Russell 2000 were up for the week before Thursday’s pounding. We will talk about the divergence taking place but remember, we said there would be a shakeout and that a mini-trading range may be developing.
If there is a flat to positive close today there should be more upside ahead. However, if the Dow and S&P continue to slip along with the overall market – and – the VIX CLOSES above 15 then we can flinch and start preparing for possible put plays.
Friday’s have been bullish of late and this morning’s Nonfarm Payroll report could weigh on the market or help the bulls recover from yesterday’s blows.
As we head to press, futures look like this: Dow (-51); S&P 500 (-3); Nasdaq 100 (-5).
MEMBERS AREA
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 tradesor “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 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. Closed Trades for 2013: 126-63 – the Weekly Wrap is 40-4 for 2013 (84-6 since 2011) and is designed for traders that want to use options with less risk.
JC Penney (JCP, $8.13, up $0.43)
January 10 calls (JCP140118C00010000, $0.60, up $0.15)
Entry Price: $0.65 (11/7/13)
Exit Target: $1.30
Return: -8%
Stop Target: None
Action: Shares traded to a high of $8.33 yesterday and we would like to see a close above $8.50 today. There is risk down to $7 on a back test.
Kodiak Oil & Gas (KOG, $11.86, down $0.44)
December 13 calls (KOG131221C00013000, $0.30, down $0.15)
Entry Price: $0.65 (11/4/13)
Exit Target: $1.30
Return: -54%
Stop Target: None
Action: Shares fell to a low of $11.29 on Thursday and held support at $11. There is risk down to $10 on further weakness. The close above $11.75 helped but short-tern resistance is now at $12-$12.25.
H&R Block (HRB, $27.36, down $1.28)
December 30 calls (HRB131221C00030000, $0.30, down $0.25)
Entry Price: $0.60 (10/29/13)
Exit Target: $1.20
Return: -50%
Stop Target: None
Action: Shares are testing the 200-day MA and have done so it recent weeks. We still like the trade as the December options have 42 days before they expire. However, if shares close below $26.50 we may have to cut the cord.
Millennial Media (MM, $6.88, down $0.21)
December 7.50 calls (MM131221C00007500, $0.65, down $0.10)
Entry Price: $0.65 (10/25/13)
Exit Target: $1.30
Return: 0%
Stop Target: None
Action: Shares are hovering around the 50-day MA with resistance at $7.25. A close above this level could lead to a run to $8 and we have a longer-term target of 10+. Support is at $6.75-$6.50.
DuPont (DD, $60.85, up $0.08)
December 62.50 calls (DD131221C00062500, $0.55, up $0.05)
Entry Price: $0.60 (10/24/13)
Exit Target: $1.20
Return: -8%
Stop Target: None
Action: Support at $60. Resistance is at $62-$63.
Other 2013 Portfolio OPEN positions (3): 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 2013Portfolio link in the Members Area to view ALL open/ closed trades.
Boston Scientific November 12 calls (from October 2013) – HOLD
Aruba Networks November 20 calls (from October 2013) – HOLD
CatamaranNovember 52.50 calls (from October 2013) – 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 but these are the trades we are watching as new candidates.
Opko Health (OPK, $10.04, down $0.27)
December 11 calls (OPK131221C00012000, $0.60, down $0.10)
January 12 calls (OPK140118C00012000, $0.60, down $0.10)
Thoughts: We could be getting real close to getting back into this name. We want to confirm the chart work we will be doing this morning and we will watching the open. We could take action today so be ready. Earnings are also due out on Monday.
NPSP Pharmaceuticals (NPSP, $23.66, down $0.13
December 27 calls (NPSP131221C00027000, $0.90, down $0.20)
December 20 puts (NPSP131221P00020000, $0.60, up $0.15)
Thoughts: The close below the 50-day MA was a sign further weakness could be ahead for the stock. Earnings were a disappointment to Wall Street this week and Wednesday’s low checked-in at $21.60. We did extremely well playing the stock’s run to $35 in early October and we are tempted to short shares for a possible drop below $20. We have listed some call options as well we can use to make this a strangle option trade for our Weekly Wrap portfolio but we are favoring the puts if we open a position.
Cliff’s Natural Resources (CLF, $26.77, down $1.21)
December 30 calls (CLF131221C00030000, $0.60, down $0.40)
Thoughts: We could go long on a break above $29 with these call options. We were following the 31’s.
ViroPharma (VPHM, $38.33, down $0.20)
December 45 calls (VPHM131221C0004500, $0.35, down $0.10)
January 45 calls (VPHM140118C00045000, $0.90, down $0.10)
Thoughts: We could add these calls on a pop past $40.
AbbVie (ABBV, $47.24, down $0.81)
December 47.50 calls (ABBV131221C00047500, $1.25, down $0.65)
Thoughts: We could get into these call options on a move past $50.
iShares Russell 2000 (IWM, $107.28, down $1.84)
December 112 calls (IWM131221C00112000, $0.65, down $0.50)
December 102 puts (IWM131221P00102000, $0.90, up $0.30)
Thoughts: We could go long on a pop above $111 or short on a close below $108.
Salesforce.com(CRM, $54.35, down $0.88)
December 60 calls (CRM131221C00060000, $1.20, down $0.25)
Thoughts: We believe shares will make a run past $60 as long as $50 holds and $55 is cleared. These options opened at $1.20 on Monday.