9:00am (EST) continued…
The Dow dipped 9 points, or 0.1%, to finish at 15,875. The blue-chips struggled at the 15,900 level after peaking at 15,917 before falling to a low of 15,836. Support at 15,800 held and there is risk to 15,600. It is very likely a triple-digit swing could come today once the Fed minutes are released and the move could define the next trend into yearend. The bulls would be above the 20-day MA on the Dow and back above 16,000 while the bears would be pushing 15,700 and the 100-day MA.
The S&P 500 declined 3 points, or 0.3%, to close at 1,781. The index struggled all session long as the bulls could only muster a fifth-point gain at the open to 1,786.77. There was no run into the 1,795-1,800 zone as the bears pushed a low of 1,777. Support at 1,775 stuck like glue once again but there is 2% risk to 1,750 on a close below this level.
The Nasdaq slipped a 6-pack, or 0.1%, to settle at 4,023. Tech traded up to 4,034 and missed Monday’s high of 4,043. We wanted to see a print above 4,050 as a possible early bullish signal. The close below 4,025 was slightly bearish with the low checking-in at 4,011. Support at 4,000 held but there is risk down to 3,950-3,900.
The Russell 2000 fell a point, or 0.1%, to end at 1,118.89. The small-caps were weak up until our midday update but showed some strength late in the day after trading slightly above 1,120. The action was bullish. We were pulling for a close above the 20-day MA and if we don’t get it by today’s closing bell there could be a quick test to 1,100-1,075.
The S&P Volatility Index ($VIX, 16.21, up 0.18) reached a peak of 16.67 but dipped late in the day to 15.81. A close below 15 favors the bulls while a finish above 17.50 would be bearish.
Futures were green throughout the night and as we head to press, here is how the indexes are shaping up: Dow (+22); S&P 500 (+3); Nasdaq 100 (+8).
Subscribers, check the Members Area for the updates.
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: 133-75 – the Weekly Wrap is 41-4 for 2013 (85-6 since 2011) and is designed for traders that want to use options with less risk.
Herbalife (HLF, $75.76, up $0.93)
January 82.50 calls (weekly)(HLF140103C00082500, $1.40, down $0.20)
Entry Price: $1.70 (12/17/13)
Exit Target: $3.80
Return: -18%
Stop Target: None
Action: We are expecting a run past $80 to $85 and we will stick with the trade as long as $70 holds as support.
Vera Bradley (VRA, $22.73, up $0.18)
January 22.50 puts (VRA140118P00022500, $0.90, down $0.10)
Entry Price: $1.20 (12/10/13)
Exit Target: $2.40
Return: -25%
Stop Target: None
Action: Another test to support at $23 held but it is thin with risk up to $$24 and the 20-day MA. We are expecting a drop to $21-$20.50 by mid-January.
Pulte Group (PHM, $18.02, down $0.09)
January 20 calls (PHM140118C00020000, $0.15, flat)
Entry Price: $0.50 (11/27/13)
Exit Target: $1.00
Return: -70%
Stop Target: None
Action: Tuesday’s low was $17.65 and there is risk down to $17.50. While there could be a near-term test to this level, we still feel as though shares will be north of $20 come mid-January.
Opko Health (OPK, $8.40, down $0.69)
January 11 calls (OPK140118C00011000, $0.20, down $0.10)
Entry Price: $0.65 (11/26/13)
Exit Target: $1.30
Return: -69%
Stop Target: None
Action: Support is at $8.50 but there is further risk to $7.50 on continued weakness. Short-term resistance is at $9.50 and a close above $10 would indicate the short selling is complete.
We have done our own research and we have written about Opko in our Weekly Wrap. We are expecting some good news on the company’s Phase 3 trial results for its cancer drug, Rolipitant, this month.
Galena Biopharma(GALE, $4.00, up $0.03)
January 2.50 calls (GALE140118C00002500, $1.50, flat)
Entry Price: $0.30 (11/11/13)
Exit Target: $0.90 (closed a quarter @ $1 on 11/21/13, closed a quarter @ $1.50 on 12/10/13)
Return: 358%
Stop Target: $1 on remaining half position (Stop Limit)
Action: We would like to see a close above $4.25 this week. Support is at $3.75 on another close below $4. Resistance is at $4.50. We have a stop limit of $1 on the other half of the trade that will likely get triggered if shares fall below $3.50.
Other 2013 Portfolio OPEN positions (4): 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.
Millennial Media December 7.50 calls (from October 2013) – Shares need to clear $7.50 by Friday’s close. The options are asking a nickel and there is no bid.
Peabody Energy December 22 calls (from November 2013)– Shares are testing $18 again and the December calls will likely expire worthless.
Kodiak Oil & Gas December 13 calls (from November 2013) – The ask is 5 cents and there is no bid as these options will likely expire worthless on Friday’s close.
Ariad Pharmaceuticals January 7 calls (from December 2013) – We will bring back coverage if shares can push $5. Continue to 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.
Jabil Circuit (JBL, $19.68, up $0.61)
January 19 puts (JBL140118P00019000, $0.55, down $0.25)
Thoughts: Shares were down 14% in after-hours trading last night and were under $17 to $16.98.
Oracle (ORCL, $33.63, up $0.09)
December 32 puts (ORCL131221P00032000, $0.25, flat)
January 32 puts (ORCL140118P00032000, $0.52, flat)
Thoughts: Earnings are due out on Wednesday. This is our favorite earnings trade for the week and while we have listed December puts, we will likely use the January puts if take action. Shares could test $30 if Oracle pulls up lame on its earnings numbers.
Carnival (CCL, $36.55, up $0.08)
January 36 puts (CCL140118P00036000, $1.00, flat)
Thoughts: Earnings are due out on Thursday. A close above $36.50 ahead of earnings might be a bullish sign but we feel shares could test the low $30’s if the company offers weak guidance going forward.
SolarCity (SCTY, $52.41, up $0.62)
January 45 puts (SCTY140118P00045000, $1.15, down $0.15)
January 47 puts (weekly) (SCTY140103P00047000, $0.70, down $0.25)
Thoughts: Shares could be headed for a back test to $40 but the options are expensive. We would like to see a test to resistance at double-nickels before possibly going short.
Morgan Stanley (MS, $30.52, down $0.40)
January 32 calls (MS140118C00032000, $0.45, down $0.10)
Thoughts: Resistance is at $31.50. Support is at $30. A close below $30 would be bearish.
Exact Sciences (EXAS, $11.79, down $0.25)
January 12 calls (EXAS140118C00012000, $0.60, down $0.20)
Thoughts: Resistance is at $12.25-$12.50 and a close above this level would be bullish for a run past $13 that could lead to $14-$15.Support is at $11.50 and the 50-day MA with risk down to $11 on a close back below these levels.
Twitter (TWTR, $56.45, down $0.15)
January 60 calls (TWTR140118C00060000, $2.90, down $0.20)
January 49 puts (TWTR140118P00049000, $1.15, flat)
Thoughts: Watch for now.
Gold Shares (GLD, $118.65, down $1.04)
January 115 puts (GLD140118P00115000, $1.40, up $0.20)
Thoughts: We have said the yellow metal could touch $1,100 this year.We could go short on a break below $117.50 but we would love to see a back test to $122 this week.
Cliff’s Natural Resources (CLF, $23.90, up $0.14)
January 25 calls (CLF140118C00025000, $0.85, flat)
Thoughts: The close below $24 was bearish and could lead to the low $20’s.
iShares Russell 2000 (IWM, $111.35, down $0.16)
January 114 calls (IWM140118C00114000, $0.90, down $0.05)
January 107 puts (IWM140118P00107000, $1.10, flat)
Thoughts: We could go short on a close below $109 or long on a pop past $112.50.
International Business Machines (IBM, $175.76, down $2.09)
January 170 puts(IBM140118P00170000, $1.60, up $0.40)
Thoughts: Weare looking for one last push to $180 before possibly going short. Support is at $175 and a close below $170 would be very bearish that could have us on board.