9:00am (EST) continued…
The Dow declined 18 points, or0.1%, to finish at 16,444. The blue-chips made another run past 16,500 to 16,525 but quickly lost steam as the fell below 16,400 to 16,378 before holding support by the close. It was the first dip below 16,400 since the day after Christmas and we mentioned the bulls had wiggle room to 16,350. Additional support is at 16,200-16,000 on a close below these levels. A close above 16,500-16,600 could setup higher highs for next week.
The S&P 500 added nearly a point, or 0.03%, to settle at 1,838. The index cleared 1,840 for the third-straight session but failed to hold resistance after falling to a low of 1,830. Support at 1,825 has been solid since late December and a finish below this level would likely lead to a back test to 1,810-1,800.
The Nsdaq dropped 9 points, or 0.2%, to close at 4,156. Tech made an impressive push past 4,175 after the open and reached a fresh 52-week peak of 4,182.74. We have repeatedly said a push to 4,200+ could come as long as 4,150-4,100 holds and it has since December 20. A close below 4,100 will likely lead to a back test to 4,000 (or worse).
The Russell 2000 gained a points, or 0.1%, to end at 1,158. The small-caps made a run past 1,160 on the opening bell to 1,163 before testing support at 1,150 with a dip to 1,153 shortly afterwards. The bulls are trying to get back into the 1,175-1,200 zone they enjoyed for a few minutes on December 23 while the bears will try to get a close below 1,125 heading into the weekend.
The S&P 500 Volatility Index ($VIX, 12.89, up $0.02) tested 12.83 on the open before being subdued and pushing 13.26.
The 3-week trading range has been frustrating for both the bulls and bears but by today’s close one side could be happy.
As we head to press, futures look like this: Dow (+25); S&P 500 (+3); Nasdaq (+7).
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 2014: 5-0- the Weekly Wrap is 2-0 for 2014 (87-7 since 2011) and is designed for traders that want to use options with less risk.
Sony (SNE, $18.08, down $0.17)
February 19 calls (SNE140222C00019000, $0.50, down $0.05)
Entry Price: $0.45 (1/8/2014)
Exit Target: $0.90
Return: 11%
Stop Target: None
April 20 calls (SNE140419C00020000, $0.60, down $0.05)
Entry Price: $0.55 (1/8/2014)
Exit Target: $1.10
Return: 9%
Stop Target: None
Action: Short-term resistance is at $18.50 and then $19.40 (200-day MA). Support is at $17.50 and will like the position as long at $17 holds up.
Galena Biopharma (GALE, $6.04, down $0.20)
January 2.50 calls (GALE140118C00002500, $3.50, down $0.20)
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, closed a quarter @ $3.50 on 1/8/14)
Return: 692%
Stop Target: $3 on remaining quarter position (Stop Limit)
February 6 calls (GALE140222C00006000, $0.75, down $0.10)
Entry Price: $0.40 (1/7/2014)
Exit Target: $0.80, raise to $1.20
Return: 88%
Stop Target: 30 cents
Action: Shares traded to a high of $6.59 on the open but faded to a low of $5.60 midday on Thursday. Gale recovered to clear $6 and this level held into the close. We will get stopped out of the January 2.50 calls on a drop below $5.50 that would likely trigger on a lower low today. However, we are trying to squeeze a close above $7 before exiting and taking partial profits in the February 6’s. We will have to close the January 2.50’s by next Friday, regardless.
General Electric (GE, $27.22, up $0.01)
March 28 calls (GE140322C00028000, $0.40, flat)
Entry Price: $0.45 (1/7/2014)
Exit Target: $0.90
Return: -22%
Stop Target: None
Action: There is risk to $26.80 and the 50-day MA on continued weakness. Resistance is at $27.50-$28. The company will report earnings on January 17.
PulteGroup (PHM, $19.79, up $0.01)
February 22 calls (PHM140222C00022000, $0.25, flat)
Entry Price: $0.40 (1/3/14)
Exit Target: $0.80
Return: -38%
Stop Target: None
Action: Shares traded to a low of $19.48 and we said we would stick with the trade as long as $19 holds. The 20-day MA is at $19.08. PulteGroup announces their numbers on January 30.
H&R Block (HRB, $30.03, up $0.29)
February 30 calls (HRB140222C00030000, $1.00, up $0.15)
Entry Price: $0.65 (1/3/14)
Exit Target: $1.30 (closed a quarter @ $1.00 on 1/9/14)
Return: 54%
Stop Target: None
Action: We closed a third of the trade to lock-in some profits on the pop past $30 yesterday. Yesterday’s high was $30.50. The 52-week is at $32.09 and the close above $30 should get new highs in play.
Other 2014 Portfolio OPEN positions (0): 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.
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.
Aruba Networks (ARUN, $18.75, down $0.10)
February 20 calls (ARUN140222C00020000, $0.70, down $0.10)
February 21 calls (ARUN140222C00021000, $0.45, down $0.05)
Thoughts: Shares have been strong this week and are breaking out of a trading range.
Cliff’s Natural Resources (CLF, $22.96, down $1.60)
February 25 calls (CLF140222C00025000, $0.85, down $0.65)
February 20 puts (CLF140222P00020000, $0.50, up $0.20)
Thoughts: Support at $24 failed to hold and there could be further risk down to $22.50-$22.
Osiris Therapeutics (OSIR, $17.19, down $0.51)
February 19 calls (OSIR140222C00019000, $0.80. down $0.30)
May 21 calls (OSIR140517C00021000, $1.20, down $0.40)
Thoughts: Support is at $15 on a back test. We are expecting a run to $20 over the near-term.
Spiders Gold Shares (GLD, $118.46, up $0.34)
February 122 calls (GLD140222C00122000, $1.30, up $0.05)
February 114 puts (GLD140222P00114000, $1.40, down $0.05)
Thoughts: We would love to see a test to $120 before a possible drop to $110. Monday’s peak at $120.39 may have been the short-term top we have been looking for.
Exact Sciences (EXAS, $13.76, up $0.25)
February 14 calls (EXAS140222C00014000, $0.85, up $0.10)
Thoughts: We like the February 14 calls at current levels as we have said a run to the mid-teens was coming. Shares could push $20 on continued momentum and a break above $15. A close back below $12.50 would signal a possible short-term top.
Under Armour (UA, $87.89, up $0.99)
February 95 calls (UA140222C00095000, $1.30, up $0.25)
Thoughts: Shares are approaching 52-week highs again and a break above $88 should lead to $90+. Shares should trip $100 at some point in 2014 and earnings on January 27 could be the catalyst to get shares pushing triple-digits.
Ariad Pharmaceuticals (ARIA, $6.76, up $0.30)
January 7 calls (ARIA140118C00007000, $0.40, up $0.10)
February 8 calls (ARIA140222C00008000, $0.50, up $0.05)
May 9 calls (ARIA140517C00009000, $0.90, up $0.05)
Thoughts: We will likely use the February or May calls to get back in this name. Shares are volatile so we can use these options to play quick moves as they are very liquid. If shares clear $7 again we could send out a New Trade Alert.
Millennial Media (MM, $7.25, down $0.11)
May 10 calls (MM140517C00010000, $0.60, down $0.05)
Thoughts: Shares are in a nice uptrend and a test to $8 could be in the works. Notice the “golden cross” that has formed with the 20-day MA breaking through the 50-day MA (check 1/5/14 Weekly Wrap for chart). A close back below $7 would be bearish and would signal the end of the momentum.
We believe Millennial Media is a takeover target that could catch a bid from one of the bigger players in the game.
PowerShares QQQ (QQQ, $87.02, down $0.29)
January 87 calls (QQQ140118C00087000, $0.75, down $0.05)
February 90 calls (Qqq140222C00090000, $0.45, down $0.05)
Thoughts: We will likely wait for a break above $88 before going long. A break below $87 could lead to a near-term test of $85 on further weakness.
Morgan Stanley (MS, $31.55, down $0.01)
February 32 calls (MS140222C00032000, $0.95, flat)
Thoughts: If support holds at $30.50 along with the Financial sector, we like these calls for a push past $32.
iShares Russell 2000 (IWM, $114.89, up $0.03)
January 116 calls (IWM140118C00116000, $0.50, flat)
January 111 puts (IWM140118P00111000, $0.20, flat)
Thoughts: We could go short on a close below $112.50 or long on a pop past $115. At current levels the options together might make a good strangle trade.
Imax (IMAX, $28.38, down $0.18)
February 31 calls (IMAX140222C00031000, $0.40, down $0.05)
March 32 calls (IMAX140322C00032000, $0.50, flat)
Thoughts: We believe Imax is a takeover target in 2014. We have covered the company since shares were under $3 in 2008 and said it would be a $10-$20 and then a $30 stock before we suggesting selling it. Disney is an obvious choice as a partner but a Chinese company could make a sweet offer north of $40 for a 33% premium from current levels.
PowerShares QQQ (QQQ, $87.02, down $0.29
March 80 puts (QQQ140322P00080000, $0.55 up $0.05)
April 79 puts (QQQ140419P00079000, $0.70, up $0.05)
Thoughts: We could go short on a close below $85.
Twitter (TWTR, $57.05, down $2.24)
February 90 calls (TWTR140222C00095000, $0.60, down $0.30)
February 40 puts (TWTR140222P00040000, $0.95, up $0.10)
Thoughts: We may have to wait a few more weeks but there could be an earnings trade coming.
International Business Machines (IBM, $187.38, down $0.59)
February 175 puts (IBM140222P00175000, $1.50, up $0.05)
Thoughts: We will get a chance to short this stock at some point and we may take a swing if $187.50 holds.