9:00am (EST) continued…
The Dow jumped 104 points, or 0.6%, to finish at 16,207. The blue-chips opened a point lower from Friday’s close of 16,103 but immediately made a run past 16,200 thirty minutes into the session. The high of 16,300 was a bullish sign the index could push 16,500-16,600 over the near-term while the bears will try to get the action back below 16,200.
The S&P 500 surged 11 points, or 0.6%, to end at 1,847.61. The index held positive territory from start to finish after reaching an intraday all-time high of 1,858.71. The talking heads jinxed the closing bell as they were rooting for the mid-January close of 1,848.38 to hold while we were looking for a finish above 1,850. We still expect 1,875-1,900 to come into play over the near-term but it will be important 1,850 is surpassed and held for a session or two. We need to watch any dips below 1,840.
The Nasdaq zoomed 29 points, or 0.7%, to settle at 4,293. Tech opened the session at 4,272 and easily cleared 4,275 on its way to a high of 4,311. We have been calling for a run to 4,400-4,500 since December but we wanted to see 4,300 hold into the close. Support is at 4,275-4,50 on a pullback.
The Russell 2000 soared 10 points, or 0.9%, to close at 1,174.55. The small-caps reached a peak of 1,180 in the morning before fading to end just below 1,175. A close above this level gets 1,200 into the mix (again). Support is at 1,160-1,150.
The S&P 500 Volatility Index ($VIX, 14.23, down 0.45) fell 3% after trading down to 13.97. We mentioned the bulls need to get a close below 13.50 to confirm the next leg higher and yesterday’s high of 14.83 stayed below 15.
As we head from desk to press, futures look like this: Dow (xx); S&P 500 (xx); Nasdaq (xx).
We have updated our current option trades with some Hard Stops to protect profits so be sure to update your trading accounts. Subscribers, hit the Members Area for the latest and greatest.
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: 19-8 – the Weekly Wrap is 9-2 for 2014 (94-9, or 91% win rate, since 2011) and is designed for traders that want to use options with less risk.
Discovery Laboratories (DSCO, $2.59, up $0.04)
April 2 calls (DSCO140419C00002000, $0.70, up $0.10)
Entry Price: $0.65 (2/24/2014)
Exit Target: $1.00-$1.30
Return: 8%
Stop Target: None
Action: Shares recently made a break out of a symmetrical triangle and appear to be headed to $3. This would get the options to a least $1.00-$1.10. Support is at $2.40.
World Wrestling Federation (WWE, $23.99, down $0.68)
March 30 calls (WWE140322C00030000, $0.25, down $0.15)
Entry Price: $0.40 (2/18/2014)
Exit Target: $0.80
Return: -38%
Stop Target: None
Action: Shares traded to a high of $24.95 before closing a penny below $24. We are expecting a pop past $25 with a run to $30 if the company’s subscription model gets off to a good start this week. Support is at $22.
Ingersoll-Rand (IR, $59.97, up $0.56)
March 60 calls (IR140322C00060000, $1.30, up $0.10)
Entry Price: $0.85 (2/13/2014)
Exit Target: $1.70 (2/24/14 closed half @ $1.70)
Return: 71%
Stop Target: 95 cents, raise to $1.10 (Hard Stop)
Action: We closed half the trade yesterday as our exit target of $1.70 triggered. We were a little disappointed shares couldn’t hold $60 into the close and we have moved the Hard Stop up from 95 cents to $1.10 to protect the rest of our profit.
We are looking for a run past $60 and up to $62. The 52-week high is at $63.42. Support is at $58.
Kodiak Oil & Gas (KOG, $12.18, up $0.38)
March 12 calls (KOG140322C00012000, $0.65, up $0.20)
Entry Price: $0.60 (2/13/2014)
Exit Target: $1.20
Return: 8%
Stop Target: None
June 13 calls (KOG140621C00013000, $0.75, up $0.10)
Entry Price: $0.70 (2/13/2014)
Exit Target: $1.40
Return: 7%
Stop Target: None
Action: Earnings are due out on Thursday. We have a near-term target of $12.75 if shares can clear $12.50. Support is at $11.50 if $12 fails to hold.
H&R Block (HRB, $31.55, up $0.47)
March 32 calls (HRB140322C00032000, $0.85, up $0.10)
Entry Price: $0.60 (2/11/2014)
Exit Target: $1.20 (2/21/14 closed a third @ $0.85)
Return: 42%
Stop Target: 60 cents (Hard Stop)
Action: We are still hopeful shares can make a run to $35 as a close above $32 represents blue-sky territory. We could get stopped out of the other half of the trade if shares fall below $30.50 but today’s bounce is encouraging.
Ariad Pharmaceuticals (ARIA, $8.63, down $0.24)
March 10 calls (ARIA140322C00010000, $0.45, down $0.20)
Entry Price: $0.95 (1/28/2014)
Exit Target: $1.90
Return: -53%
Stop Target: None
May 11 calls (ARIA140517C00011000, $0.80, down $0.30)
Entry Price: $1.05 (1/28/2014)
Exit Target: $2.10
Return: -24%
Stop Target: None
Action: We are expecting a pop to $10 over the next few weeks. Support is at $7 with $6 serving backup. Earnings could come out this week as we are getting conflicting reports but we will keep you updated once we get a hard date.
The water cooler talk is that Eli Lilly has made a “friendly approach” to buy the company and is willing to pay up to $20 a share. GlaxoSmithKline is also in the hunt along with Shire.
We have said there is a HUGE gap to fill on the stock’s drop from $23 to a 52-week low of $2. Eli is trying to get the company for cheap as it currently has a $1.25 billion market-cap.
Exact Sciences (EXAS, $13.96, down $0.19)
April 19 calls (EXAS140419C00019000, $0.60, flat)
Entry Price: $0.88 (1/22/2014)
Exit Target: $1.75
Return: -32%
Stop Target: None
Action: We didn’t like the close back below $14 as it brings $13.75 back in play.
The company should get some FDA news in March on its Cologuard drug. These are April options with 3 months until expiration and we plan to hold through the volatility because we want to be in when the March news is released. We do not have a Stop Limit listed. Support is at $11.75.
Other 2014 Portfolio OPEN positions (5): 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.
Sony April 20 calls (from January 2014) – continue to HOLD
General Electric March 28 calls (from January 2014) – continue to HOLD
Caterpillar March 85 puts (from January 2014) – continue to HOLD
McDonald’s March 90 puts (from February 2014) – continue to HOLD
Apollo Education Group March 29 puts (from February 2014) – 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.
Verizon (VZ, $46.23, down $1.04)
March 49 calls (VZ140322C00049000, $0.30, down $0.25)
April 44 puts (VZ140419P00044000, $0.63, flat)
Thoughts: Shares are on the verge of clearing the 200-day MA at $48.27. If shares clear $48.50 we could go long as shares could reach $50-$52. If resistance holds, we could go short at some point so we have also listed put options. Shares have been volatile of late but they are losing customers. At current levels this could also make a great strangle trade going forward.
Rosetta Stone (RST, $12.03, down $0.32)
March 12.50 calls (RST140322C00012500, 0.50, down $0.10)
March 12.50 puts (RST140322P00012500, $0.95, up $0.10)
Thoughts: This could be a great straddle trade as shares could make a push towards $15 or flop to $10 based on earnings. A 10% move would get shares near $14 or $11 and would likely be enough to make a nice double-digit return.
DreamWorks Animation (DWA, $34.85, up $1.64)
March 35 calls (DWA140322C00035000, $1.70, up $0.75)
Thoughts: The 52-week high of $36 could trigger on better-than-expected earnings.
Philip Morris (PM, $79.17, up $0.20)
March 77.50 puts (PM140322P00077500, $0.62, down $0.13)
Thoughts: Shares may have peaked with resistance at $80 holding. A back test to $85 could be coming.
Krispy Kreme Doughnuts (KKD, $18.27, up $0.30)
March 17 puts (KKD140322P00017000, $0.60, down $0.05)
March 16 puts (KKD140322P00016000, $0.35, down $0.05)
Thoughts: Resistance is at $18.50 and where we would like to see a back test to continue.
S&P 500 Spiders (SPY, $184.91, up $1.02)
March 175 puts (SPY140322C00175000, $0.45, down $0.22)
March 173 puts (SPY140322C00173000, $0.36, down $0.18)
Thoughts: Continue to watch.
iShares Russell 2000 (IWM, $116.51, up $0.85)
March 110 puts (IWM140322P0011000, $0.50, down $0.20)
March 113 puts (IWM140322P00113000, $0.90, down $0.30)
Thoughts: We could go short on a drop below $112.50 or long on a close above $116.