9:00am (EST)
The bulls pushed new highs on Thursday on the S&P 500 and the Dow ended higher, but the bears controlled Tech and the small-caps as they finished lower.
It was another tight trading range despite the choppiness as Wall Street braces for this morning’s Nonfarm Payroll report.
The Dow gained 61 points, or 0.4%, to settle at 16,421. The blue-chips reached a peak of 16,450 and held positive territory throughout the session. The index is 167 points away from a fresh all-time high and remains on track to test 16,600. A close above this level would get 16,800-17,000 in play.
The S&P 500 added 3 points or, 0.2%, to close at 1,877. The index closed at another all-time high after trading up to 1,881.94 and cleared 1,875 on the close. We have said this would be a bullish sign for a possible run to 1,900 and we have penciled-in fluff to 1,909 as long as 1,875 holds. A close back below 1,870 would suggest a back test to 1,850.
The Nasdaq slipped a 6-pack, or 0.1%, to end at 4,352. Tech showed strength into our midday update yesterday and tested another fresh 14-year intraday high of 4,371.71 but faded afterwards. We have said a close above 4,375 should trigger our near-term fluff target of 4,400-4,500. Support at 4,350 held into the close after the index tested a low of 4,341 and was a bullish sign. A close below 4,350 could lead to a back test to 4,300-4,275.
The Russell 2000 dipped a little more than a point, or 0.1%, to finish at 1,204.54. The small-caps kissed 1,208 before smooching 1,202. A move above 1,213 could lead to 1,225 but a close below 1,200 could lead to 1,175.
The S&P 500 Volatility Index ($VIX, 14.21, up 0.32) tested 14.42 after trading lower for the first half of the session but stayed below 15. The bulls tried to get below 13.50 after testing 13.73 but we had a feeling the VIX would stay between the 2 aforementioned levels ahead of today’s “big” news.
Futures are showing a strong open following the release of the Nonfarm Payrolls report.
As we head from desk to press, futures look like this: Dow (+85); S&P 500 (+9); Nasdaq 100 (+17).
Subscribers, hit the Members Area for the current trade updates. We have updated a number of trades so please pay close attention to the details. We could also have additional New Trades/ Profit Alerts ahead of our midday update so stay locked-and-loaded throughout the morning.
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: 24-8 – the Weekly Wrap is 10-2 for 2014 (95-9, or 91% win rate, since 2011) and is designed for traders that want to use options with less risk.
Aruba Networks (ARUN, $21.30, up $0.12)
April 23 calls (ARUN140419C00023000, $0.65, flat)
Entry Price: $0.65 (3/5/2014)
Exit Target: $1.30
Return: 0%
Stop Target: None
Action: We believe shares could make a run past $25 and challenge its 52-week high of $26.26. Support is at $20.
Opko Health (OPK, $8.99, down $0.41)
April 10 calls (OPK140419C00010000, $0.40, down $0.20)
Entry Price: $0.65 (3/4/2014)
Exit Target: $1.30
Return: -38%
Stop Target: None
Action: We are expecting a surge past $10 over the next few weeks and a close above $9.50 would be bullish. Support is at $9-$8.75.
Ingersoll-Rand (IR, $61.32, up $0.35)
April 62.50 calls (IR140419C00062500, $1.10, up $0.10)
Entry Price: $0.90 (2/27/2014)
Exit Target: $1.80
Return: 22%
Stop Target: 90 cents
Action: We have a near-term target of $64-$65. If reached, these options will easily double from our entry price. Support will try to hold at $60 on any pullback with $59 serving as backup.
Discovery Laboratories (DSCO, $2.58, down $0.07)
April 2 calls (DSCO140419C00002000, $0.80, down $0.05)
Entry Price: $0.65 (2/24/2014)
Exit Target: $1.00-$1.30
Return: 23%
Stop Target: 60 cents
Action: Support is at $2.50 but we are still looking for shares to test $3.
World Wrestling Federation (WWE, $29.80, up $2.70)
March 30 calls (WWE140322C00030000, $1.90, up $1.05)
Entry Price: $0.40 (2/18/2014)
Exit Target: $0.80 (3/5/14 closed half @ $0.80)
Return: 231%
Stop Target: 50 cents, raise to $1.20 (Hard Stop on other half)
Action: We closed another quarter of the trade at $1.80 yesterday and we have raised the Hard Stop up from 50 cents to $1.20.
Shares reached a peak of $30 following our midday update and we would love to see a close above this level heading into the weekend. This would get the options “in-the-money” but technically these options are worth $0 as shares are still “out-of-the-money”. In other words, these options are trading on premium and it will start to evaporate over the weekend and into next week. Because of this, we could close the other quarter of the trade in our midday update to reduce our exposure to the time decay. Otherwise, our Hard Stop will lock-in the reminder of our profits if shares slip from here.
Kodiak Oil & Gas (KOG, $11.97, down $0.17)
June 13 calls (KOG140621C00013000, $0.70, down $0.10)
Entry Price: $0.70 (2/13/2014)
Exit Target: $1.40
Return: 0%
Stop Target: None
Action: We believe the company is a takeover candidate that could get a bid north of $15. Resistance is at $12.50. Support is at $11.75 following the close below $12.
Ariad Pharmaceuticals (ARIA, $8.37, down $0.21)
March 10 calls (ARIA140322C00010000, $0.15, down $0.05)
Entry Price: $0.95 (1/28/2014)
Exit Target: $1.90
Return: -84%
Stop Target: None
May 11 calls (ARIA140517C00011000, $0.60, down $0.15)
Entry Price: $1.05 (1/28/2014)
Exit Target: $2.10
Return: -43%
Stop Target: None
Action: We are expecting a pop to $10 over the next few weeks but we are running out of time with the March calls. Support is at $8 with $7 serving backup.
Revenues should grow during the current quarter with the re-launch of Iclusig in the U.S. The company could also have a new drug debut in the second half of 2014 and why we also suggested longer-term options on this trade as well.
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, $13.69, down $0.70)
April 19 calls (EXAS140419C00019000, $0.50, down $0.10)
Entry Price: $0.88 (1/22/2014)
Exit Target: $1.75
Return: -43%
Stop Target: None
Action: Resistance is at $15 and a move above this level should get us back near even. Support is at $12.50.
The company should get some FDA news in March on its Cologuard drug. These are April options with 2 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.
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 and why we have 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.
Morgan Stanley (MS, $31.84, down $0.13)
April 33 calls (MS140419C00033000, $0.63, down $0.07)
Thoughts: The Financial stocks are finally showing strength this week and we are warming up to them as they will help support the market going higher. The 52-week peak for MS is at $33.52. These call options will double if shares can clear $34.
Valero Energy (VLO, $52.88, up $2.60)
April 52.50 calls (VLO140419C00052500, $2.50, up $1.30)
Thoughts: For those of you that got into this trade, keep riding the wave.
S&P 500 Spiders (SPY, $188.18, up $0.43)
March 190 calls (SPY140322C00190000, $0.75, up $0.08)
Thoughts: We like these calls if the S&P clears and holds 1,875.
H&R Block (HRB, $30.96, down $0.17)
April 33 calls (HRB140419C00033000, $0.65, down $0.20)
Thoughts: Shares could test $30 after the company missed Wall Street’s earnings expectations.
Philip Morris (PM, $80.91, down $0.16)
April 77.50 puts (PM140419C00077500, $0.85, up $0.05)
Thoughts: We said a close above $80 could lead to $82.50. A back test to $75 could be coming afterwards and this could be setting up for a decent strangle trade.
Krispy Kreme Doughnuts (KKD, $18.90, up $0.33
April 17 puts (KKD140419P00017000, $0.60, down $0.05)
May 17 puts (KKD140517P00017000, $0.80, down $0.05)
Thoughts: Resistance is at $20. We could go short on a close below $18.
Verizon (VZ, $47.46, up $0.08)
April 45 puts (VZ140419P00045000, $0.45, down $0.05)
Thoughts: If shares clear $48.50 we could go long as they could reach $50-$52. If resistance holds, we could go short at some point.
iShares Russell 2000 (IWM, $119.74, down $0.02)
April 115 puts (IWM140419P00115000, $1.45, flat)
Thoughts: We could go short on a drop below $117.50.
Alexza Pharmaceuticals (ALXA, $5.50, down $0.03)
June 6 calls (ALXA140621C00006000, $0.40, flat)
Thoughts: These options look like a bargain if shares make a run past $6.
